Thursday, October 19, 2017

Corporate valuation: Book "Valuation and Common Sense". Updated 2017. Free download

This free book (6th edition, updated until September 2017) has 514 tables and 414 figures that are available (with all calculations) in Figures and Tables in Excel Format
It also has more than 1,000 readers comments of previous editions. I use the book with MBAs and Executives.
You may use (resend, distribute, copy, photocopy…) the book and any chapter as you wish.  I would very much appreciate any of your suggestions for improving the book
.
Best regards,
Pablo Fernandez. Professor of Finance. IESEwebPage
IESE Business School

The 48 chapters may be downloaded for free at the following links: 

Valuation and Common Sense              Chapters
Downloadable at:

Table of contents, acknowledgments, glossary
1
Company valuation methods
2
Cash flow is a fact. Net income is just an opinion
3
Ten badly explained topics in most corporate finance books
4
Cash flow valuation methods: perpetuities, constant growth and general case
5
Valuation using multiples: how do analysts reach their conclusions?
6
Valuing companies by cash flow discounting: ten methods and nine theories
7
Three residual income valuation methods and discounted cash flow valuation
8
WACC: definition, misconceptions and errors
9
Cash flow discounting: fundamental relationships and unnecessary complications
10
How to value a seasonal company discounting cash flows
11
Optimal capital structure: problems with the Harvard and Damodaran approaches
12
Equity premium: historical, expected, required and implied
13
The equity premium in 150 textbooks
14
Market risk premium used in 82 countries in 2012: a survey with 7,192 answers
15
Are calculated betas good for anything?
16
Beta = 1 does a better job than calculated betas
17
Betas used by professors: a survey with 2,500 answers
18
On the instability of betas: the case of Spain
19
Valuation of the shares after an expropriation: the case of ElectraBul
20
A solution to Valuation of the shares after an expropriation: the case of ElectraBul
21
Valuation of an expropriated company: the case of YPF and Repsol in Argentina
22
1,959 valuations of the YPF shares expropriated to Repsol
23
Internet valuations: the case of Terra-Lycos
24
Valuation of Internet-related companies
25
Valuation of brands and intellectual capital
26
Interest rates and company valuation
27
Price to earnings ratio, value to book ratio and growth
28
Dividends and share repurchases
29
How inflation destroys value
30
Valuing real options: frequently made errors
31
119 common errors in company valuations
32
Shareholder value creation: a definition
33
Shareholder value creators in the S&P 500: 1991 – 2010
34
EVA and ‘cash value added’ do NOT measure shareholder value creation
35
All-shareholder return, all-period returns and total index return
36
339 questions on valuation and finance
37
CAPM: an absurd model
38
CAPM: the model and 307 comments about it
39
Value of tax shields (VTS): 3 theories with “some” common sense
40
Expected and Required returns: very different concepts
41
RF and Market Risk Premium Used for 41 Countries in 2015: A Survey
42
RF and MRP used by analysts in USA and Europe in 2015
43
Meaning of the P&L and of the Balance Sheet: Madera Inc
44
Net Income, cash flows, reduced balance sheet and WCR
45
Meaning of Net Income and Shareholders’ Equity
46
The Market Portfolio is NOT efficient
47
Is it Ethical to Teach that Beta and CAPM Explain Something?
48
Finance and Financial Economics: A debate

Saturday, July 15, 2017

Branding book now available in paperback!


Now available in paperback on Amazon.  The definitive guide to branding and brand building in less than 53 pages.

"Thanks for this book. It has been a fantastic, simple, step-by-step source of information... it's been the best money we ever spent!!" -- Neil, Australia

"I wanted to extend my gratitude and thanks to you for your insight on Branding through this book. I have read several opinions on the subject and find your work to be the most informative and easy to understand. I look forward to reading more of your work." -- Miles, Florida

Wednesday, February 22, 2017

Why I don't trust crowd funded companies and products



With the recent announcement of another startup, camera drone maker Lily, biting the dust before it even got out of the gates or shipped a single unit, I'm even more convinced than ever that consumers should avoid funding products on crowd funding sites such as Kickstarter and Indiegogo and avoid pre-ordering products that have no history of successful manufacture or commercial beta testing.

