Hiding In Plain Sight.


I am notorious for losing things.

The other day I misplaced my car keys and I could not find them anywhere. Maybe I dropped them on the driveway when I was taking groceries out of the car or more likely, they were here in the house somewhere. Of course, this isn't a dire issue but then again, the house keys were on that same ring and you wouldn’t want those keys lying in the driveway.

I looked EVERYWHERE - even silly places like the cupboard where the coffee cups go and in the refrigerator (don’t laugh, it’s happened before). I finally found them inside my daughter’s sneaker which was on the floor, under the antique green bench that sits in our front hallway. I must have dropped the keys on the bench and they fell off and into the sneaker. As the old saying goes, “if it had been a snake, it would have bitten me.”

Sometimes the thing you’re looking for is right there in plain sight and you just don't see it or think to look there. A company’s value is like that sometimes.

Have you ever seen a sign that says, “We Love Our Customers” or a business that boasts “our employees are our biggest asset?” That’s not just a line. Sometimes those things ARE where the value of a company lives.

Customer relationships, an assembled and trained workforce, manufacturing processes, logos…all of those things that are important value drivers but don’t typically show up on a balance sheet.

Guess what…if you’re running or selling your business, you know all about these.

You know what makes your business run and maybe it’s that fact that your customer and supplier relationships are long-standing and you’ve “been through the wars together.” Value could live in the way your manufacturing facility is set up - where the machinery for one part of the process is right there beside the machinery for the next step.  Those things create value and you should be paid for that value.

I once worked on a deal to sell a company that manufactured a component that went into great big industrial machinery. It was sort of a funny looking part and the simple fact that this company’s production process entailed “stamping” versus bending meant that they could produce parts faster and cheaper and of higher quality than anyone else. It wasn’t a patented process, just something they “made up.”

Does that show up on a balance sheet? Nope. The only way to understand it is to see and once you do, it’s one of those forehead-smacking moments where you just “get it.”

A long, long time ago, I was working with tech startup that pioneered digital imaging software aimed at the high-end home décor market. This was way before any of this sort of stuff existed – “if you put a green couch here and paint the walls an eggshell finish in ecru, with the light coming through the skylight at this angle, blah blah blah…” – stuff I know NOTHING about. BUT, after thinking about it for a few minutes, I kind of thought that what they were saying sounded like the way the military uses imaging in targeting and navigation systems. Sure enough, when I read the bios of the team, most of them had spent years in the military and had degrees in things like aeronautical engineering. Makes sense, right?  The driver of value was the backgrounds and experience of the engineering and development team, not the “hard assets” - of which there were almost none.

Value is predicated on what a buyer or investor will pay (not a theoretical “willing buyer” but a REAL one). At the end of the day, people who buy businesses don’t buy balance sheets (really, they don't). They buy future cash flow generation and a company’s ability to generate that cash flow is often driven by things that are right there in front of you but that are still overlooked. You can pore over the balance sheet, read the notes to the financials, even look in the refrigerator but the only way to really understand the value that is being created is to ask the questions and LISTEN to the answers and THINK.

And for heaven’s sake, just move the bench and look inside the sneaker.


And now here are some words of wisdom from people who aren’t me:

  • “There is nothing more deceptive than an obvious fact” - Sir Arthur Conan Doyle
  • "The obscure we see eventually. The completely obvious, it seems, takes longer." – Edward R. Murrow
  • "The real voyage of discovery consists not in seeking new landscapes, but in having new eyes." – Marcel Proust

 Thanks for reading. As always, I appreciate and welcome your comments and feedback.

Be good and be well.

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