The Business Transition & Valuation Review
January 16, 2018
Next issue: Tuesday, January 30
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In this issue
Lead Commentary:
20 Critical Business Transition Questions!
& 8 news commentaries that discuss AI spend, bitcoin, gender pay, North Korea, world risks and world trade
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20 Critical Business Transition Questions!
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Synopsis
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Finding the right answers requires asking the right questions. This commentary:
1. poses twenty ‘right questions’ business owners should ask in the contexts of their business & transition success prospects.
2. suggests how business owners and their advisors ought to interpret owner-specific answers.
3. urges advisors to ensure business owner clients learn of, and thoughtfully answer, these questions.
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Your thoughts on '20 Critical Business & Transition Questions'?
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Informative and useful, I own a business and will answer them.
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Informative and useful, I will bring these questions to my clients attention.
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Not informative and useful.
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Want commentary on a
business transition or valuation topic?
Write to me at icampbell@ircpost.com. I will write a commentary on your suggested topic, or find someone better equipped than me to write one.
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Please forward this Newsletter email to a colleague, friend or client interested in Business Transition and Valuation
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Comment
: A central issue that frequently causes business owners to procrastinate over business transition is: what am I going to do in retirement that will result in personal fulfillment and happiness. It typically is more complex than that, but that is the general idea.
1. What do you like to do?
2. What are you good at?
3. What allows you to live out your values?
4. What can you give back?
To that list I suggest family business owners add:
1. What is likely to give you long-term personal satisfaction and positive feedback in your retirement years?
2. Do you really want to work to build a family business legacy?
3. If you do, do you have a business that you are confident will remain viable and grow for the foreseeable future, the financial resources, and next-generation family members who likewise want to and are capable of doing that as owners, even if not as managers?
4. If you do, is your business large enough or potentially may become large enough to create a family financial legacy base if sold to an arm’s length third party?
The two lists taken together – along with any further questions their advisors add – ought to provide good food for thought for family business owners. This where they presumably periodically take time out of their busy days to contemplate their and their family members respective futures in our new normal economic and business climate.
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Comment: On January 10 the World Trade Organization announced Canada has filed a wide ranging trade case against the U.S. This filing is reported as being seen by the U.S. as damaging to Canada’s interests while playing into China’s hands. The complaint apparently has been filed in a way that enables other countries to join. Unsettled trade disputes, including NAFTA and now this, are increasingly a fact of life. Among other things they add an element of uncertainty to current and longer-term business value.
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Comment: This article reports that effective January 1, 2018 Iceland’s government has introduced a new law enforcing equal pay ‘for equal work’ (my interpretation of the article) between genders for all companies that employ more than 25 people.
Other articles on Iceland’s new law quote World Economic Forum statistics of gender pay inequality, to some degree point out reporting differences in how that law will be applied, talk to state laws in California and Minnesota, and note that Bernie Sanders is demanding the introduction of a “similar mechanism (presumably to Iceland) in the United States. Some of these articles seemingly include ‘absolute percentages of gender pay differences’, while others quote gender pay differences based on ‘equal pay for equal work’ principles. This where those things may be quite different. See:
It is difficult to argue against an equal work for equal pay maxim (i.e. a general truth, fundamental principle, or rule of conduct). Business owners and their advisors fairly might wonder whether Iceland’s introduction of this law might be seen as the ‘tip of the iceberg’ in the context of other countries going forward (pun intended).
In concept, this goes to the point I frequently make in these curations. Prospectively I believe:
1. government and societal interventions are likely to change business cost structures – perhaps materially.
2. business owners and their advisors should work to improve cost structures and balance sheets now in anticipation of such things.
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Comment: The accompanying chart has been developed from data shown in the referenced article. It shows directionally the reported growth in world spending on Artificial Intelligence (AI) after 2011.
The article says China is currently the second largest AI investor after the U.S. This where the article reports that in 2016 U.S. and Chinese companies made up 66% and 17% of world AI spend respectively.
