This week there was a theme to Prof Les Charm’s lectures – how to value a company. On Monday we looked at a case study called “Paint Pen” where we had to 1) create a cash flow sheet from the balance sheet and the income statement and 2) value the same company based on the cash flow statement and information given in the case.
Les had a few interesting points for assessing a company based on financial statements. The most important point is that we aren’t expected to be accountants, but that we need to be able to ask the right questions to get the important information. Towards this goal, Les recommended the following:
- Round figures – every entry becomes a lot clearer if you can round to the nearest sensible number
- Common size analysis – convert the numbers into percentages, for example on the income statement you might make revenues 100% and everything else a percentage of that. It makes it easier to compare across years.
- Compare these percentages to what you know about cash flow in other industries – analyse one channel compared to other channels. You can also leverage the existence of public company income statements – eg comparing your coffee shop percentages to those of Starbucks (by the way, Starbucks’ revenue in 2016 was around $21 billion with over 50% gross margin… not bad for a coffee shop!)
- To easily create the cash flow statement, separate entries into 1) Sources of Cash and 2) Uses of Cash. Forget about separating by Investing, Financing and Operating as that is for accountants!
- Business is all about how to divide the dollar – who’s getting margin where. “Business is about dividing a buck”. You can show where each percentage of a business dollar is going on a very easy to comprehend graph…
Then on Friday we had a session with a bit of a surprise. We had read a case study about a company named “Pyron” that was being put on the market. We split into 2 teams – buyers and sellers – and had 30 minutes to come up with 1) our respective negotiation strategy and 2) the highest we would be willing to pay for the company, or the lowest we would accept for the company. It was a stressful 30 minutes as we attempted to analyse the company (I was in the buying team). The negotiation was also difficult as 9 people at once had to remain on the same track – and neither team was giving the other an inch of leeway!
The point Les was trying to make – as he deftly managed the dynamics of the session – was that each person in the group would make different decisions at different points leading to different outcomes. And that it was all about choice. He also made the point that we all have to negotiate but that its not something we practise…
The session took a turn when the man, the myth, the legend Prof Ed Marram walked into the room and revealed that the case was a real life one based on his own experience! He had been the buyer and took us through his incredible story of how he bought the company for very little cash. His approach was 1) finding out who the stakeholders were 2) starting with the employees to make sure they wanted to come across to his company 3) rebalancing the accounts in a clever way so that shareholders didn’t lose out 4) deciding what he actually valued in the company (inventory and employees) and only paying as much as they were worth 5) leveraging a third party lender who had a vested interest in the deal going well…
It was an incredibly inspiring session that will stay with me, and has prompted me to plan to practise negotiation.
Les Charm’s Banking Session
There is a lot of Prof Les Charm in this blog already, and more coming. On Monday evening, Les very kindly invited us to his evening MBA class where he had invited a banker along to discuss a deal she had orchestrated and written up as a case study. It was a fascinating session where we learned about subordination of loans, what bankers look for in loaning money and why they do it the way they do.
American Emergency Room Shift
On Tuesday I did a 1600-2200 shift at a local Massachusetts Emergency Room, in Leominster. I wrote up a blog post about the experience, and the American Healthcare system, here.
Sell it to me!
On Wednesday we had a great class with Prof Tim Marken, who has been teaching us Sales as per the Value Selling Framework. We had to put ourselves in the position of “Sarah Harris”, an entrepreneur looking for investment from a successful (and wealthy) serial entrepreneur Jason. We teamed up in twos and took turns at grilling each other in 7 minute sessions.
The Museum for Fine Arts Diwali
Wednesday evening I went to the MFA, which was free for their Diwali evening. There was amazing art, dancing and Indian music, and I even got an opportunity to do some life drawing – pics below!
