Knowing Where the Potholes Are

We have done some of this homework for you by interviewing three senior level BV professionals, each of whom has many years experience in supervising and mentoring staff talent.  They are Ed Belanger, Managing Principal at American Appraisal in Dallas; Michael Halliwell, Vice-President, Taylor Consulting Group in Atlanta; and Michael Graham, Firm Director with Kroll in San Francisco.

Borrowman: What have you seen staff level BV people do that really impressed you?  Was there something in particular that had you thinking “this person is going to do well in their career”?

Belanger: The first thing that comes to mind is people who are already anticipating your needs after a short time on the job.  When you give them a set of tasks, they’ve already learned what you’re going to do with their output afterwards.  So, they anticipate that and prepare for it.  Oftentimes, very beginning staff are asked to go to our databases and models and pull down some market data in terms of guideline company multiples.  That process is always followed by certain adjustments to the multiples, an exploration of which multiples should be given more weight, a review of which companies are more comparable, and so on.  A staff person that’s been there six months, who does the initial work and then starts down the road toward those subsequent steps without being asked; you know this is a person who will do well in valuation.

And this is true even if they may stumble while they’re going down that path.  The fact that they’re taking the initiative and they’re trying to imitate what they’ve seen more experienced people do is an extremely positive trait.

Halliwell: I think the thing that impresses me most is when someone goes beyond the call of duty.  Let’s say the staff person is going on an interview or site visit with me.  I’ve seen someone prepare by coming up with a long list of questions they want to ask, even though I’m going to be leading the interview.  They’ve obviously asked themselves: “What would I want to know if I were doing the interview?”  I’m always impressed by that because it shows they’re trying to think about the big picture and they’re starting to put the pieces together for the project.  They’re not just looking at it as “I’m just valuing this asset and these are the things I need to get”.

Graham: When I’m working with younger staff I’m impressed by an attitude that is very open to taking on new challenges.  I’m also interested in the person who is engaging and easy to talk to.  Someone I can put into a situation with a client and who can develop rapport with the client.  I’ve seen clients bristle when the staff person just starts firing off questions.  They want someone to develop a rapport with them.  Someone who can do that, maybe spend 15 to 20 minutes getting to know them, really stands out.  If you have a person with good grades, or an MBA, they generally have good analytics.  You’re not going to have a problem with that.  It’s a combination of attitude and personality that I’m looking for.

Halliwell: As another example, seeing someone take a template and actually put in the effort to expand sections and put more detail in is impressive.  It’s evidence that they’re starting to see the big picture and going beyond their individual assignment.

Belanger: Intellectual curiosity is the key that shows a staff person is going to succeed in the long run.  Wanting to know not just how to do something, but what makes this client tick.  What drives value in the client’s industry.  I’m interested in people who aren’t content just with asking what or how, but want to understand why.

Borrowman: What was it that they did, perhaps unknowingly, that turned out to be self-sabotaging?

Graham: I’ve seen staff shoot themselves in the foot by trying to disguise their weaknesses.  I would much prefer them to be candid about those weaknesses and where they needed help, because I can help them.  I don’t have a problem with the person who says “I just don’t know the answer to that.”  I’ll get them the resources so we can develop a solution together.  When you first start in valuation, you think there’s got to be an answer.  In this field, though, there are very few clear cut answers.  There’s a lot of gray.  Understanding that can help the staff person be more comfortable asking for help.

Halliwell: The biggest problem I’ve seen is not enough attention to detail.  Sometimes a staff person will come out of an MBA program and think they have the big picture.  Maybe they do.  What they may not realize is that in the valuation business, everything is in the details.  If they mess up a link in an Excel spreadsheet, or utilize the wrong formula, or confuse an EBITDA, EBIT, free-cash flow, or net income number, it can be hard to know that you’ve made a mistake until it’s too late.  We do our best to point out all the mistakes they’ve made so they learn for the next time.

Belanger: As a follow-on to the previous point, people sometimes overreach or get too ambitious in terms of what they’re trying to do.  Instead of incrementally expanding their skills, they try to make a quantum leap and go do something entirely new.  I’ve seen a staff person walk past the desk of an admin assistant who is in the middle of taking a message from a client for one of the executives.  The staff person says “I know what that’s about.  I’ll take care of that.”  In situations like that you can very quickly find yourself in over your head.

Borrowman: What have you seen as the most common – and most easily prevented – mistake that staff level BV talent make in terms of advancing their careers?

Halliwell: Sometimes staff will forget that valuation is an “art” and not a “science”.  For example, a more technically oriented person will want to marshal a lot of technical arguments to support their conclusions.  It’s important for them to understand that while their point may be valid and technically correct, another valuation professional may look at the arguments differently or discount their methodology or conclusions in favor of another methodology or conclusion.   It can be tricky to explain that and still encourage them to be active in defending their conclusions. 

Graham: One of the most common mistakes I see happens as part of today’s electronic world.  I’ve watched staff assume that because they got the model from someone else, it works.  They don’t think about digging into it and trying to find out why, testing the numbers or looking at the concepts behind what’s going on.  The real key to this business is understanding those concepts.  Once you grasp the bigger issues, the rest of it rolls forward pretty easily.

Belanger: Not having the patience to go through the learning experience in the depth that it really requires to be a strong valuation professional.  Trying to be in too much of a hurry to get on to the next stage of their careers.  As I said earlier, it’s important to reach out and take initiative.  But reach out two or three steps beyond your comfort zone.  Don’t try to take a leap of ten steps.