Value Maps: Valuation Tools That Unlock Business Wealth

Preface xiii

Acknowledgements xix

About the Web Site xxiii

List of Acronyms xxv

Part I CORNERSTONES 1

Chapter I Why a New Approach Is Needed 3

Valuation as Craft 5

The State of Our Craft 6

Cause and Effect: What and Why 7

Multidisciplinary Tools for Analyzing Value Creation 8

Parameters of Valuation 10

What We Know about Risk 11

Components of Risk 12

A Framework for Unsystematic Risk 13

Unlocking Business Wealth 16

Summary 17

Additional Reading 17

Chapter 2 Tools from Strategic Management 19

History 19

Perspective 22

Valuation Tools 22

Strategic Intent 23

Generic Competitive Strategies 26

Resources 29

Competitive Analysis 32

Distinctive versus Sustained Competitive Advantage 34

VRIO 37

Customer Satisfaction Surveys 38

Diversification 39

Unlocking Business Wealth 42

Summary 43

Additional Reading 43

Chapter 3 Tools from Industrial Organization 45

Perspective 46

Tenets 47

Tools 49

Unlocking Business Wealth 62

Summary 62

Additional Reading 63

Chapter 4 Tools from Organization Theory 65

Perspective 68

Tenets 70

Tools 70

Unlocking Business Wealth 82

Summary 82

Additional Reading 83

Chapter 5 Tools from Evolutionary Economics 85

Perspective 88

Tenets 89

Tools 89

Unlocking Business Wealth 103

Summary 103

Additional Reading 104

Chapter 6 Tools from Austrian Economics 105

Perspective 110

Tenets 112

Tools 113

Unlocking Business Wealth 123

Summary 123

Recommended Reading 124

Part II POURING THE FOUNDATION 127

Chapter 7 The Straight Scoop on Value Drivers 129

Definition 129

Value Drivers versus Balanced Scorecards 131

Why Value Drivers Matter 132

The Regenerative Power of Capitalism 134

Assessing Durability 138

Summary 139

Additional Reading 140

Chapter 8 The “OT” in SWOT Analysis: The Macroenvironment 141

Defining the Domain 141

Unit of Analysis 144

Trilevel Unsystematic Risk Framework 145

History and Background 146

Why Does the Macroenvironment Matter? 147

The Forces 148

Summary 153

Additional Reading 154

Chapter 9 The “OT” in SWOT Analysis: The Domain 155

The Roots of Domain Analysis 155

Oligopolies Large and Small 155

Price Competition in an Oligopoly 158

Published Industry Risk Premiums 158

The Domain 161

Summary 165

Additional Reading 166

Appendix 9A: Competitive Analysis and

Estimating Market Share 167

Chapter 10 Getting to “Why”: Analyses, Composites, and On-Site Interviews 171

Financial Ratios 171

A Key Metric 172

Finding Sector-Specific Metrics 173

The Analysis 173

How to Construct a Composite 175

Prepping for the On-Site Interviews 175

Conducting the On-Site Interviews 177

Summary 180

Chapter 11 The “SW” in SWOT Analysis: The Company and SPARC 183

Cause-and-Effect Relationships 186

Value Drivers and Value Destroyers 190

Assessing Durability of Advantage 202

Back to VRIO 202

Summary 204

Appendix 11A: Bringing It All Together: Quantifying Unsystematic Risk 205

Chapter 12 SPARC Archetypes among Small and Medium-Sized Enterprises 207

Exploiter and Extender 208

Explorer and Experimenter 210

Equivocator 213

Summary 214

Part III TALES FROM THE FIRING LINE 217

Chapter 13 Construction and Manufacturing 219

Construction 220

Specialty Publishing I 223

Specialty Publishing II 226

Specialty Manufacturing 228

Packaging 232

Chapter 14 Business to Business 237

Safety Equipment/Supplies 237

Industrial Supply 240

Construction Materials 244

Antique Building Materials Reclamation 249

Chapter 15 Transportation 255

Transportation Collection Services 255

LTL Trucking 258

Freight Forwarding 264

Chapter 16 Specialty Retailing 269

Jewelry I 269

Jewelry II 273

Building Materials 276

Pharmacy 277

Chapter 17 Services 281

Outplacement Services 281

Executive Search 283

Private Equity 285

Investment Banking 287

Dental Lab 289

Quick-Lube Services 291

Part IV PRACTICE MANAGEMENT 297

Chapter 18 The Engagement Process 299

When Can an Engagement Include a Value Map? 299

Finding Good Clients 300

Avoiding Problem Clients 301

Marketing and Selling the Work 302

The “Shake-’n’-Howdy” Visit 303

Pricing the Engagement 304

Engagement Letter 1 305

Highlights of Engagement Letter 1 306

Managing Expectations 307

Engagement Letter 2 309

Summary 311

Chapter 19 Working with Clients 313

A Few Words about Family Systems 313

Processes 315

How Not to Do It 315

How (Else) Not to Do It 317

Start at the Beginning 317

Think like a Buyer 318

Planning the Engagement 319

As the Process Unfolds 321

Winding Up the Value-Mapping Process 322

Summary 323

Additional Reading 323

Chapter 20 IFRS, IVSC, and Value Maps 325

The Valuation Process Outside the United States 326

The Cost of Capital Outside the United States 326

Gathering Data Outside the United States 327

Summary 332

Chapter 21 Epilogue: The Future for Value-Mapping Services 333

The Future for Valuation Services 333

Marketing Matters 335

That Special Cadre Dedicated to Delivering Value to Clients 340

Closing Words 342

Bibliography 345

Index 351