On Thursday we had a prototyping class with Erik Noyes, an expert in innovation management and growth strategy. It was a fun class that followed on very nicely from our Design Thinking Class with Sebastian Fixson. We learned about Erik’s experiences prototyping for a fun crowd-funding campaign, and also gave a whirlwind prototype a go.
The brief was to create a product to encourage kids aged 10-14 to take their chewy multivitamin daily. Our team (Kirsty, Nick and I) created a crane game with wrappers that can be exchanged for big prizes:
Erik then showed us a 10 minute clip of kids aged 10-14 feeding back to a previous Babson group who did a similar exercise, and we very quickly got a feel for what would have worked and what wouldn’t have worked. The important thing for me was that it showed the value of rapid prototyping and feedback.
Chris van der Kuyl, Chairman of Entrepreneurial Scotland
It was a great honour to have Chris pop in at last minute’s notice to give us a lunch and learn session. He told us about his new company – TVsquared – which has solved the technically challenging problem of attributing the effect of television adverts to website visits, and it sounds like they are doing fantastically well. Although I got a bit taken away by how cool the technology is, his real point was about the growth mindset required to scale a company quickly to avoid leaving value on the table or allowing a competitor to catch up, and how he thought that Scotland can sometimes lack that growth mindset and he wants us to think about it going forward.
Cambridge Innovation Centre
Cambridge Innovation Centre (CIC) occupies several floors of the building at 1 Broadway in the centre of MIT. I had attended several events there, including our visit to the British Consulate in Week 5, without understanding the CIC business model – and this was rectified on Thursday when we visited for a tour and talk.
CIC is a real estate company that rents out space – from flexible hotdesks to full-size offices – to entrepreneurs. They are currently looking to expand to several countries, and told us an interesting story about how many companies looking to expand ops to Boston – eg Facebook – like to rent space from them to “test” out the fit of the area, before moving on to their own larger offices.
It’s a great resource with fantastic events on every week.
I spent the weekend with a friend in Burlington Vermont. Driving along the I-89 briefly through New Hampshire, then Vermont, it became obvious that we had missed the “peak” fall foliage – however the views and scenery were still spectacular as we made the 3.5 hour drive.
It was a beautiful few days with good food, good drink, a stunning town, pumpkins and Halloween everywhere, a farmer’s market and a cheeky dip in Lake Champlain:
I’m ready to take on our last week in Boston!
1. What do I have to work on the next few days?
I have several deliverables for the Digital Health and Care Institute – I’ve taken a good chunk out of most of them and want to have it almost completed by the end of this week, for polishing whilst in California.
2. What deadlines do I have coming up?
Deliverable to DHI for 2 weeks time.
3. Are there any new projects I have time to start working on?
4. What went wrong over the past week? What lessons can I learn from that?
Nothing I can think of right now…
5. What went right over the past week? How can I make sure more of that happens?
Once again I managed a good balance of work, culture, socialising and getting the homework done, in part due to good time-keeping skills and organisation.
6. How well am I keeping up with all my duties and obligations?
Reasonably well – I have a growing stack of emails to reply to but I think this will be a lot easier when I am back in Scotland.
7. What is coming up that I need to be prepared for?
The return to Scotland! On a serious note, Katie Michels provided us with a very helpful Harvard Business Review article titled “How to Return Home After an Assignment Abroad” – in a sentence, the author’s argued that you can either decide to take on a blended new personality encompassing parts of the culture you were visiting, or actually segment your personality and take it out like “a change of clothes” for different situations – your old style with colleagues, and your new with new clients.
8. What kind of help do I need?
9. Is everything I’m doing contributing to my advancement towards my goals? What can I do about the stuff that isn’t?
10. Am I happy with where I’m at? What would I like to change?
Yes! Looking forward to getting back and getting cracking on some work with the Digital Health and Care Institute.
11. What are my goals for the next week? Month? 90 days?
- Get on a call with the DHI to discuss our plans for my return
- Send some outstanding emails
- Write a few more blogs this week if possible
- Enjoy the last week!