If it’s a machine shop, the answer has typically been, “a business is worth the value of its physical assets, plus receivables less payables.” But the dynamic appears to be changing as the demand for American produced goods increases. I see companies paying for goodwill, but even more for the fluid organization of skills visible in seasoned viable businesses. Customers are transferable if the manufacturing skills can be proven and maintained. When new operators come in and fire everybody and then try to hire people back for less money, they are courting disaster. Even if the judgment they make is…
Author: Lloyd Graff
My 50th High School Reunion of the U-High class of 1962 is coming up at the end of May, but it really has already been happening over the last several months on the Web. A class of 100, which has dwindled to 80 with deaths and disappearances, has magically been brought together on the Internet with people sharing their stories, sometimes with amazing candor and sensitivity, like they never did in high school. Yesterday, the group received the awful news that the wife of a classmate had died of a heart attack over the weekend. The heartfelt condolences have been…
The International Association of Machinists and Aerospace Workers is involved in two significant high-profile strikes this week – at Caterpillar in Joliet, Illinois, and Hawker-Beechcraft in Wichita, Kansas. The situations are quite different, with Cat making record profits and Hawker on the cusp of bankruptcy with its finances controlled by a cadre of Hedge Funds – but the workers feel they are being abused in both places. Cat is asking for a 6-year wage freeze for the striking workers, who do not comprise a majority of the Joliet workforce. Caterpillar can keep the plant going without the striking workers. The…
May 1 is decision day for American colleges on the million applications from aspiring freshman. A lot of the seats that used to be occupied by Jimmy from Janesville and Susie from Springfield will be taken by Sing-Sung from Shanghai. Higher education in the United States is in a secular growth pattern despite skyrocketing tuitions because foreign students must pay full boat for an American college education. Their parents see it as the surest path to riches and respect in the world economy. U.S. parents may be doubting the value of a four-year university and its accompanying debt load, but…
The negativists see 8% unemployment, home foreclosures, Spain in free-fall, a Socialist winning in France, an Obama second term, and $4 gasoline. Plenty to moan about, but U.S. machining companies see an economic honey pot. Why? Autos (not so much pickups) are still selling despite gas prices. This indicates that car purchases are more related to economic optimism than the price of gas. Why do we have $4 gas? It is not lack of supply that hurts, because we have a glut of oil in North America. It just isn’t in the right place at the moment. The East Coast…
There has been a lot of hand wringing in the press about Facebook’s deal to buy the Bay Area startup Instagram for $1 billion, almost what the New York Times Company is valued at. Mark Zuckerberg, founder and still principal owner of Facebook, negotiated the deal with Kevin Systrom of Instagram, which has 13 employees and zero revenue. People are sniping at Zuckerberg because he did the deal over a weekend without informing his Board of Directors. But in the fast moving world of social media he saw a strategic threat to his $100 billion dollar enterprise, because his users wanted to…
The education of my son Noah in the used machinery business has been progressing for nine months. This is a report from his boss, which is complicated because he is also his father. Next week you’ll hear from Noah about his view of the process. To an outsider, buying and selling used machinery may seem simple: buy low, sell high. The reality is that it is one of the most demanding intellectual challenges I have ever encountered. Valuing dirty, broken, flawed, obsolete iron and convincing a potential buyer they are getting fair value is so difficult. The iron is generally an…
I had a hankering for a croissant and decided to drive over to Nielsen’s Bakery, a local bakery I don’t go to often, but they made nice croissants. All I found was a letter on the window saying they had closed after 21 years. The letter read like a note to a few insider friends and I could not really understand what it said, except that they were closing. The letter confirmed to me why I had not patronized them for years. I always felt I was an outsider there, a tolerated visitor interrupting a local Kaffeeklatsch (an informal gathering)…
I didn’t want to write about baseball again today. Enough already with the sports stuff, Lloyd. But Noah sent me an ESPN interview with Jamie Moyer, who will pitch later this week for the Colorado Rockies at the age of 49. How could I resist that story? Moyer cracked the starting rotation of Colorado because he proved in Spring Training that he can get guys out with his 80-mile-per-hour (heater?) and assorted off-speed pitches. No knucklers like Wakefield and the Niekro brothers. No trick pitches, no splitters, no spitters. Just location, guts and belief. Jamie came up with the…
What’s the business plan? What’s your revenue model? How do you get from point A to Point B? Can you scale this? These are the questions people used to ask and lenders still probably ask to people audacious enough to start a business. I think they are the wrong questions today. These are the questions I would ask today, after a lifetime of experience as a business owner and operator. 1) Do you believe in yourself as a business owner? If you cannot answer “yes” and believe in the “yes” you have very little chance, because you are going to…