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.