Tag Archives: Rationale

How Do You Value the Stock of a Private Company? Three Factors

Situation: A private company has not issued stock options in over 6 months. The business press highlights concerns over appropriate valuation at the time of option grant. How do you value the stock of a private company to assure that option awards reflect proper company value?

Advice from the CEOs:

  • Decide on the objectives of your valuation exercise. These may include:
    • A credible valuation to protect the Board from challenges over option valuation.
    • A calculation that the company can use quarterly or semi-annually to assess company valuation; possibly something that can be done internally on a quarterly basis, with independent validation annually.
  • Given that your concern is option valuation and protection of your Board, they only clean way to do this is to have an outside party perform your valuation. Internal valuations are subject to challenge. Look for reputable CPAs that specialize in private company stock valuation and get quotes from several for initial valuations plus follow-up valuations in 12 months. You may anticipate paying a fee of $12,000 to $15,000+ for this service.
  • There are issues that you will want to address in your valuation process:
    • A valuation must have a supportable rationale and demonstrate consistency of methodology so that valuations will be performed on a comparable basis year after year.
    • You want to see consistency between valuations with your annual financial audits which will reflect company performance.
    • There are at least two models that you may follow – a hard model and a soft model.
      • The hard model is a one-time valuation based on your financials. This may include historic performance, as well as forward-looking ROI.
      • The soft model is based on operational and risk assessment.

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How do you Adapt Behavior as you Shift Focus? Five Points

Interview with Adam Kleinberg, CEO, Traction

Situation: The Company is shifting focus from project-based to relationship-based client interactions –from a short to a long-term perspective. This is a challenge. How do you adapt employee behavior to a new strategic focus?

Advice:

  • Assume the best intentions.
    • Everyone wants to do a good job. The challenge is making sure everyone knows what constitutes a good job.
    • Be clear on objectives, and why they are important. Be clear on the new roles.
    • This is most difficult when the shift is counter to a well-established company culture.
  • You have to have the right people.
    • Avoid smart people with no role, or a role for which they are ill-suited.
    • The organization IS the people. There must be absolute commitment to assigning the right talent on any job, and the right people to the right team.
    • Players must fit in terms of skill set and culture. The company is who, not what!
  • Focus efforts and objectives on the long-term vs. the short-term.
    • Paint the end state – the vision. Add tangible steps to guide people to the right path.
    • Don’t micromanage. Set direction and initial moves, but let staff blaze the path.
    • Provide feedback and recognition.
    • Negative feedback is always difficult, but best when delivered directly and quickly.
    • Recognize success and contributions both 1-on-1 and in all-hands meetings.
  • We hired an experienced manager with a strong track record. Initially this created discomfort; however discomfort was quickly resolved as this person produced positive impact.
    • We cited the wins in all-hands meetings to support the shift.
  • Make people feel that their opinions are heard, and their solutions.
    • Be clear on objectives and rationale. Assure that your perspective as leader is grounded in a credible reality that you can communicate to the team.
    • Conduct workshops which focus on the practical steps that will produce the desired result.
    • Listen to feedback from team members, and include what you hear in the agenda for future discussions. Involve the team in developing the solution. Delegate and recognize!

You can contact Adam Kleinberg at [email protected] or Twitter at well@adamkleinberg

Key Words: Focus, Client Interaction, Behavior, Role, Objective, Rationale, Right People, Culture, Feedback, Recognition, Workshop, Involvement

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