In my book, Business Exit Planning (John Wiley & Sons, 2012), I confess to have made a significant error in judgment: I have barely touched on the option of bankruptcy as an option for exit. It is an option that should be considered seriously for quite a number of companies.
If there is one graph that one might look at that would best summarize perceptions of risk associated with the world economy, which graph would that be? Probably the VIX-- a volatility index published by the Chicago Board Options Exchange (CBOE)—also known as the “fear index”. It is calculated based on the number of put and call options sold, as related to S&P 500 shares, with a 30 day duration. So a reading of 15 means that the market expects the S&P to go up or down by 15% (on an annualized basis) over the next 30 days.
Stephen Covey, in his acclaimed book, “The Seven Habits of Highly Effective People, uses an interesting analogy to distinguish between management and leadership.
I have seen several situations where management was of the view that costs could not be cut without considerably affecting the revenues or profitability of a company, but a new management team or a consultant showed otherwise, or where economic duress forced management to rethink what was possible.
For anyone who has anything to do with business in Central Europe, it is important to know the risk associated with your country, and also where this fits in by comparison to other countries in the region. There are numerous reasons for this:
Although few SME owners will ever take their companies public, it’s useful nevertheless for business owners to keep an eye on what’s going on with stock exchanges, if for no other reason, because they provide some interesting benchmarks.
What surprised me about the most recent statistics (see chart below) is that:
(a) The Alternative Investment Market (AIM) in London leads by number of listed companies;
(b) The Moscow Stock Exchange dwarfs both Warsaw and the AIM in terms of Market Capitalization;
One should not look a gift horse in the mouth, as the saying goes, so forgive me if I raise an unorthodox point of view: free money, in the form of EU or Government grants to Small and Medium-sized Enterprises (SME’), is not necessarily a good thing.
Why not? I start from the premise that the greatest need for SME’s is to increase competitiveness. To the extent that a business is competitive, it will increase its market share, exports, profits, etc. as well as generate more jobs, taxes, etc., and help everyone to live in the lifestyle in which they would like.
Business owners often ask themselves whether they need a business valuation, and if so what kind of valuation is required. My last article dealt with the first issue, and this article deals with the second issue. This is an important issue, so please bear with me during the slightly technical explanation.
The two most common methodologies for valuing small and medium-sized companies are the Discounted Cash Flow (“DCF”) method, and the “Multiples” method.
Business owners often ask themselves whether they need a business valuation, and if so what kind of valuation is required. This article deals with the first question. My subsequent article, appearing in two weeks, will deal with the second question.
As the owner of an SME (Small or Medium Enterprise), and as an individual consumer of financial services, I am always amazed by the standard fees that financial institutions charge for various types of transactions. In this article, I will deal with three examples: visa payments, foreign currency exchange, and wire transfers.
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