Posts Tagged ‘partnership’

Don’t hold back. Do ask.

by Himanshu Jhamb on April 8, 2010

Have you ever been in a situation where you were going to ask for that elusive raise, but did not? Ever been in a situation where you wanted to ask for that extra day of vacation and decided not to? Or that time when you wanted to ask … well! you get the point.

Here’s the thing about asking. Without the act of asking, the world around you simply does not know what you want. Now, I am not saying that by the simple act of asking, you will get what you want. No. Chances are… 9 out of 10 times you won’t because you are probably not very skilled at asking. Even so, what will happen is that the people around you will know what you want… regardless of whether you can get what you are asking for at that time or not. Eventually, there comes a time when you have something they need… and they know the point at which to align with you… and they offer you that. This is where magic happens!

Here’s a small story that speaks to this point:

A friend of mine bootstrapped a company with a couple other partners who said they all would invest some money together, over a period of time. Another friend of theirs wanted to join the company, was willing to invest but was told that he could invest but could not participate as part-owner since he joined a little later. This did not bode well with this fellow and he stuck to his guns aligning the group with what he wanted – to participate in contributing to the business as one of the part-owners. This request was met with repeated declines for more than 2 years… and then the magical moment came. Not all of the original partners could fulfill their commitments of investing what needed to be invested & guess who the remaining partners went to, to fill the gap? Yep! The same friend of theirs who had been consistently asking what he wanted.

Of course, most of the people called this friend of theirs “Lucky”. Reminds me of the popular saying:

Luck is what happens when opportunity meets preparation

Opportunity knocked on their friends door in the form of the investment needed to keep running the business; Preparation happened all the time with the standing request of participating in the business not as a passive investor but as a player!

One of the quickest lessons I learned as an entrepreneur when I started Active Garage was not to hold back & ask. “What’s the worse that will happen”, said our mentor, Rajesh, “People will say NO or maybe they won’t respond. What have you got to lose?” … and armed with that piece of advice, I asked away. There were more “No’s” than “Yes’s” that came my way but here’s a little secret that they won’t tell you… the No’s have been far better teachers to me than the Yes’s… as they created powerful opportunities for me to grow… and I have a very strange feeling that Rajesh knew that all along!

Oh! … and did I mention you can get all this, too if you just simply STOP holding back and START asking for what you really want!

Selecting a Business Valuation expert

by Steve Popell on February 18, 2010

Introduction

There are myriad reasons why the owner of a privately held company may want or need to have the company valued, including (partial list):

  1. Acquiring another company
  2. Selling the company
  3. Buy-sell agreement
  4. Repurchase of minority shares
  5. Divorce
  6. Partnership breakup
  7. Estate planning
  8. Probate

Regardless of the reason for the valuation or the urgency of the task, finding the right expert will pay off in the quality and utility of the opinion.  Here are a few tips to help you to make the best choice.

Background Check

Just as in hiring, you accept a resume on face value at your peril.  Always check references and publications.  In addition, go beyond the references provided by the expert.  You can do this simply by asking the listed references for the names of others who may have valid input on the competence and relationship skills of this individual.  These are called secondary references, and will typically be a more reliable source of information than the primary references.  You can even take it a step further by asking the secondary references the same question and, thereby, developing tertiary references.  Some questions you may want to ask will include the following.

  • Did the expert communicate clearly on all aspects of the prospective assignment at the initial meeting?
  • Did the engagement letter accurately reflect the shared understanding of the purpose of the assignment?
  • Was there a firm fee quote, or did the expert work by the hour?
  • Did the expert exhibit a genuine commitment to impartiality?  In other words, did the expert indicate clearly that s/he would simply go where the evidence led?
  • Was the request for data, including financial, reasonable?  If you didn’t have a particular document or piece of information readily available, did the expert insist on getting it, even if it seemed tangential?
  • Did the actual performance of the expert (data gathering, analysis, report, etc.) match up well with what you expected, based on the initial meeting and the engagement letter?
  • Was the report clear and easily understandable – even by non-financial people?
  • In the case of a divorce valuation, was the expert sensitive to the emotional aspects of the process?
  • How did the expert relate to other professionals on the case, such as a Collaborative Practice team, attorneys or mediator?
  • If you had to make this choice again, would you select this expert?

Absence of Ego in the Process

There is no place for ego or pride of authorship in the business valuation process.  One way to scope out this aspect of an expert’s approach is to determine if s/he is willing to submit a preliminary report that is open to criticism.  It is always possible that even the most competent expert will over-emphasize or under-emphasize some important data or, perhaps, miss something altogether.  It is also possible that something unexpected has cropped up during the valuation process that was knowable as of the valuation date, but the client(s) neglected to mention same.  The expert should be open to (even anxious for) the client(s) to provide such feedback.  The objective, after all, is the best valuation report possible, not the easiest to crank out.

Fundamental Understanding of What is Really Going On

Fair Market Value (FMV) is defined as what a hypothetical willing buyer will pay a hypothetical willing seller in a hypothetical free market in which both sides have essentially all the information they need to make an informed decision, and neither is compelled to conclude a transaction.  FMV is an appropriate standard of value in many situations, such as probate or any other circumstance in which the opinion will be presented in court or involve the IRS or other federal or state agency.  However, a number of other scenarios call for a different standard of value.

In a divorce, for example, or for a buy-sell agreement for a company with 2-4 owners, investment value is far more appropriate than fair market value.  The reason is very straightforward.  In either of these situations, the objective is not to determine what some outsider would pay for the company, or a portion thereof.  Rather, it is to ascertain what it is worth to one spouse (or one owner) to own a greater share of the company.

Avoid an expert who fails to grasp this critical distinction.

Flexible Fee Schedule

Anyone can charge several hundred dollars per hour.  It is more challenging to provide a fee schedule that offers the client genuine choices.  There are a few key questions in this regard.

  1. Will this opinion be offered in court or to some government agency?  If so, an “official” opinion will be required, and will be the most expensive.  If not, does the expert offer an “unofficial” opinion for a lot less money?
  2. Can delivering a much shorter report cut the cost significantly?
  3. Is there a choice between a broadly based analysis and report and one that considers financial documents only?  Is door #2 cheaper.

In sum, you have a right to expect quality performance from an expert with whom you have an excellent relationship, and for a cost that is commensurate with you needs.  Go for it!

This article has been contributed by Steven D. Popell CMC (Certified Management Consultant.) Steve has been qualified as a business valuation expert since 1974, and has published extensively on this topic. CMC, a certification mark awarded by the Institute of Management Consultants USA, represents evidence of the highest standards of consulting and adherence to the ethical canons of the profession. Steve was a 2007 winner Collaborative Practice California Eureka Award for contributions to Collaborative Practice in this state and is a Senior Partner in Popell & Forney, with offices in Los Altos Hills and Pleasant Hill, California.