Memorial Day, 3.4=40,003.59, CPI, DJI, M&As and some Take-Aways
When 3.4% = 40,003.59
It seems like Groundhog Day. Again.
I almost expect to hear Sonny & Cher singing I Got You, Babe. But I digress.
Google “Groundhog Day, and I got you, babe” if you want to understand my digression.
Last month, the CPI went up, and the market – the one with stocks, not the one with baking goods – went down.
And then new jobs were at a recent low, and new claims for unemployment were at a recent high.
And the stock market stayed depressed.
This month, the CPI was better (meaning lower) than last month.
Month over month, it was at 0.3%, but 0.4% was expected. It beat expectations.
The Annual CPI came in at 3.4%, meeting expectations and lower than last month’s 3.5%.
There were other peripheral reports:
Retail sales were flat but an increase of 0.4% over last month was expected.
That would imply a slowing economy and less spending, which could mean prices not going up or going up as fast, keeping inflation in check.
Jobless claims were lower than last month, signaling that maybe, just maybe, the economy wasn’t softening too much.
So, the Dow Jones Industrial Average went to a record high, ending the week at 40,003.59, closing above 40,000 for the first time.
Key Take Away: Hopes are back up that the Fed will cut rates this year. There are still some folks who are not so sure about that, but if rates are cut, that could cut your interest expense on your loan.
And that’s more to your bottom line.
Business M&A
I happened to attend a presentation by a group called the Exit Planning Institute. Their guest speaker was Anna Jacob with Diamond Capital Advisors.
She was really tuned in to how a family should sell their business.
I’m not talking about selling for $750,000. She handles the deals that are north of $20 million.
That’s roughly a cash flow of $3 to $5 million, depending on the industry and the multiples.
The Take Aways:
Plan at least 3 years in advance, preferably 4 or 5.
Don’t wake up one day and decide to sell your business by year-end. It can be done, but you will leave a LOT of money on the table.
If you plan it out and take the time, you can really increase your company's value.
If you take the time to build a strong management team, that will build the value of the firm. The more dependent the company is on you, the owner, the lower the purchase price.
The CFO is a key player, so make sure that is one of the stronger players on your team.
When a buyer throws a high number at you, and you sign the NDA, you may have successfully been taken off the market. You now must wait it out.
And odds are, that buyer is coming back with an ‘adjusted’ offer.
So the due diligence on your buyer is also important.
Know your cash number.
Many deals are cash, stock and earn-outs. Make sure you are getting the cash you want.
Earn-outs are, shall we say, subject to interpretation. The new owner, who may be your new partner, may insert new expenses or otherwise impact what the ‘earn-out’ will be.
So, cash, once again, is king.
Your outside team should have a:
Wealth manager
Estate and tax attorney
CPA and M&A tax expert and a Quality of Earnings – QE – evaluator
Investment banker to manage the process.
If you were a professional athlete, the investment banker would be your agent.
M&A attorney
That’s a lot of content to chew on, but selling your business for the money you want takes a lot of work. We’ll continue this in another Report.
It’s Memorial Day – Monday, May 27
Next Monday is Memorial Day, traditionally the cultural start of summer in the USA.
It also marks the time of year when prospects put off all future sales appointments until September.
This is a federal holiday observed (not celebrated) on the last Monday of May. This date has been set since 1971.
I say “observed” because the whole point is to remember our military service men and women who have died during military service for the United States of America.
It is Veteran’s Day in November that we celebrate living service members, past and present, in case you are keeping track.
Many states and cities lay claim to starting it, but generally speaking, it started as Decoration Day in the 1860s during the Civil War.
In 2000, Congress passed the National Moment of Remembrance Act. This asks all citizens to stop and remember these service members at 3:00 p.m. Or, more appropriately, 1500 hours.
My ask this week is as follows:
Survey your employees and learn if any of their family members died in service to their country.
Then, thank them for their family’s sacrifice.
Whether you are grilling, swimming, driving, or picnicking, please make a point of setting your phone to ping at 1500 hours. You can even ask Alexa, Siri, or Google; they will be happy to track your activity. They kind of do it already, anyway.
Enjoy the weekend while remembering why we have it.
