The Data and Research behind CoreValue

The Foundation

Private business executives have no quantitative tools for looking into the future, to measure the impact of operational investments of time, dollars and human resources. They do have access to world-class financial tools, but those only look backwards. They only measure what has happened after the fact; there is no reliable view forward.

What this means in practice is that private businesses cannot communicate what makes them valuable and worthy of investment. In turn, this means that there is a mountain of cash in the market that cannot find a useful home. (The money supply as measured by M1 is over $3T, increasing almost 300% in ten years. The venture and private equity world is sitting on over $1T in “dry powder.”)

This issue becomes even more pressing because baby boomers, who own 75% of the private businesses, will likely need to transfer or sell to new owners in the next decade. The investment opportunity in these businesses – estimated at over $10T – is clear and obvious, however, 80%-90% will never be able to sell because the business is not transferable; it cannot provide proof that the future will look like the past. These 5M+ businesses impact over 40% of the US job base. (Learn more, “Transferable Enterprise Value.”)

The challenge is to provide private business executives with the operational performance measures and tools to build valuable businesses, and communicate more than just the financials. The challenge is to provide investors transparency into these private businesses so they can make good decisions. The challenge is to build a bridge between the capital and the need for capital.

For public companies, analysts provide the needed communication and transparency.

For private businesses, CoreValue has built a set of tools and products to do the same.

The Challenge

Private business executives have no quantitative tools for looking into the future, to measure the impact of operational investments of time, dollars and human resources. They do have access to world-class financial tools, but those only look backwards. They only measure what has happened after the fact; there is no reliable view forward.

What this means in practice is that private businesses cannot communicate what makes them valuable and worthy of investment. In turn, this means that there is a mountain of cash in the market that cannot find a useful home. (The money supply as measured by M1 is over $3T, increasing almost 300% in ten years. The venture and private equity world is sitting on over $1T in “dry powder.”)

This issue becomes even more pressing because baby boomers, who own 75% of the private businesses, will likely need to transfer or sell to new owners in the next decade. The investment opportunity in these businesses – estimated at over $10T – is clear and obvious, however, 80%-90% will never be able to sell because the business is not transferable; it cannot provide proof that the future will look like the past. These 5M+ businesses impact over 40% of the US job base. (Learn more, “Transferable Enterprise Value.”)

The challenge is to provide private business executives with the operational performance measures and tools to build valuable businesses, and communicate more than just the financials. The challenge is to provide investors transparency into these private businesses so they can make good decisions. The challenge is to build a bridge between the capital and the need for capital.

For public companies, analysts provide the needed communication and transparency.

For private businesses, CoreValue has built a set of tools and products to do the same.

The Solution

The solution is simple, but it has been a long time in the making. The fabric of what has become CoreValue was created by the input and effort of hundreds of people who understood the challenge and the need. To understand the solution we need to go back a few decades when this country faced a similar challenge.

When the markets collapsed in 1929, much of the blame for the crash was pinned on lack of financial transparency and reliability. There was no standard for financial accounting; no one trusted the numbers. The solution to this challenge was a set of generally-accepted financial standards, known as GAAP. Thanks to GAAP, we have reliable financial measures and powerful tools to view financial performance. But as we can see from the huge gap between investors and private businesses, GAAP alone is no longer enough.

The solution to today’s market challenge is to be able measure operational performance as reliably we do financial performance; in essence, we needed to create a set of generally-accepted standards for operational performance. CoreValue pioneered these standards over two years with academics and industry experts. Like GAAP, these standards – known as the Private Industry Standards – were for a well-run private business irrespective of industry. (Learn more, “Enterprise Value and Operational Excellence: A Reasonable Starting Point.”)

With these standards, and a mountain of research, CoreValue created a set of “Apple Easy” tools and products that enable private businesses to see forward, grow the business, build enterprise value, and communicate to the investor community when the time is right.

Quantifying Transferable Enterprise Value

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Enterprise Value and Operational Excellence

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