John Wiley & Sons The Value Equation Cover Discover one of the surest means to create personal wealth by building a profitable business Every .. Product #: 978-1-119-87564-2 Regular price: $26.07 $26.07 In Stock

The Value Equation

A Business Guide to Wealth Creation for Entrepreneurs, Leaders & Investors

Volk, Christopher H.


1. Edition July 2022
272 Pages, Hardcover
Wiley & Sons Ltd

ISBN: 978-1-119-87564-2
John Wiley & Sons

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Discover one of the surest means to create personal wealth by building a profitable business

Every now and then, a business book comes along that offers original insights and a fresh perspective. In The Value Equation: A Business Guide to Creating Wealth for Entrepreneurs and Investors, veteran executive, entrepreneur, and investor Chris Volk delivers an engaging, straightforward explanation about how businesses work and provide wealth for entrepreneurs and investors. The author's signature approach is centered on his award-winning wealth creation formula in a book designed to simplify complex subjects with math no more complicated than what you learned in middle school.

Readers will become acquainted with the characteristics of successful business models, together with insights into how leaders can improve their own models in ways that generate personal and collective wealth. The author's framework presented in The Value Equation is the foundation upon which most of the largest personal fortunes were built.

Chris Volk also provides supplemental materials including interactive Excel spreadsheets, illustrations, and sample corporate financial models on a companion website. There is even a link to an award-winning video series created by Volk that served as his inspiration for the book. Full of illustrative case studies that highlight crucial business and finance concepts The Value Equation includes:
* Explorations of the true value of using OPM (Other People's Money) and capital stack variations to build and grow your company.
* Advice on business assembly, growth, mergers, acquisitions, and corporate reengineering, including discussions of valuation multiples, common risks, and capital options.
* Guidance on how to valuate business models, delivered with help from a variety of stories and case studies. Uniquely, the author also draws on his own background, including the introduction of three successful companies to the public markets, two of which he was instrumental in founding.

The Value Equation is an indispensable addition to the libraries of anyone interested in growing wealth and capital through business, whether as a business leader, entrepreneur or investor.

Preface xi

Introduction 1

Chapter 1: Free Enterprise and Wealth Creation 11

In the Beginning Is the Idea 12

Unicorn Likelihood 13

Odds of Success 14

The Six Variables 16

Chapter 2: Daymond John and the First Variable 17

Accountants vs. Entrepreneurs 21

Variable #1: Business Investment 23

Chapter 3: The Capital Stack and Two More Variables 25

The Right Side 25

Other People's Money (OPM) 26

Variables #2 and #3: Amount and Cost of OPM 29

Cost of Capital vs. Cost of Equity 30

Capital Stack Assembly 31

Equity Sourcing 33

Chapter 4: Three More Variables and Voilà! 35

Variable #4: Sales 36

Variable #5: Operating Profit Margin 36

Variable #6: Annual Maintenance Capital Expense 37

Putting the Six Variables Together 39

Gordon Growth Model 42

Equity Valuation 43

The Miracle of Compounding 44

Dissecting Investment Returns 47

Chapter 5: The Value Equation 51

EVA and EMVA 52

Making the V- Formula Even Simpler 54

Solving for Other V- Formula Variables 56

V- Formula Data Tables 58

Chapter 6: Business Model Evaluation 61

STORE Capital 62

The FAANGs 66

Chapter 7: Pulling the Corporate Efficiency Levers 75

Operating Efficiency (O) 76

Asset Efficiency (A) 80

Capital Efficiency (C) 85

Six- Shot Economics 88

Chapter 8: Choosing from Your OPM Options 89

Designing Your Own OPM 90

Leasing 91

Creating a Model to Evaluate OPM Options 93

Real Estate as an Investment 98

Chapter 9: Opportunity Cost 101

Some Opportunity Cost Illustrations 102

Creating a Model to Evaluate Real Estate Lease Opportunity Costs 104

Chapter 10: The Final Form of OPM 115

OPM Equity 116

Sustainable Growth Rate 118

Taking on OPM Equity 120

Contents ix

Deciding How Much OPM Equity to Use 121

Creating a Five- Year Model 122

Sweetening the Deal 125

OPM Equity Flavors 127

OPM Equity Considerations 129

Chapter 11: A Look at Public Companies 131

Determining Public Stock Equity Returns 137

Walmart 143

Chapter 12: Animal Spirits 149

Elon Musk and Tesla 152

Stock Exchange Differences 154

Restaurant Case Studies 155

Lone Star Steakhouse & Saloon 155

Boston Chicken 158

Value Investing 159

Chapter 13: Mergers and Acquisitions 165

OPM Capital Options 167

Solving for Equity and Company Valuation 170

EBITDA Valuation Multiples 172

M&A Risks and Rewards 173

M&A Nightmares 176

GE and M&A- Driven Growth 179

Focusing on What Matters 184

Chapter 14: The Essential Ingredient 187

The Growing Restaurant Illustration 187

Designed Structural Change 189

Planned vs. Imposed Structural Change 197

Blockbuster Video 200

Designed Revolutionary Change 203

Reengineering the Corporation 205

Chapter 15: The Art of the Possible 209

The Circles of Business Life 212

Evolving Capital Choices 216

Value vs. Momentum Investing 219

Defining a Financial Win 221

Some Final Thoughts 225

Glossary of Terms 227

The Value Equation Framework 231

Notes 237

Acknowledgments 243

About the Author 245

Index 247
Christopher H. Volk

Veteran Executive, Entrepreneur, Business Leader & Investor

A recognized business model expert, Chris has introduced and led three successful public companies, two of which he co-founded. Those companies provided more than $20 billion in growth capital to thousands of businesses, helping them succeed. Chris resides with his wife in Arizona and Alabama.