The Changing Face of Business

Woman sitting on a stool contemplating the old way and new way of doing business.

 

Does the way you run your business, and its purpose matter? Is there a difference between operating a Fortune 500 business and a local Business? What is the current value of businesses in Southern Nevada?

To answer the first question, we look to the recent meeting of the Business Roundtable, an association of chief executive officers of leading companies working to “promote a thriving U.S. economy and expanded opportunity for all Americans through sound public policy.”

Earlier this month, during the Business Roundtable meeting, nearly 200 CEOs issued a statement with a new definition of the “Purpose of a Corporation.”

The new “Purpose of a Corporation” argues that companies should no longer advance only the interests of shareholders. Instead, the group said, they must also invest in their employees, protect the environment, and deal fairly and ethically with their suppliers.

“Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term. These modernized principles reflect the business community’s unwavering commitment to continue to push for an economy that serves all Americans,” said Jamie Dimon, chairman and CEO of J.P. Morgan Chase and chairman of Business Roundtable.

“The American dream is alive, but fraying,” said Dimon. That sentiment was echoed by Amazon’s Jeff Bezos, Apple’s Tim Cook, Bank of America’s Brian Moynihan, Dennis Muilenburg of Boeing, GM’s Mary Barra, and many other of corporate executives in attendance.

This major rethink came at the urging of BlackRock chief Larry Fink, who has previously called on CEOs to reevaluate the purpose of a corporation, specifically the “inextricable link” between purpose and profit.

“Purpose is not the sole pursuit of profits but the animating force for achieving them,” Fink wrote in his 2019 annual letter to shareholders. “As divisions continue to deepen, companies must demonstrate their commitment to the countries, regions, and communities where they operate, particularly on issues central to the world’s future prosperity.”

Fink said that fundamental economic changes and the failure of the U.S. government to provide lasting solutions had forced society to look to companies for guidance on social and economic issues, such as environmental safety and gender and racial equality.

The long and the short of it is that these Fortune 500 CEOs are now saying that it is more important to focus their business on the good of the employees and consumers, and becoming better corporate citizens than it is to operate only on a bottom-line basis to simply provide profit to the shareholders.

The question is, are these major corporation CEOs just now learning what small businesses have known all along?

Most small to medium-size businesses know that ‘happy employees make happy customers, and happy customers mean more business.’ Whether or not the new “Purpose of a Corporation” statement is just words on a piece of paper, or an actual change in corporate culture will be proven out over time. After all, nearly 100 years ago, Henry Ford had the same epiphany and shocked the business world by giving all of his employees a raise to $5 a day. It was that he realized that he should pay his workers sufficiently large sums to that they could afford the products they were making. In this manner he could expand the market for his products.

The Business Roundtable did not provide specifics on how it would carry out its newly stated ideals, offering more of a mission statement than a plan of action. However, the companies pledged to compensate employees fairly and provide “important benefits,” as well as training and education. They also vowed to “protect the environment by embracing sustainable practices across our businesses” and “foster diversity and inclusion, dignity and respect.”

Las Vegas Business Values

Based on the sales of 419 Las Vegas-area businesses listed on BizBuySell in the second quarter or 2019, values have increased to record-high prices.

  • The median asking price of businesses for sale in Las Vegas in Q2 of 2019 was exactly $190,000 compared to $175,000 at the halfway mark of 2018.
  • Businesses listed in Las Vegas had a median revenue of $375,000 up from $325,457 at this same time last year at the same time in 2018.
  • Median cash flow for Las Vegas businesses is $101,425 vs. the median cash flow of $91,178 last quarter.
  • Owners asked for, on average, a revenue multiple of 0.73 and a cash flow multiple of 2.67.

BizBuySell Active Listings – Business for Sale Data

Chart showing the types of businesses sold and median asking prices.

While the business market was strong through the second quarter, BizBuySell cautions that federal trade wars and other variables might have a dampening effect on as we close out the year.

As businesses work to keep their place in an ever-changing market, there is one thing for certain, no matter your focus the amount of cash on hand determines your ability to stay relevant. On a business level, BUSINESS FINANCE CORPORATION works with you to minimize the amount of cash receivables and maximize the amount of cash in the bank at times when it is needed most. As a community minded business, we at BFC believe in giving back and have been a decades-long member and supporter of ROTARY in Las Vegas through its local community service projects and international service projects. We believe in the ROTARY motto of “Service Above Self.”  To see how BFC can help your business, contact David Cabral  or Albert Delgado  or call 702-947-3800.

Your Partner in Success,

David Cabral