Too many companies can create slick videos of "prototypes" which might not even exist, launch a campaign and then watch the money flow in from an unsuspecting public who want to believe and support the fantasy.  To be fair, I'm sure some of these companies truly believe they can launch a successful product if they only had additional investment, but I also believe that far too many people have learned that selling a fantasy or vaporware is an easy way to get peoples' money with little to no risk.

I watched the entire Amiigo fitness tracker and other debacles unfold before my eyes and am amazed that these companies can take in so much investment money and pre-order sales and then delay launch for months or years and then simply just pivot or walk away from the project and leave thousands of people without product or refunds.

Venture capitalists serve a critical role.  Founders of start-up companies must stand in front of these venture capitalists and sell their business ideas and then answer tough questions while the potential investors scrutinize every aspect of the product, capabilities, backgrounds of the key players, financing, timelines, technology, etc.  In short, venture capitalists fully vet a venture before they invest in it because they want to minimize their risk and have some reassurance that the company has a sound concept with the ability to execute and implement a solid plan.

Startups on crowd funding sites, however, only have to communicate one way and create slick materials to pull in pre-orders and "backers" from unsuspecting people who have no way to evaluate the credibility of the offer or the experience of the people behind the offer.  Backers have no way of authenticating marketing claims nor examining finances or business plans to better understand the risk.

If a business cannot attract funding from professional investors, then it probably is not worthy of being funded.


If a business cannot attract funding from professional investors, then it probably is not worthy of being funded.  If a company has to turn to crowd funding sites or take pre-orders before it has a realistic idea of whether it can actually manufacture and deliver product of sufficient quality and in sufficient quantities, then it is probably taking a much greater gamble with your money than you ever would.

Here are some quick tips:

1. Never order a product that has not emerged from beta testing and is not already in final manufacturing.

2. Don't fund or back companies with no history of previous successful product launches.

3. Wait until there are actual, real customer reviews of the product.  Believe me, early adopters and beta testers will quickly write reviews or post YouTube videos about their experience.  Wait until there are enough of these reviews to get a better understanding of which ones are real, which ones were written by shills, and which products are truly winning over real customers.

4.  Research the founders and principals of the company.  If they have no track record of success or look too young to have much real world experience, then the odds are they have no idea how to actually bring a product to market.

5.  Be wary of slick videos that depict products that look too good to be true.  Those products probably are too good to be true.

See also:
The 5 biggest crowdfunding failures of all time



Monday, August 17, 2015

Sales and Marketing Alignment

Alignment of the sales and marketing functions exists when the two functions or departments fully understand each other and share a common language, especially as it pertains to customer acquisition.

Ask your sales people what defines a sales lead. Then ask your marketing department. If there is not a common understanding, then you most likely have some aligning to do.

Marketing will often view a lead as a name and a telephone number of somebody who potentially has an interest in your product or service. The sales folks, on the other hand, will often define a lead as a person who has expressed specific interest in your product or service and who has been at least initially qualified by somebody to verify that they have the want, the desire, and the means to purchase such a solution. The two often have a very definition of what a "lead" is.

Without alignment between sales and marketing, there is a disconnect between the two functions. That disconnect hampers success and profitability.

Monday, March 16, 2015

New marketing e-book

I'm beginning the research phase of my next e-book. What #marketing topic would you like me to cover?

Friday, February 06, 2015

Wednesday, December 17, 2014

How To Brand And Market A Commodity

Currently on Countdown Deal at Amazon for $0.99. http://amzn.to/1zydt33

Layoffs hit USA Today

My inside source reports that on Dec.10, 2014, USA Today laid off "about 70 staff people, including many of the most experienced...without any notice."

This move reveals the death of print media is coming and that true journalism is near death as bloggers with no journalistic standards or ethics take over in a world of garnering clicks and page views at all costs, regardless of truth or actual vetting.

I wish those USA Today folks all the best.  Please feel free to comment if you are one of those people or some media outlet who wishes to reach out to them.

