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Business Valuation and Common Misconceptions and Associated Risks

Women holding iPad, reflecting a business valuation
Maneuvering through the intricate landscape of business valuation can be as challenging as it is critical for owners looking to sell their business - their life's work. The valuation process is not merely an academic exercise but a practical one that can significantly influence the final sale price of a business.  It's essential for business owners to understand that an early, independent valuation serves a dual purpose: it provides a snapshot of the current worth and highlights potential value increases through operational improvements. This article delves into the complexities of business valuation, exploring common misconceptions and strategic considerations to ensure that entrepreneurs maximize their wealth when the time comes to sell. Understanding Different Business Valuation Methods 1. Market Comparison Valuation Approach Also known as the Market Approach, the Market Comparison Valuation Approach, is a method for valuing a business by comparing it to similar businesses that have been sold recently.…
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How to Sell Your Business

How to sell your business represented by image of 2 businessmen shaking hands.
Embarking on the sale of your business is not just about cashing in on your hard work—it's a complex process that reflects the culmination of time, investment, and dedication. This journey to a successful sale begins with understanding the pitfalls and planning meticulously to avoid them. In this guide that follows, inspired by the book Tips & Traps, you’ll benefit from strategic advice and essential steps to maximize your wealth during the sale. It's a path that requires a team of professionals to navigate, ensuring you get the true value for your business while being prepared for both planned and unexpected opportunities. And it all starts with the right mindset. Mindset for Selling Before you can approach the undertaking of selling your business, you will want to understand your motivation for selling. What are the targets you want to achieve? What is your ideal outcome? Whether the intent is to…
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Economic Outlook for 2024

  Well, it looks like the economy is finally normalizing. So, the question now becomes "what's next for 2024?" I just got back from a fascinating luncheon at ACG Houston. ACG is the Association for Corporate Growth. We had an economist from First Horizon Bank in New York City speak to the group, and it was a very interesting presentation, one that I somewhat agreed with. Basically, they pointed out what we've talked about - inflation is pretty much under control. It's at 3% and falling. The job market has loosened up. We've gone from "you just can't find people" to "you can find them but they're a little bit expensive". So, that's at least manageable for most employers. A Goldilocks Economic Recovery The interest rate hikes are clearly over and there are some wild bets going on in the market over when and how low these long rates are…
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Investment Outlook for 2024

  We've had a sweet rally in the last quarter in both stocks and bonds. So with this beautiful end to 2023, what's the outlook for 2024? The Markets Historically, future returns are driven by attractive valuations, and so when we're looking for the threats and the promises we look at evaluations. The biggest threat to the markets or within the markets are the Magnificent Seven. We've talked about these, Apple, Microsoft, Google, Amazon, Nvidia, Meta, and Tesla. A lot of the Magnificent Seven story is highly correlated with the AI stocks and the AI story. The rest of the markets are actually fairly valued. They haven't done a lot in the last few years. In fact, this recent rally, somewhat, has been a more normal rally and not so much a Magnificent Seven rally. And so with markets fairly valued, that means there's all sorts of opportunities as long…
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Rethinking Investing in Commodities

  With inflation falling fairly rapidly already at 3%, is it time to rethink commodities? What is a Commodity? Let's begin by defining commodities. The basic goods and raw materials typically sold on specialist exchanges. We're talking about oil, gold, wheat, pork bellies, and there's a number of ways we can own these commodities; four fundamental ways to own commodities. First, we can just own the commodity, direct physical ownership. That's a bit of a pain. Gold coins may be the easiest, but you've still got to buy them. They usually have a pretty big bid-ask spread when you buy a coin, and then you've got to store them somewhere safe. If you want to buy a barrel of oil and bet on the oil market, you've got to figure out where you're going to put those 55 gallon drums. Investing in Commodities Most people don't want to deal with…
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