Thorns in Life...

“Night honey”, and off went the lights.  It was only 10 pm.  The clocks had fallen back that day, so it felt like 11 pm.  Good. Tomorrow at 6 am when I awoke, it would feel like 7!

We finally got our toddlers to sleep after lots of protesting.  It’s a pretty typical dilemma in our family, but this night, our one year old just would not go to sleep.  His clinginess as of late was as endearing as it was challenging, but tonight seemed different.

He just couldn’t seem to get comfortable.  We passed him back and forth taking turns rocking him while he screamed.  After a while, I gave up and brought him into our bed hoping that being close to mama would help him calm down.  Nope, that didn’t work either.

I went back to our rocking routine until I couldn’t take it anymore and put him into the crib to let him cry it out.  I think he was already tired because it didn’t take too much longer before it got quiet. Ahhh… relief…

A couple of hours passed and my four year old woke me up, as he normally does.  I walked him back into his room and sat with him while he fell back asleep.  I glanced over at the crib and noticed that while he slept, my baby’s bottom lip turned down and was quivering while his face crumpled up.  Awe.  Poor thing must be having a bad dream.  He was having a tough night.  I left their room hoping it would be the last that night.

An hour later, the baby started crying.  I waited hoping that he would fall back asleep which usually works.  Footsteps pounded toward my room, and I yelled out softly… “I’m coming, I’m coming.”

I picked the baby up and rocked him more.  Nope. That didn’t work.  I took him into my room hoping my husband wouldn’t feel crowded out of the bed.

An hour later, my four year old jumped on top of me.  I yelled out to my husband, “he’s wet, he’s wet,” and my husband carried him off to the bathroom. Then, they nestled back down for a few last moments of rest.

Flashes of light came from the bathroom. It was 5:30, and my husband was up with a flashlight getting ready.  The tots softly stirred until they were tumbling around, clicking lights on and off, and then jumping off the side table onto the bed and then the floor.  Already?

I got up, got ready and started to change them for daycare.  And then I found it…. A small, sharp nail clipping poking into my little one’s backside.  Like the Princess and the Pea, my littlest prince had been suffering all night long.

Each one of us faces little and sometimes big problems that poke at us throughout our days and our nights. “Blessed is the one who perseveres under trial because, having stood the test, that person will receive the crown of life that the Lord has promised to those who love him.” (James 1:12)

What is poking you? What can you take to the Lord in prayer?

As I learn how to buy businesses, there are many thorns.  One that I have identified and have been working through is how to find the value of a business.  What is the business worth and not just what someone else thinks the business is worth?

There are 3 methods to value the company.  The Multiples Method is the easiest.  It gives you a way to do some back of the napkin math that anyone can do.

Before your eyes glaze over, this method is really simple.  For a small to medium business (SMB), take the number at the bottom of the P & L which is called net profit and multiply it by an industry standard (generally 2-4).

What does that mean?  Basically, someone will pay whatever profits that the company makes in one year times a number.

Here’s a basic example:

• Company Makes $100,000 per year

• Times a multiple - let’s use 2 for this example

• Value of the Company -OR- the Price You Would Pay to Buy It = $200,000

To make the number a little more accurate, once you get more detail with tax returns, you can add back any money to the net profit that is not normal (like a company paying the salary for their spouse who doesn’t really work in the business) and multiply it again.  This will make the Value of the Company a little higher, but using net profit is a great way to get a baseline value.

Of course, there is more detail that goes into validating the numbers that make up the P & L as well as quality of the business, but this type of valuation is so simple that anyone can do it.

Here are some resources for helping you learn how to value a business:

1. How to Value a Small Business This is the best video that I’ve found to explain the Multiple Method in a way that a person off the street could understand. 

2. An example of how to calculate the value of my small business gives us a simple explanation on how to exercise the Multiple Method teaching about the concepts of goodwill in conjunction with net profits.

3. How To Value A Small Business  This video is short and sweet.  The presenter provides an old school visual breaking it all down.

4. How to value a company using multiples - MoneyWeek Investment Tutorials provides direction on how to use the Multiple Method.  This video is a little more technical but very well taught so maybe a 102 level.