The saying “two heads are better than one” suggests that working collaboratively with others can lead to better outcomes and more effective problem-solving than working alone. In a business context, there are several reasons why two heads (or more) can be better than one:
Diverse perspectives
Collaborating with others can bring a variety of perspectives and experiences to the table, which can help to generate new ideas and solutions that may not have been considered otherwise.
Complementary skills
People have different skills and strengths, and working with others who have complementary skills can help to fill in gaps and create a more well-rounded team. For example, one person may be good at generating ideas, while another may be good at analyzing data and making decisions.
Increased creativity
Brainstorming and ideation sessions can be more productive and innovative when working with others. Bouncing ideas off of each other can spark new ideas and lead to creative solutions.
Improved decision-making
Collaboration can help to ensure that decisions are well-informed and carefully considered, with input from multiple perspectives. This can help to mitigate risks and improve the overall quality of decisions.
Support and accountability
Working with others can provide emotional and practical support, as well as accountability for following through on commitments and meeting deadlines.
Collaboration can lead to better outcomes and more effective problem-solving in a business context by bringing diverse perspectives, complementary skills, increased creativity, improved decision-making, and support and accountability.
A presentation for Jim Hitchner’s Valuation Products and Services Wednesday, May 18th, 2022 1:00 – 3:00 PM EDT
Jeff got up from his hospital bed after missing most of tax season and felt better. So good that three days later he canceled the closing on his 7 employee CPA practice. Unfortunately Jeff spent the next tax season in the hospital too and did not have a practice to return to. While this sounds crazy and far fetched it happens all the time.
How do you keep your exit and succession clients from being Jeff?
Presentation Description: Starting and then following through – taking consistent forward moving action is the biggest issue with succession and exit planning. In this presentation we will review seven major pitfalls that reduce business value and at times stop the process altogether. Several of these are common errors made by professionals and several are traps into which clients commonly fall into. Emphasis will be on maximizing value while continuing to take actions to move the process forward. A simple exit plan template will be provided to aid in initial discussions with the client and to prompt them to take the first steps. Click here for more details from a similar presentation.
You will gain a better understanding of what it takes to get your clients to start – and successfully finish – a business or practice exit and succession plan. If you provide succession planning, would like to add this service, or are just thinking about your own plan, this presentation is for you. This presentation is designed for advisors of smaller businesses with revenues typically under $10 – 20 million.
Improved listening will Improve Your Leadership and Sales Results Improving Business Value
Roberto constantly meets with prospects and in machine gun fashion proceeds to tell them why he is the best tax accountant (you could put contractor, banker, auto shop….) and how he will save them money. Most politely listen and then, after 45 minutes to an hour politely find a way to leave the meeting without a full proposal or commitment to work with him.
Contrast this with Cynthia who briefly explains that she would like to address the prospect’s specific needs therefore it is best for her to start with some questions. She then proceeds to ask questions and listen in order to carefully assess their needs, budget, likely competitors in order to put together a succinct plan of action to address their specific problem. Most of her meetings result in an engagement.
Clearly an effective sales increases business value by improving the resiliency of the company.
Below is Cynthia’s secret to success –
Listening is a lost skill. It is through listening that we can truly understand others. People long to be listened to therefor effective listening will improve all your relationships and increase your value and your business value to your clients and others important to you.
What we think we “know” often gets in the way of true understanding. This happens in our businesses and in all parts of our lives. For instance, every now and then my assistant comes to me with a great idea, yet I “know” she is going to have a complaint, usually about technology. My knowing does not help either of us. Do situations like this happen to you?
A few steps to listen better:
Recognize that you have a “view.” Sort of like if you put pink glasses on. For a while everything seems pink. Then you get used to it and do not see it but it is there. That is one version of a view. My knowing as explained above is another version of a view. We all have views of everyone we “know” and almost instantly of everyone we meet.
Consciously let your view go. While doing this take 3 deep breaths and exhale slowly.
Ask your question or let the other person speak.
When they speak just listen to them very intently. Do not think about your next question or your response. Just listen.
While listening note the tone of their voice, their body language, and facial expressions. Pay attention to what is being said and what is not being said.
One more time – Listen to the answer carefully. Do not be thinking about your next question. Your next question will be better if it comes directly out of the answer just given. You can take a moment or two and think between questions. It will be interpreted as you are really listening and absorbing. Everyone likes being listened to.
Seek the answer behind the answer. What is really driving the results you see? What could change those results positively and negatively? The child’s question, “why” is remarkably powerful for digging deeper.
Listening attentively means that besides noting the response, summarize, paraphrase, and ask new open ended questions to draw out answers. If an issue is emotional in nature, empathize. Work with the person. Develop a relationship that will foster greater openness with you.
This listening skill takes an incredible amount of effort if it is not your habit. But, if you practice and train and become good at listening you will improve all your relationships including leadership and sales raising your value to all. This will improve both your personal value to your clients and your business value.
“This is a book review of The Art of Business Valuation: Accurately Valuing a Small Business by Gregory R. Caruso, author. This book is a guide and desk reference published by Wiley for valuing small and micro businesses under $10 million in revenues.
