Description
Book SynopsisTable of ContentsPreface 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
