Chapter 10, we focus on the business appraiser, providing insight into how the importance of this profession is often overlooked and giving tips on what to look for in a seasoned valuator.
In Chapter 11, we provide four vignettes to tie together many of the insights and concepts shared within this book.
There will always be those who want the knowledge nuggets from a 30,000-foot view. While we encourage reading this book cover to cover, that may just be my own wishful sentiment. While not all inclusive, here are some of the top take-aways to consider and apply.
• Book value is seldom a guide to business value. The latter is dynamic and uncertain.
• Businesses are all their assets – tangible and intangible. They both have life cycles.
• The assets hidden below the financial statements often drive equity value.
• Governance, relationships, and knowledge are assets, not line items. They impact risk.
• How a company tracks and measures its assets influences whether value will be created.
• The higher the ratio of sales to fixed assets, the greater the likely value of these assets.
• Value creation occurs when both tangible and intangible assets are well managed.
• Relationships, knowledge, innovation, and culture (governance/strategy) drive growth.
• Risk and opportunity decisions often differ between entrepreneurs and their advisors.
• Risk management must consider internal and external variables in the context of an ecosystem.
• The ecosystem includes constituents whose ideas, insights, and actions must have alignment to be impactful.
• Leadership is not administration. Leaders inspire uncommon knowledge and actions.
• To differentiate a business must be dynamic. It senses, seizes, transforms, and scales. This is achieved through leveraged human capital.
• Optimal levels of employee retention and decision making are indicators of higher values.
• Most businesses and advisors focus on revenues, profits, and taxes – not risk and innovation. One deals with yield and the other capital appreciation.
• Effective leaders integrate risk management and strategy resulting in value creation.
• Navigating risk well reduces obstacles, saves time, and increases opportunities – a huge differentiator.
• Tools and language can provide transparency and clarity. It's what we all want.
• Value can be extracted from and/or offered to others beyond technical know-how.
• Value creation occurs with a strategy that is executed to rethink and recombine all assets.
• What is the company's free cash flow? Is revenue/profit more important than value?
• What is the company's return on equity/assets/invested capital and what changes can have the greatest impact on value?
• How will strategy be communicated, executed, and governed to achieve scalability (growth)?
• What assets and measures are relied upon to weigh risk/opportunity and value?
• What is the articulated and aligned strategy of founders, families, and their advisors?
• What is the vision of the this ecosystem and its constituents?
• What are the resources needed to get from here to there? What are the gaps?
• How will differentiation and measurement be used to leverage assets?
• How will success, wealth, and risk be defined and by who (spiritual, emotional, intellectual)?
• What are the top three issues and how will decisions be made and guidance be sought and offered?
• How can founder, family, and advisors be proactive in a dynamic/uncertain environment?
• Where are the governance, relationship, risk, and knowledge gaps?
• Why is optimal debt to equity mix so relevant?
• What are critical decisions for better planned and unplanned transition event outcomes?
• Which is more important: the strategy or the ability to execute it? Why?
• Where is there clarity and transparency? Where is there not? Why?
• How is legacy and vision established and communicated? What are the disruptions?
• What are the liquidity options and needs? What and who influences these decisions?
• How do founder, family, and advisors see capital (human versus financial)?
• Is leverage achieved from governance, relationships, and knowledge?
• Sharing this journey differentiates you from the 90 percent who simply are part of the herd, choosing to remain with the familiar. There are abundant opportunities out there to create concentrated wealth – as long as value creation is GRRK to you. Read on.
Acknowledgments
After I finished my doctoral dissertation on private capital illiquidity over a decade ago, I thought I'd be done. I have since gone on to be a prolific writer, presenter, and panelist. However, my words would be meaningless without those numerous valuation legends and investment bankers upon whose shoulders I stand and whom I may join.
My bread-and-butter work primarily has been from the legal community, whether it is a trust and estate or transaction matter or some business dispute. It has morphed into more risk management and mitigation advisory services dealing with the 6Ts, where strategy, facilitation, operational savvy, communication, and stewardship skills all have application. I am indebted to these professionals who make the work interesting and are often underappreciated for their ability to shift risk and assist clients in making better decisions.
Often hailed as the most trusted advisor to business owners are accountants who have accepted my work and me despite my not being a CPA. Rather, I have been honored to train more than a thousand such professionals to perform client-taxpayer valuation work or represent the position of the IRS on matters of business enterprise and equity values and discounts. I am grateful for the many, many CPAs who have trusted me with their affluent business owners, C-suite clients, and their families' issues in 6T engagements.
Recognitions are deserved for the many bankers, trust officers, wealth-insurance professionals, private equity groups, family business advisors, family offices, family businesses, and private and public companies' founders/families, owners, and executives. I'm humbled by your trust and commerce, which has served my passions. You put a roof over my family's head. You gave me the voice to share how your interests can best be served and how together we can leverage both
