Professional Accounting Blog

    Accounting For Your Prosperity

    Advice for Buying Your First Business

    Posted by Lloyd Bell on Aug 30, 2019 7:30:00 AM

    Topics: Corporate Finance

    Henry Ford famously said, “Whether you think you can or can’t, you’re right.” When it comes to buying your first business, the ability to effectively run a business is a different skill set than what is required to complete an acquisition. As a result, many successful companies and/or executives underestimate the complexities involved in closing a transaction.

    By far the largest hurdle that first-time business buyers need to understand is that sellers don’t have to be rational. A buyer can develop all sorts of financial models projecting certain rates of return on various capital structures, but a seller rarely cares. Their internal rate of return is not calculated on a spreadsheet, but rather, by what they’ve been able to provide for their family and what they hope to enjoy in retirement. A successful transaction, therefore, must meet the personal goals of the seller while protecting the financial goals of the buyer.

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    Why Business Valuation is About More Than Forecasted Earnings

    Posted by Lloyd Bell on Jul 30, 2019 2:23:00 PM

    Topics: Corporate Finance

    Business valuation is not as simple as multiplying earnings by a number and receiving recent earnings or forecasting earnings. One must get behind the numbers and assess them in order to know the risk of generating those earnings on an annual or go-forward basis.

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    Accounting Acronyms and Definitions When Buying or Selling a Company

    Posted by Lloyd Bell on Jul 30, 2019 9:49:00 AM

    Topics: Corporate Finance

    Acronyms are ubiquitous in the transaction world. Sometimes I forget that the accounting acronyms that are spoken aren't always known to the companies that are actually participating in the deals. I think we've now become accustomed to hearing EBITDA (earnings before interest, taxes, depreciation, and amortization), but what about TTM? That's trailing twelve months, and it's used when we're looking at 12-month periods that don't coincide with the company's FY (fiscal year).

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    Typical Multiples for Business Valuation

    Posted by Lloyd Bell on Jul 19, 2019 7:27:00 AM

    Topics: Corporate Finance

    A common question that I’m asked is, “Where are the current multiples for my industry?” The answer: it depends! Think about business valuation multiples as being an average or median of a data set. It’s likely that the company in question is not an average company, but rather is probably performing above or below the average of its peer group

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    Farewell to LIBOR

    Posted by Lloyd Bell on Mar 4, 2019 10:41:09 PM

    Topics: Corporate Finance

    Over the past 20 years, we have witnessed an almost complete transition in the lower middle-market from prime-based loans to those based on LIBOR (London Interbank Offered Rate). In fact, it’s estimated that there are currently over $350 trillion of loans and other financial products based on LIBOR.

    There are many reasons why the shift occurred, notably the fact that LIBOR is market-based while prime is an administrative rate.

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    Maybe I Should Give up Coffee...

    Posted by Lloyd Bell on Nov 20, 2018 2:20:43 PM

    Topics: Corporate Finance

    I recently came across a 2015 study by the University of Innsbruck that concluded that people who drink black coffee, tonic water or enjoy radishes are more likely to be psychopaths. Actually, it states that people who enjoy those items are more likely to exhibit signs of “Machiavellianism, psychopathy, narcissism, and everyday sadism”. Not sure how “everyday sadism” differs from just plain old sadism, but they’re Austrian and must know something I don’t. Anyway, I happen to enjoy all three of those things, although I must admit the tonic water needs gin to make it palatable.

    The reason, according to the study, is that psychopaths enjoy taking risks. The bitter flavors found in nature (or black coffee) are often from plants that are poisonous.

    Thanks for dropping the knowledge, Lloyd. But where are you going?

    If psychopaths enjoy taking risks, would that suggest that entrepreneurs are psychopaths? Of course not. Psychopaths generally have a lack of empathy and feeling for others, selfishness, lack of guilt, and a superficial charm that manifests exclusively to manipulate others. OK, that sounds like some entrepreneurs I’ve met, but risk taking on its own can be explained by other, less menacing-sounding traits.

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    Happy 65th Baby Boomers!

    Posted by Lloyd Bell on Aug 30, 2018 3:44:47 PM

    Topics: Accounting & Auditing, Corporate Finance

    Much of the excitement in recent years has centered on the great transfer of wealth that is expected to occur as Baby Boomers retire. There is no denying the demographics: the Pew Research Center reports that 10,000 Boomers will turn 65 every day for the next 19 years. Gads…where are we going to put them all?

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    How High Are We?

    Posted by Lloyd Bell on Jun 6, 2018 2:48:50 PM

    Topics: Accounting & Auditing, Corporate Finance

    GF Data Resources began its latest quarterly report with the statement, “High valuations and abundant use of debt continued to mark completed deal activity in the first quarter of 2018.” Let’s dig deeper and get a better understanding of “high.”

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    Taxes and Business Value

    Posted by Lloyd Bell on Mar 1, 2018 1:38:00 PM

    Topics: Accounting & Auditing, Corporate Finance

    Will the changes in the tax code impact the value of your business?

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    Increase in Plastic and Rubber Manufacturing is Expected as Prices of Raw Materials Decrease

    Posted by Lloyd Bell on Nov 1, 2017 1:55:56 PM

    Topics: Accounting & Auditing, Corporate Finance

    The following overview of the plastics and rubber manufacturing industry trends is part of a larger series of industry reports that will be published between August and November 2017 for the benefit of our subscribers. Data and information provided is cited from IBIS World, a global business intelligence leader specializing in industry market research.

    In 2016, Meaden & Moore clients in the plastics and rubber manufacturing industry experienced a 9.8% decrease in revenue. This decrease in revenue caused the net income for the clients in this industry to fall 15.0%. The plastic manufacturing industry as a whole experienced revenue growth of 1.9% over the past five years. This growth is expected to increase slightly to 2.5% over the next five years.

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