Tuesday, July 01, 2014

Suggested Reading List: Books on Marketing & Branding

Building the Brand Driven Business, Scott Davis & Michael Dunn
22 ImmutableLaws of Branding, Al Ries & Laura Ries
A New BrandWorld, Scott Bedbury
Leveraging the Corporate Brand, James Gregory & Jack Wiechmann
Selling the Invisible, Harry Beckwitht
Brand Aid, Brad VanAuken
Building the Brand-Driven Business, Scott Davis & Michael Dunn
Emotional Branding, Marc Gobé
BuildingStrong Brands, David Aaker
Why Johnny Can't Brand, Bill Schley 

Death of a Brand: Burn out or fade away?

Good brands are living entities.  They change and evolve with changing market conditions so that they grow and continue to deliver value to both their owners and the consumers they serve.

If a brand is fundamentally an identifiable entity that makes some specific promise of value, then the promises made by healthy brands will continually communicate and deliver significant and relevant value to consumers.

All brands must be managed, not just healthy ones

Much of today’s contemporary information on branding focuses on creating new brands.  The plethora of self-proclaimed branding experts like to tell us their views on the best ways to establish a brand, how to create awareness, how to help brands connect with consumers, how to position brands and how to create brand strategy so brands enjoy strong positions in their markets.

Often these experts fail to acknowledge that not all brands are strong or healthy.

Not all brands are able to successfully adjust to changing market conditions and remain relevant.  Not all brands can continue to promise significant value and actually deliver that value.  Not all brands continue to resonate and remain relevant in an ever-changing society.

The truth of the matter is, according to research conducted by Nirmalya Kumar, professor of marketing at IMD, Lausanne, Switzerland, most brands do not make money for their companies.  Kumar found that year after year companies make most of their money on very few brands.  Significantly less than 20% of the brands in the world deliver the majority of sales and profits.

The logical issue that arises then is not how to create and maintain a new brand, but how to navigate the much more likely -- and much less enjoyable -- decline or death of an existing brand.  How do we know when to put a brand on life support in order to nurse it back to health or allowed it to fade away or actively kill it?

The best way to understand how and when to retire or kill a brand is to understand what a valuable brand should look like and then explore the warning signs that indicate when your brand is in trouble. 

What strong brands look like

Strong, valuable brands promise value that cannot be found anywhere else.  These brands are highly differentiated from competing brands, deliver higher profits than competing brands, and create an aura of superiority that surrounds the brand name, symbol or mark.  Valuable, powerhouse brands also enjoy strategic awareness in the market such that not only do people understand how and why they are different, but those same people understand that those differences make the brand superior and a wiser choice than other offerings.   Powerful and valuable brands influence buying decisions, shape the ownership experience, command a premium price, deliver healthy profits and create trust and emotional attachments with consumers.

As I outlined in my Top EndAlignment™ branding process back in 2003 when I was still consulting, the best brands also tap the guiding vision of the organization and foster the mission of the organization in some way.  These aligned brands not only communicate the unique selling proposition of the brand but also foster the guiding principles of the company or organization.

Such brand leadership must be driven by a strong organizational leader who recognizes the importance of living the brand and ensuring that all levels of his or her organization act in accordance with brand promises.  These visionary leaders also understand that a brand is ultimately controlled by and shaped by consumers and that brands are not just defined by a few people within the marketing department but by the entire organization and its alliance with consumers.

Now that we know what strong and powerful brands should look like, it is important to understand how to recognize when a brand starts to falter.

Monitor your brand’s pulse

Whether you own a single brand or manage a multi-brand portfolio, conducting periodic brand audits is critical to understanding the health of your brand or brands.

A brand audit is a comprehensive examination of a brand that assesses the health of the brand while uncovering its sources of equity.  Through brand audits, you will construct snapshots of the overall health of your brand at any given time while uncovering possible new sources of equity upon which to build.

Consumers’ perceptions about your brand will change over time and you must periodically explore those perceptions through routine audits so you can understand what needs to be done to help your brand evolve and remain relevant while continuing to promise and deliver compelling value.

