The Value of Knowing What You Don’t Know

EBITDA to Guarantee

Few of us really like uncertainty. It fills us with dread. It frustrates our planning efforts. It makes analyzing its effects complex. After all, where in a spreadsheet do you put uncertain values for revenue or costs? Admittedly, accounting for uncertainty can be difficult, but doing so can add a lot of value to your business decisions. Let me explain… The Problem – “How Do We Communicate the Value?” A colleague recently took on the opportunity to broker the sale of a resort hotel. The hotel was recently refurbished and now operates profitably at an approximate 69% occupancy rate for an average nightly room rate of $219. It also gathers a healthy food & beverage income as well as rental income from stores that operate on the promenade level. The sellers offered the hotel at a premium price, arguing that the refurbishments and marketing/operating strategy that they will pursue (part of the deal is that they will continue to operate the property) will continue to grow the … [Read more...]

How a 1979 MG Midget Taught Me to Love Risk Analysis

Thinking about the principles of risk analysis in my '79 MG Midget.

At the tender age of 17 I sold my soul to a 1979 MG Midget.  Or, at least I sold my body into indentured servitude to it.  I spent my entire earnings from two prior summer jobs and my part time job after school to acquire this little gem.  Fire engine red.  Black racing stripes.  Mag wheels.  And, yes, a sixty-five bhp engine.  As cool as that sounds, and as anyone who has ever owned a British Leyland product already knows, I spent a lot of time tinkering with the car to keep it running, often at the most inconvenient of times. Doe-eyed brunette: "Why are we stopping here?" Me: "Uh, I have to tinker with the engine.  Seriously." I obsessively measured the performance of this car by the fuel mileage.  With each fill-up I recorded the gallons and the change in the odometer reading in a little notebook I kept in the glove compartment.  By this, I kept track of my fuel mileage between fill-ups and a running average over the month, each to unwarranted precision.  My vigilance didn’t … [Read more...]