Would be interesting to see the distribution of data. In BC and in the Vancouver lower mainland, for example, I expect margins to be very high for a very small number of providers. It would also be interesting to see what kinds of companies the article’s writer considered to be “holding companies”.



Investing in 2015

August 23, 2014


I don’t invest based on macro economics, I prefer fundamentals on a company-by-company basis. Nonetheless, this is interesting. Credit to PH&N / RBC Wealth Management.


Here’s an article in the current edition of Inc. magazine that might be of interest to business owners.

My observation of the BC market is this:

– lots of baby-boomer business owners are hanging on in order to improve their financial statements after the 2008/2009 downturn

– US private equity firms and firms from Ontario are sitting on lots of committed capital and have to put it to work. That’s having the effect of making it a sellers’ market for businesses with more than $5,000,000 EBITDA.

– There is a dearth of really good small businesses with $500,000 to $1,000,000 EBITDA which is also making that a sellers’ market.

– The next five years will see a shift with an increase in the number of businesses for sale and fewer buyers after having already put their capital to work.

– It will shift to a buyers’ market.

Enjoy the article.


This month we discussed business failures. Failures are an important part of the business process. Successful entrepreneurs pick themselves up, dust themselves off and learn from their failures. Often times the most successful entrepreneurs have had the most spectacular failures.

Warren Buffett estimates that his biggest failure has cost him $100 billion. I discuss this and others on today’s CFAX 1070 show at 2:30pm.

Click this link and fast forward to about 32 minutes: http://www.cfax1070.com/Media/CFAX-Podcasts/Ian-Jessop/November-4-2013-2pm.


I am in Omaha, Nebraska and attended the annual general meeting of Berkshire Hathaway yesterday. I have been an investor in BRK for six or seven years. I am most definitely a value investor and follow the principles espoused in Benjamin Graham’s “The Intelligent Investor”.

I dabbled in penny stocks in the 1998 – 2000 period and then bought another junior technology stock in or around 2005 / 2006. None of them provided a return commensurate with the risk.

A number of things struck me at yesterday’s AGM:

(1) Warren Buffett has made this event a profit centre for Berkshire’s businesses. For example, today Warren Buffett will be working in Borsheim’s selling jewelry. He personally sold $1.5 million worth of jewelry last year. This year his target is $2 million. I bought a BRK tie yesterday and the exhibit hall was packed with shareholders spending a lot of money – all at Berkshire owned companies.

(2) His principles don’t change. His messaging yesterday is precisely the same as his messaging ten, twenty or thirty+ years ago. Watch a YouTube video of him from 2001 and you’ll essentially hear what I heard yesterday.

(3) Charlie Munger is the silent giant in that partnership. Seeing the two of them interact on the stage provided real insight into how a functional and complementary partnership can work. These two are incredible individually, but together they are the best. The numbers prove this fact!

(4) The biggest challenge facing BRK going forward is its size. Its operating businesses produce so much cash that the holding company is having trouble finding acquisitions large enough to duplicate its returns of the past. This doesn’t scare me.

(5) Some shareholders are calling for dividends to return capital to us and to release some of the company’s cash hoard. I’m not one of these shareholders. Read pages 20 – 21 of Berkshire’s 2012 annual report (find it on-line) to find out why.

(6) Succession planning is a concern for shareholders. Berkshire’s board has been thinking about this for many years and the plan is in place. While I’m sure there will be some self anointed pundits who will scream loudly about BRK’s demise when our Chairman passes away. I’m confident the company is in great shape and that the succession plan will ensure its continued success.

There are more lessons, but I’m going to head out and absorb some more of Omaha before returning home.


February 11, 2013

A number of years ago I decided to try and use up my Aeroplan points. Thereafter my intention was to cancel my Aeroplan card.

Unfortunately Aeroplan has made it so difficult to use points that my account just keeps growing. The company either blocks the dates of interest, proposes to charge an exorbitant number of points or charges for business class tickets while only providing business class service for 10% of the flight time.

Most recently I have been trying to book a couple of flights to Calgary. Aeroplan is now using the new tactic of recommending an untenable itinerary. I think 12 hours and 22 minutes between Victoria and Calgary (typically a 1 hour and 21 minute flight) doesn’t suffice.

Undoubtedly the company is doing this because of the multi-hundreds of millions of points overhang.

However, the unintended consequence of all this is that people like me can’t use their points. We end up continuing to accumulate at a meaningful rate serving to grow the overhang of unused points.

These loyalty programs used to be terrific. I guess they are victims of their own successes.

Valuing a Business

June 4, 2012

As I come across entrepreneurs considering transitioning out of their business I am often surprised at what they think their businesses are worth.

I am also rather surprised when entrepreneurs resist retaining a professional (CA, CMA or Chartered Business Valuator) to value their business.

For most people their home will be the single largest asset in on their balance sheet. For successful entrepreneurs it’s highly likely that their largest asset is their business.

This is over simplified, but when purchasing a business that is intended to continue as a going concern a buyer is essentially buying a discounted series of cash flows. They calculate what they think the business will earn on a go forward basis, discount that based on their view of the likelihood (risk) associated with those earnings and then come up with a price.

Now there are often other things that impact the value of a business, not the least of which being the motivations of the buyer. Some of these include:

  • cash flows,
  • strategic bolt on,
  • remove a competitor,
  • enter a new market,
  • acquire a product or a management team,
  • get a job, and
  • myriad others.

At the end of the day a business is worth what a buyer is prepared to pay. As baby boomers begin retiring over the next twenty years there is likely going to be a growth in the number of owner-operated businesses coming available for sale.

This spells an opportunity for acquirers of businesses.

In a later post I will talk in more detail about how a business is valued and some of the things buyers and sellers should be considering.