The warning signs of a faltering brand

The brand audit will result in tangible data to help you assess the health of your brands.  Sometimes your audits will uncover an unhealthy brand.

Some warning signs of an unhealthy brand are:

  • Your brand’s sources of equity have vanished
  • Through the course of natural evolution and growth of your organization, certain brands in your portfolio no longer foster the organizational mission or fit in with overall business strategy
  • The investments you make in your brand cannot be justified based upon the level of revenue and profit those brands return to your organization
  • Nobody within your organization can seem to succinctly articulate your brand’s core values or concisely state its unique selling proposition
  • Your brand is promising more than your organization can deliver
  • Your brand has gotten a bad reputation and new, unwanted associations have been made by consumers
  • Your brand’s identity seems dated or old-fashioned
  • Competing brands now hold the leadership positions in the category
  • Your brand is not reaching out to new, younger consumers and your brand is aging right along with your customers
  • The promises of value your brand makes no longer resonate or remain relevant
  • Your market has moved beyond your brand
  • You do not understand who your brand’s most valuable customers are or why they choose your brand
  • Sales are slumping and so are profits

When you recognize these warning signs you must then analyze if you can and should invest in reinvigorating your brand so that it returns healthy revenue and profit once again, if you should let it fade away, or if you should actively kill it.

When to kill a brand

Building and maintaining brands requires significant investment of effort, time and money.  Sometimes the diminishing returns from the brand no longer make sense to fully support.

If it has been decided that supporting a brand no longer makes sense for your organization then there are several options available to effectively retire or kill the brand.

The brand life cycle

The life of a brand mirrors the product life cycle from introduction to growth, maturity, decline and withdrawal.  While the maturity and decline stages can be significantly extended through innovation, proper brand management and rebranding efforts, ultimately the brand will enter into decline and a decision might be made to retire or kill the brand rather than invest in it.

How to kill a brand

There are four main approaches to killing a brand.

1)       Merge it

In this approach, managers find a closely-related, healthy brand that can be merged with the unhealthy one.  While the unhealthy brand is being dropped, the healthy, surviving brand is simultaneously reengineering to add the old brand’s desirable product features, sources of equity and promises of value that had previously been embraced by the retiring brand’s consumers.  The surviving brand can then boast of new attributes while providing a safe, comfortable place for consumers to migrate.  This approach is often implemented when the retiring brand still has a significant number of customers or when the market has future growth potential.

2)       Milk the cash cow

Cash cow brands return a superior profit to the organization.  Often during the maturity stage, profit numbers slowly start to decline but can often be boosted to desirable levels by slowly withdrawing investment in the brand and reducing the expenses associated with supporting it.  Marketing and advertising activities can be scaled back, brand extensions can be eliminated to reduce management costs, distribution can be changed to cut costs, and all but the bare minimum investment in the brand eliminated.  The company then tries to maximize profits for as long as possible until sales drop to the point where there brand is sold or killed.

3)       Sell it

Sometimes the market value of a brand is greater than the value the brand represents to its own organization.  When this happens, wise brand managers consider selling the brand to an organization who can fully capitalize on the equity of the brand.  If the brand seller is retreating from the category altogether, then selling the brand is much easier than if the company wishes to remain in the category with other brands.  In the latter case, legal safeguards should be put in place so you do not end up with your old brand as a new competitor that damages your remaining brands.

4)       Kill it now

The way you kill or retire a brand might be just as important as creating and building it in the first place.  You may simply drop the brand by eliminating it.  Remain fully aware, however, of the state of ownership of brand names in order to protect yourself from allowing a competitor to buy and resurrect the brand.  Some brands that are killed still have enough equity to be highly lucrative to other organizations.  You must protect yourself from your own brands coming back to haunt you.

Managing brands involves more than just creating and launching them.  Brands in their declining stages must also be properly managed to respect the dignity of both the brand and its consumers.  Only through analysis can you determine whether or not it is better to help a brand return to full health or simply let it die or fade away.

Copyright 2014.  All rights reserved.

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