The primary question answered in the book is: How do we as business valuators, business brokers, accountants, lawyers, owners, and other interested parties who prepare, review, evaluate, or use business valuations for small and very small businesses in difficult environments?
This is an environment where owners are still engaged in planning for the future. The owners are taking out loans. They are adding and eliminating partners who are often lifelong friends or family members, adding to the volatility of the mix. They are getting divorces. Some are even selling or filing for bankruptcy.
All of these common activities require an accurate business valuation; this is not just a matter of applying techniques, it requires that the person valuing the business continually ask him or herself “Does this make sense?”
The book, “The Art of Business Valuation, Accurately Valuing a Small Business” has 400 pages covering many professional judgement, calculation, standards, and other important valuation issues along with access to sample reports, calculators, and checklists downloadable from the web. This will be the one book you will reach for if you value or rely on valuations of micro or small businesses with revenues under $10 million. The book published by Wiley is available at your preferred bookseller. To Buy from Amazon Click Here
Greg Caruso, JD, CPA, CVA, the author of “The Art of Business Valuation, Accurately Valuing a Small Business” 2020 published by Wiley is always available to prepare (or review) business valuations for all purposes and situations.
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After a recent seminar “Valuing Small Businesses in the Shadow of COVID-19”, I took time at the end to answer some questions from the attendees. Here are some of the questions (and answers!) on using the Income Method to value small businesses that I felt might be most helpful for other seminar attendees as well as business valuators, CPAs, lawyers, and consultants that work with business valuations.
Do you believe projections and forecasts for the discounted cash flow income method of business valuation use will be less reliable during the Covid-19 Pandemic than before?
It is very difficult to estimate reliability of projections for business valuation outside of comparing a company’s prior projections with actual results. Most small companies do not have that type of data or the projections prove to be unreliable pretty much all the time. Therefore I do not believe most projections are less reliable due to COVID-19. There are reasons to believe they may be more reliable. I suspect in most cases much more thought and support will be provided in creating the projections and final forecast. For many companies, instead of being a “add 5% to last year” situation (we have all done it) much more strategy and foresight will go into the whole planning and projection process.
In all events all projections and forecasts for use in an income method of business valuation need to be reviewed carefully from the point of view of, “is this the absolute best that can be done” with what is known and knowable. In the “The Art of Business Valuation”, much time is spent on reviewing projections as it is always a difficult area with a high level of professional judgment.
Aswath Damodaran models deal with changing growth rates and discount rates in the future in order to estimate business value using the discounted cash flow income method. See his discussion of the three state dividend discount model and the H model. Do you agree?
Damodaran is clearly a sage in the field of business valuation. He deals almost exclusively with public and extremely large private companies that may go public. That is entirely different from valuing small and micro businesses typically with revenues under $10 million. Certainly if you are working with a company that can provide a quality projection as a base for use in a discounted cash flow analysis, adjusting the cash flows and the discount rates over time is a reasonable way to estimate the value. In fact, if the data is highly supportable, the discounted cash flow method is theoretically the best method. Of course this is fact and situation dependent like all business valuations.
Many Companies and most small companies cannot give you a reasonable starting point projection or forecast. From my point of view, if I do not have a reliable projection to start from, it is usually best to use a single period valuation method such as the capitalization of earnings method with proper adjustments. Therefore in the proper situations, I agree with Damodaran. But for most micro and small business valuations we will not have the starting point data available to us to use the discounted cash flow income method of business valuation.
On last comment. I will frequently run estimated discounted cash flow models with various potential earnings streams to get an understanding of a companies range of values under possible scenarios. But to me, these are sanity checks and/or information underlying my professional judgement not final valuation methods. A useful tool but if I can’t really support the cash flow, it is not a final valuation method.
Have you ever had a situation where the Company Specific Premium in the Income Method of Business Valuation is negative because risk is lower than normal?
Absolutely but it is quite rare. Every now and then we find a company that is so locked in with its customers (often referred to as “sticky” ; for example, credit card processors can be sticky because they are written into your website) and so well organized and profitable that the risk is below the average public company. But, that is very rare. If you find that company, make sure you really build a well thought out case for your adjustment because it is likely to be doubted. Clearly explain why your company is different and why it should stay that way in the foreseeable future.
More webinars on the “Valuing Small Businesses in the Shadow of COVID-19″ topic and other business valuation topics are being scheduled in the upcoming weeks. If you are interested in participating, please visit our Upcoming Events page
“The Art of Business Valuation, Accurately Valuing a Small Business” covers many aspects of small business valuation and market sales including working with business brokers, increasing sales value, descriptions of a well-run sales process, due diligence including a checklist and guidance on SBA loans.
If you value or use valuations of businesses with revenues under $10 million, you need this book on your desk. The book, published by Wiley, is available through your favorite bookseller.
Finally the author, Greg Caruso, JD, CPA, CVA, is always available to assist with exit planning, brokerage, and to prepare or review business valuations with an emphasis on increasing value and likely transaction values and terms.
