Decision Making

Debt is Both Good and Bad

Gregory Pearl

I’ve been thinking about debt and leverage after reading the Warren Buffet (Berkshire Hathaway) shareholder letter. For individuals debt can be dangerous. It is easy for consumers to rack up debt in part due to the ceaseless marketing of credit solicitations. This includes everything from credit cards to unnecessary and ill-advised student loan debt. Some consumer debt may be unavoidable but much of it is discretionary. Self-discipline is advisable. The consumer should never allow debt levels to become so high that it closes off options and opportunities such as changing jobs, getting married, and so on. On the other hand,…

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Alternative Investments, Business Valuation, Buying & Selling a Company

Seven More Factors That Will Change the Value of Your Business

Gregory Pearl

My last article listed seven factors that can and will affect the value of your business. That list was not comprehensive. There are more. Here are seven more factors you, the owner of a privately held business, should consider. The additional seven-factors are: 1) Narrow Customer Base (Concentration) lowers value. Most successful companies try to reduce dependence on a few large customers. Should any one customer be lost, the effect on business earnings is then minimal. The more loyal and diverse the customers that a company has the higher its value. It is even better to have long-established contracts with…

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Alternative Investments, Business Valuation, Buying & Selling a Company

Seven Factors That Will Increase The Value of Your Business

Gregory Pearl

What do Buyers specifically look for when buying a business? Or stated another way, what factors affect business value? What increases or decreases business value? There are many things that affect business value. Some may be obvious others not so much. But all will require that you, the business owner, pay attention to them. Here are seven factors to consider. 1) Poor Quality Financials. Having poorly prepared financial statements means the Buyer may not know what he/she is buying. And there may be hidden problems in the company. It is best to have independently audited financial statements that do not…

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Alternative Investments, Business Valuation, Buying & Selling a Company

How Do Buyers Value a Business? (Danger: Wonkish)

Gregory Pearl

The overriding theme of business valuation for Mergers & Acquisitions is that anything that increases Cash Flow increases the value of the business.  Cash Flow (not profits) is the most important factor. The methods listed are for established businesses with ongoing revenues.  Valuing startups is another thing entirely. The specific technique used to value a business can vary, and the use of any depends on what the buyer prefers.  But here are some common ones. Smaller businesses bought by an owner/operator tend to be valued based on: a multiple of Seller’s Discretionary Cash Flow (Owner’s Salary & Benefits + EBITDA…

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Alternative Investments, Exit Planning

Yet Another Reason Why Indexing is Best for Most DIY Investors

Gregory Pearl

Patrick Luo is a doctoral student at Harvard. He published a new study that supports the idea of just how hard it is for the average investor to achieve returns better than the market when trading individual stocks. The paper is called: “Talking Your Book: Evidence from Stock Pitches at Investment Conferences”. His research shows that well-known hedge fund managers – those private investment firms that often control billions in investment funds –  often publicly pitch the stocks they currently own as great investments. Then, after the stocks rise quickly due to the publicity, the hedge funds will sell them…

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Decision Making, Exit Planning, Tax

Why is an Asset Protection Strategy Critical for Your Business?

Timothy Foster

Most business owners that I meet are surprised to learn that just because they operate their business as an incorporated entity (S-corp or C-corp) or an LLC, their business and personal assets are NOT “automatically” and “fully” protected from business or personal litigation. Ignorance is bliss, getting a hard reality check from the hungry litigators in an overpopulated legal system is a difficult lesson to learn. Take note – if you’re not prepared – the legal system can be brutal and unforgiving. We get too many phone calls from business owners who are facing litigation from an event that’s already…

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Decision Making, Exit Planning

How To Calculate If Your Retirement is Fully Funded

Gregory Pearl

What does “fully funded” mean? It means you have enough money to provide the retirement you want to have for the length of time you need it to last. I talked about this topic in an earlier post though in a more general way.  This article points to some of the specific techniques you can use to know the answer to the above question. It doesn’t give the mathematical detail on how to do it, but simply the direction. I said mathematical because at its core this is a calculation. As with all calculations forecasting the future, the results are…

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