What really matters here is the further confirmation that AI is a very big – and getter ever bigger – deal going forward. Clearly business owners and their advisors everywhere need to increasingly focus on AI and how it is going to impact individual businesses going forward.
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Comment
: Blockchain – famously related to Bitcoin – combines data storage and communication in a trusted medium. This article is about a start-up combining blockchain technology with ‘purpose-built scanners and specialized sensors’ in a farm crop application.
Perhaps more important is the chart included in the article which is reproduced here that shows 2017 deployment of blockchain in four business sectors. Presumably the percentages shown in the chart are U.S. specific – but that does not mean business owners and their advisors everywhere don’t need to focus on this as one further push to stay focused on technology developments as they change the way things are done ‘before our very eyes’.
Chart source: Deloitte, 2017 (n=308 senior executives)
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Our information/reference book receives
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Comment: This lengthy article was written by David A. Welch Senior Fellow, Centre for International Governance Innovation (CIGI), CIGI Chair of Global Security Balsillie, School of International Affairs, and Professor of Political Science at the University of Waterloo.
While it is a 15 – 20 minute read I recommend it for Dr. Welch’s clarity as to how he sees and assesses possible consequences that could arise out of the North Korea – United States standoff over North Korea’s ongoing nuclear arms tests and the threat of war. As I read the article, in the end, Dr. Walsh says the matter needs to be brought to a head and dealt with where it postponement will simply enable the issue to fester.
I believe I far better understand this issue having read his article. You may already have read it, but if you haven’t I suggest you consider doing that.
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Comment
: Pretty much everyone has heard about Bitcoin, cryptocurrencies, and blockchain technology. The recent enormous reported gains in the price of a Bitcoin staggers the imagination. Yet in my recent discussions I find few who pretend to have even a basic understanding of blockchain technology and cryptocurrencies.
The referenced article strikes me as a well researched, easy to read and seemingly objective high-level overview of Bitcoin and blockchain. I can’t attest to the efficacy of its contents. That said, I suggest in the current environment it can reasonably be described as ‘must read’.
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Comment: Anyone can make up ‘their list’ of ‘greatest risks’. Here is a list of the ’10 biggest risks’ as generated by Eurasia Group’s Chairman and President.
Eurasia Group is said to be the world’s largest political risk consultancy.
1. China filling a global leadership vacuum.
2. ‘Accidents’ in Eastern Europe, Iraq, Korean Peninsula and elsewhere – including terrorism issues.
3. A global technology ‘cold war’ in artificial intelligence and supercomputing.
4. Mexico in the event of a NAFTA talk collapse.
5. U.S.-Iran relations.
6. Erosion of institutions, being governments, political parties, courts, media and financial institutions – all said to be losing credibility.
7. Country-specific protectionism.
8. The UK, particularly in the context of ongoing Brexit negotiations.
9. Identity politics in south Asia.
10. Spillover of violence in Africa to its ‘core countries’, identified as Cote d’Ivoire, Ethiopia, Kenya and Nigeria.
And three ‘red herrings’, identified as:
1. the Trump White House.
2. the Eurozone.
3. Venezuela.
You might want to read this article for explanations behind each identified risk. When doing that you might want to consider that the authors spend their time thinking about political risk. Query: what about central bank policies and financial markets that seem to go nowhere but up?
Then think hard about all of the foregoing before moving on to things you have some personal influence over.
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No financial markets news articles are included in this issue.
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Ian R. Campbell
is the principal contributor to this Newsletter. He has given business valuation and transition advice to both public and private company owners for over 45 years. Other contributors are experts in business transition or specific disciplines relevant to business transition and valuation.
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Newsletter content ('Content') does not constitute individualized business transition, valuation, technology, economic or investment advice. The ideas, views and opinions expressed in the Content are solely those of the authors/contributors. Provided 'as is', Content may change without prior notice, may be incomplete, inexact, incorrect or jurisdiction specific. It is used at the reader's own risk.
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Copyright © 2018 Transitus Publishing Inc. All Rights Reserved.
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