Slides from Videos

Key slides extracted or used in

Checklist for Survival Video Series

The slides depicted below are in no special order and are taken from various videos either currently posted on my website or will be posted by the end of October 2011. Most are self-explanatory in nature. If you have any questions don't hesitate to email me at: qkconsult@aol.com. Unless noted otherwise, all percentages are based upon the annual percent of sales for that specific category or expense. There may be a difference of +/-2% depending upon the extraction used, but the overall data has a high degree of reliability with the overall margin of error at +/-3%. Note that a 3% margin of error is applied against the percent show; consequently, applying a +/-3% margin of error to 40% would mean that the actual range in terms of accuracy (95% of the time) would range between 38.8% and 41.2%. I hope that is clear! John Stewart

Note the large number of firms reporting significant negative owner's compensation. It takes an owner's compensation of approximately 12% or greater before a firm begins to have any appreciable value above and beyond any assets it may sell.

Winners vs. the Losers - Notice the stark difference in every expense category between the Top Quartile and the Bottom Quartile. The most startling difference by far is the huge difference in payroll costs. This is nothing new and has been a problem plaguing the industry since the mid 1980's.

While some expense categories have stabilized, one category (Payroll) has not. The significant increase in payroll costs are the primary reason why so many companies are in trouble. Guess what, it is not because of Obamacare or excessive governmental restrictions placed on small businesses.

Some things haven't changed much in 27 years - Note that between 1983 and 2009 Cost of Sales and Overhead Expenses have either held their own or actually decreased. Only one expense continues to skyrocket out of control - Payroll!

Almost the total difference in profitability between the top and bottom quartiles in this industry can be attributed directly to differences in payroll expenses! How much more can we hit subject - other than to note one more thing! <g> High payroll expenses are typically the result of employing too many people, not paying people too much!

Use this basic formula to estimate a value for your firm. Do not exaggerate your entries.

The more accurate and honestly you calculate your true owner's compensation, the better off you will be when it comes to establishing a "Fair Market Value" for your business.

A simple formula that is easy to apply!

This formula has met the test of time. It makes it quite easy to establish a fair market salary for an owner. Profits above that amount are considered "excess earnings" and it is these "excess earnings" that have the great impact on value.

The slide above is self-explanatory in terms of defining the "Excess Earnings" approach to valuations.

Above are some of the key factors considered in a valuation of our fictional firm named Premier Digital.

Although there is significant evidence that many owner's would place a higher value on this firm, we believe our estimated value of this business to be very realistic. In a situation such as this the average buyer would ask considerably more and a knowledgeable buyer would offer considerably less. It is important not to confuse "value" with the terms "selling price," "offering price," or "purchase price." The latter terms can vary greatly from situation to situation.