Capital For Value

As a business appraiser, I've always questioned how people use Seller's Discretionary Earnings (SDE) Most small businesses I've encountered depend heavily on their owners BUT adding back the owner's entire salary can obscure the real cost of operating the business If someone must replace that owner's labor, then those costs don't simply disappear That's why I prefer to normalize owner compensation and evaluate the cash flow remaining Because if there's little cash flow after paying for the work required, what exactly is the buyer purchasing?

The year is 1999 A stranger gives you a photo from the future This is the photo you get What’s your next thought?

If you have debt on commercial real estate, if the lender is a bank, the debt covenants can require the property management account & owner account to live at the bank That makes sense What becomes tricky, is the bank can make it challenging for you transfer funds outside their bank They can do this by limiting your ability to wire funds outside their bank

Commercial Real Estate conference in a nutshell "Here is what [____] is doing now. But they are mainly concerned with interest rates. So we are hoping the Fed lowers rates to spur activity. " Exchange [ ] to be tenants, developers, leasing, transaction, etc. The entire conference devolves into a discussion about interest rates & the *hope* the fed lowers rates

A Valuable Business, Worthless Equity. Strong recurring revenue. Proprietary technology. A unique market. Yet past management decisions created liabilities (debt financing & unpaid sales taxes + penalties) that wiped out shareholder equity value. Our valuation distinguished enterprise value from equity value, helping the board weigh a sale against shutdown & negotiate from an informed position. Ultimately, the valuation provided the board with a defensible basis for evaluating its strategic alternatives & the confidence to negotiate with an interested third-party buyer.

For SMB owners there is a fine line between building a lean team & resilient team A lean team can move quickly & be afforadable A resilient team includes redundancies, which can be more costly and slow you down But a lean team could fall apart if one or two members leave, effectively destroying business value as you pay $$ to get in talent & possibly provide worse customer service in the process of hiring

Nature is so impressive! (This video could be AI, but the bird & what/how it builds is 💯 true) youtube.com/shorts/AnWG0f3xl…

Dear SMB Buyers Most landlord's hate when a tenant wants to sell their business & assign their lease to a new buyer. It is added risk for the landlord as a new creditor is taking over the payments.

When looking at companies as an investment, sometimes the hardest part is trying to make sense of the economics of the business Good economics solve a lot of problems Seeing $AMZN at 20x PE and possibly compounding earnings at 18%+ over the next 5 years deserves a second look valueinvestor.substack.com/p…

Can you imagine how old she could live to if she used excel?? And use Teams?? Infinite life. 🤯

Moment of zen - Sunday Edition

Moment of zen

How much time do you think about creating generational wealth for your children vs they should figure it out if they want it?

For small businesses, does the Better Business Bureau rating (BBB) matter?

Does anyone open these emails, click the link, and read the updated terms of service??

Some good context for the relationship of Bond yields & Equity Price changes

Someone close to me developed a genuinely cool medical device prototype Sales: $0 Go-to-market plan: nonexistent Customers: 0 Products manufactured: 0 Staff: 0 Marketing: nonexistent He put the details into ChatGPT ChatGPT valued the company at $12 million I love AI. I use it every day. But please, for the love of God, hire a professional to value your business