My last post listed some great cognitive biases. The human mind is easily fooled by both ourselves and others! I could list more, of course. There is so much published on this topic that it could fill many posts. That being said, here is a bunch more. Gambling System Bias – gambling is a real problem that causes harm. I’ve seen the damage gambling can do in my own family growing up. There’s always a rationalization. And they stick to their ‘system’ well beyond the point where it obviously doesn’t work. I heard an old gambler one time say as…
My Favorite Cognitive Biases #1
Buying and Selling Companies, Investing, and even just general life involve decision-making. I’ve seen people in positions of authority really make some bad mistakes in their decisions. Decisions that were obviously bad to those around them before action was taken by the power figure. What causes this? Are they dumb? Well, in some cases yes. Just because a person has power doesn’t make them smart or wise. But sometimes otherwise smart people fool themselves. If you are really interested in this subject I would refer you to the book Thinking Fast and Slow by Daniel Kahneman. If you are really…
What Is Mezzanine Capital?
I get asked this question occasionally. The question is usually asked by non-financial directors/officers of client companies. It just came up again so here is a description. Usually mezzanine capital is defined as unsecured, higher-yielding loans that are subordinate to bank loans and other secured loans but rank above equity in the event of liquidation. Here is a more in depth explanation. Mezzanine is junior debt that is between senior debt and equity on the balance sheet. Therefore it is called mezzanine, a Latin word that means “middle.” But there is more. Mezzanine capital now means more than just subordinated…
Balance the Positive and the Negative
Early on in my career, I worked with an astonishingly effective salesman. He did exactly what you’d expect such an effective sales professional to do, be enthusiastic, deal well with rejection (when it happened), craft a good succinct story, understand his customer’s needs. One thing he also did is that he looked at the negative. He analyzed the situation and his customer and put it this way “Eliminate every reason why the customer can say No and then he has no reason not to say Yes.” He looked for the obstacles and problems in the situation and determined a solution…
The Four Steps of Valuation
Alteris LLC offers a unique approach to business valuation – the Four Steps of Valuation. Each step is increasingly more detailed and comprehensive. You can pick the level of valuation that fits your needs. Step One – The Express Valuation The Express Valuation uses very basic industry formula, market and other sector metrics and is ideal for preliminary business planning and general information. If you have never valued your company or want a very general “ball park” estimate, the Express Valuation is for you. The Express Valuation is only for use in conjunction with other consulting services and should not…
Business Valuation FAQs
What is a Business Valuation? A Focus on Value. A business valuation determines the estimated market value of a business entity or financial asset in total or in part. A valuation estimates the complex economic benefits from combining a group of physical assets with the intangible assets of the business, most likely as a going concern. The Fair Market Value estimates the price that hypothetical informed buyers and sellers would negotiate at arms length for an entire business or a partial interest. Business Valuation: Art or Science? A business valuation combines quantitative financial techniques with qualitative analysis of the business, the…
Legal Considerations of Exiting Your Business
No doubt your business exit will be a complex transaction. Without the proper planning and drafting of the associated legal documents the negative tax, business, and legal consequences may be far-reaching. A well designed exit strategy starts with your goals and executes your exit plan with the necessary consideration to the business, tax, and legal components of the available strategies. Caution must be exercised because too many attorneys practice “This is the way we do it” legal advice. Their methods may have adverse tax consequences and impact the amount you pocket from the transaction and on the business’ cash flow.…