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ECONOMIES OF SCOPE is an idea that was first explored by John Panzar and Robert Willig in an article published in 1977 in the Quarterly Journal of Economics entitled “ Economies of Scale in Multi-Output Production ”. Marketing – The cost of advertising can be shared across products.
At Consultant Journal, we know many entrepreneurs, small business owners and consultants wonder about the business impact. Think about what’s actually needed for your sales and marketing : Wave or nod instead of shaking hands. Take a look at your cashflow and what a change to sales or staffing could do.
Second question: is there similar activity with larger companies, small, mid-sized, and lower middle market firms? Barlow research – Two-thirds of lower middle-market business owners are expected to retire. Similar firm in a different market. What we write about is aimed at the $10 million deal and below. Easy money.
On June 2, 2018 Jason Zweig’s article in the Wall Street Journal was titled, “ The Fanciful Alphabet Soup Companies Use to Fool You.” This goes back to before the stock market crash of 1929. Zweig writes that any form of modified profit isn’t cashflow. Marketing expenses (the marketing didn’t work so it’s really profit).
I wrote last year about the pricing of middle-market companies and an article in the Zachary Scott newsletter titled “8 is the new 6″ (referring to multiples of EBITDA on middle-market deals). Or perhaps they figure the prices for business have skyrocketed like the stock market.
In the Discounted Future CashFlow method profits are projected (same as the first issue) and discounted back to a present value. As I write this, according to the Wall Street Journal, the current PE ratio for the S&P 500 is 25.89. For small businesses, it’s 3-5 times profit (after fair market owner compensation).
Good employees are hard to find and often are not in the job market. Great employees with industry knowledge and experience are in the job market even less. In simple terms, if your primary motivation is acquiring a customer base, you are acquiring market share. Just talk to any executive recruiter. Yes, we can!
In the 1980s, project management software packages often were marketed in terms of how well they performed what was called “cost/schedule integration.” If we are undertaking the project scope because of the value (contract price, sales revenue, market visibility, productivity improvement, mortality reduction, etc.)
They argue that the market has become saturated because of the barriers to entry are low (do we really need 53 subscription box companies offering sex products?), grocery market were almost $800 billion, only 1.2% the absolute size of the customer base and the number of customers acquired each quarter). Case Study: Blue Apron.
On April 5 the Wall Street Journal had a frontpage article titled, “ Small-Business Owners Feel Weight of Personal Debt Guarantees. Makes sense given another recent headline I saw, “ Office-Space Subleases Flood Market.” 1) debt coverage ratio (the first number is free cashflow and the second number is debt service payments).
On August 24 my phone buzzed with a news flash from The Wall Street Journal. Can inventory values be inflated, sure, but if the deal says the lower of cost or market the value can’t be more than the cost. Cashflow is, however, the tricky one. The reason is supposedly “to secure favorable loans and tax benefits.”.
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