A sensible cynic

December 6, 2019

Australia has a wonderful enthusiasm for business ownership. Many of us want the thrill of controlling our own business, watching it grow and reaping the rewards just before retirement (the exit). The reality could not be further from the truth. Owning and operating a business is bloody hard work. You have to deal with demanding...

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Valuation lies…

December 6, 2019

My second rant, as sensible cynic, is to highlight a few common features that surface in a business valuation or business exit process: Valuations / listing prices are based on a small pool of transaction evidence. Only a very small number of businesses actually sell, yet we use the statistics to value all businesses. Maybe...

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Illiquid investments and trapped wealth

March 13, 2019

As a business owner, you need to decide whether you have a business (something that may be sold later) or a job. A job provides short term financial security, and if you are organised, you will set some of this aside for the future. If you are a genuine business owner, treat your business like...

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Growth and shareholder value

February 4, 2019

Simply puffing up your business will not create shareholder value. Lots of business owners I meet are chasing growth – they want to be a bigger business, have more staff, more clients, more sales, bigger office, and so on. They want growth, but many don’t appreciate this can be poisonous or value destructive. Almost every...

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Intangible asset valuations

September 3, 2018

Last time I discussed goodwill – what it is and how we estimate it in business valuations. I recently heard from Chris Mellen, a US valuations guru, about valuing a business for sale, particularly relating to intangible assets. Let’s say that a business makes a small profit, but there is significant equipment and working capital....

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What is goodwill?

July 30, 2018

I have met with a range of businesses in the last 6 months where the owner is critical to the ongoing success of the business. That might be because of their unique skills (specialist doctors), relationships with clients (accountants) or intimate knowledge of the whole business (basically any founder). George, a business owner, works tirelessly...

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BV “learnings”

July 6, 2018

Last post I talked about the Mysterious Vernacular of Valuations by giving a couple of examples of jargon used in the BV world. The vernacular will continue later, but one word that won’t appear in the list is “learnings1,2,3″. After a short social media hiatus, I realised that Value ADE is 18 months old, walking...

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Vernacular of business valuation

April 23, 2018

Last month I talked about the value of private companies, marketability of a handful of privately held shares and other fun valuation concepts. Unfortunately, the “fun” valuation concepts are not well understood as there is lots of weird language to wade through. A client recently said to me “you have a mysterious vernacular”. He went...

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Private company valuations – my shares are worth what?

March 8, 2018

Last month I talked about the “plummeting” of the ASX following the lead of Wall Street. Since then, the All Ordinaries and the ASX 200 indices have recovered somewhat. Life goes on. On a side note, Alan Kohler wrote a great article about “Evil indexes we could do without” in The Australian recently. Well worth...

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Business valuation – listed company volatility

February 5, 2018

I read with interest the headline this morning in the AFR: “ASX set to plummet after broad Wall Street sell-off” ASX set to plummet. The article explains the Dow Jones in the US declined 2.5% on Friday, the largest decline since 2016 with increasing volatility, weaker than expected profit announcements and speculation the Fed Reserve...

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