Frequently Asked Questions
How do you get to your valuation of my business?
We base the valuation on a simple EBITA X multiple for the sake of simplicity.
To value a business in detail, a business needs to run sophisticated financial analysis as well as a number of scenario analysis. If the business is expected to have a higher valuation in the coming months, please offer an alternate valuation and how you calculated it. We are open to this, and are looking for a fair valuation between us as partners.
Please note, we are also placing a very simple valuation on our value creation and performance. The question should be asked, should we have a higher performance incentive? We prefer to have a fair valuation of both our assets and be all in together.
How did you decide on the percentage of shareholding in my business?
Our shareholding percentage is based on our minimum “return on effort and resources” that we allocate when evaluating a business for partnership and the minimum return we need to generate to meet our investment criteria.
This evaluation is based on the initial objective goal that we are trying to achieve in the option period and all parties being happy with the “return for equity”
In simple terms, if my business achieves this and I give you that, I will be very happy.
I have inventory, how is this calculated in the valuation?
Inventory is calculated in the overall valuation. This is reflected in the valuation price and ultimate option strike price. If you feel this needs to be discussed further, we are happy to discuss.
It is worth noting there are several factors that should be considered when a business is valuing inventory. The industry rule of thumb is as follows:
The Cost of Goods Sold (COGS) is affected by inventory, impacting the profitability and valuation of the business.
Inventory is valued at the lower of cost or Net Realisable Value (NRV), which is the estimated selling price in the ordinary course of business, minus any costs of completion, disposal, and transportation.
Inventory that is no longer sellable is written off or discounted, as adjustments for obsolete or slow-moving inventory affect the overall inventory valuation.
As partners, we are also hedging our bets on the businesses ability to move inventory, and this is also part of our valuation calculations. As an FYI, if this was a valuation for business sale, any inventory in the business over 12 months old would be deducted from the sales price!
You are buying into my business without putting physical money in… please explain!
Our investment in businesses is based on being able to provide an absolutely unique and proven business performance infrastructure only available through Philotimo Partnership. This service infrastructure, support and access to people would require $300,000 - $400,000 per year at a minimum plus management of this.
We need to generate a return of investment of 4:1 to make working with anyone feasible so investment in the Partnership is only in businesses and people where we believe that we can achieve this return and are aligned in ambition and values.
For owners of the business, we believe this not only equates to significant financial returns but acceleration of your business of approximately 5 – 10 years against your current growth expectations and performance.
We see deal option as Philotimo taking the financial risk as we:
Still have to buy into the business if results are not generated fast enough (no loss to you at the current valuation and option)
We have invested significant time and resources that are not compensated (our risk)
We are paying for all the resources, people, infrastructure and expertise that is freely available in this partnership.
We are buying into the business and we do it as a delayed option agreement. As the owner, you know that we are incentivised to accelerate the business as fast as possible in order to increase the value of the option asset (your business!) that we are buying into.
How do I know if Philotimo is a cultural fit for my business? What do you do to integrate yourself in with my team.
We have a culture of high performance at Philotimo, and we are the first to say that we are 100% accessible, but we aren’t for everyone. We have expectations that everyone we work with will perform to their best. What you have experienced with Philotimo to date is largely our culture.
Duty. Honor. Care. We are your friend who is there in good times and bad. We are there for your team when they need us.
When you become a partner we add three words to Duty Honor Care: Guide. Protect. Defend.
We Guide Protect Defend your business. We will keep you, your team and Philotimo accountable. We will expect the best each person has offer every day, and we will give all the support we can to ensure everyone is looked after and reaching their goals.
Our culture becomes your culture. What you allow in your business is what your business will become. We bring in high performance by providing a clear and accountable path, and helping people to be the best version of themselves.
90 plans and then what…?
Within the plan for the first 90 days we will move through crucial components, foundational development and ongoing development. The crucial components are the reason for the business being in existence, ensuring that the next five years is clear and backed up with the data, ensuring business model profitability, and reviewing and re-establishing business drivers.
As crucial components are worked through with Stuart Brookshaw and Tim Krotiris, your Philotimo Partner Team will focus on the foundational development of the business. Led by Elana Harari in the Philotimo Performance Centre, this focus is driven by having you – as the owner –in full control of your time and your life, while bringing the high performance mindset in your business.
Within these foundational developments, the Philotimo Partner Team works with your internal team to ensure they understand the business direction, see their impact within the business plans, and know their role and how they can be best assist within the business for the next phase of growth.
Crucial components and foundational development ensure that the business is being built in a clear, accountable, and confirmed as profitable manner.
Once critical and foundational elements have been locked away – within the first 7 weeks – we then move into a focus on ongoing development phase. Once again led by the Philotimo performance Centre, this focus is on the must have elements of a successful business and is in the form of growth, people, financial accountability, essential infrastructure and business optimisation.
This is all part of the day-to-day running of the business and includes elements such as reporting, the team infrastructure and accountability, and an ongoing sales focus.
Layered over the top of the ongoing development and working beside it will be the ongoing strategy focus. Led by Stuart Brookshaw and driven by Tim Krotiris, this looks at the big picture strategy, the innovation, the blue sky thinking… the reason why you got into business!
When a new partner joins with Philotimo, Tim, Stuart and Philotimo Partner Team run a series of sessions, workshops, half days, (and whatever is needed!) in order to ensure the decided direction is clear and understood.
Week by week internal Philotimo flows.
Your business strategy is worked on weekly by the Philotimo Partner Team and the Philotimo Performance Centre, with Monday meeting to review progress, changes required and the upcoming month and quarter.
Every week, the Partner Team and the Performance Centre report to Tim on the progress of your business. Tim reviews key elements of your business weekly and provides real time direction, strategic changes and interventions as required.
Tim is heavily involved (hands on) in the first four weeks of strategic, innovative, and big picture thinking. From there, he is brought into sessions and workshops based on the speciality that he can bring. The same goes for the rest of the Philotimo Partner team. Specific team members will be brought in at key times and on key projects to ensure your business is getting exactly what it needs when it needs.
What happens after the first 90 days
With the structure of the business set in stone, key reporting in place, the team on board, key meetings and accountabilities locked in, your time going where it should be going and high performance just being how your business is run, we get into the ‘real life’ of business. They day to day.
For this, the Philotimo Partner Team and the Philotimo Performance Centre work with you and your team on achieving the strategy we have set together. While all businesses are different, we focus on the Philotimo Five each Month: Business Strategy, Business Innovation, Growth, SLT, and two key elements from your business strategy (the SOT).
Each week we work to achieving monthly milestones that line up with quarterly objectives. All of these are driven by achieving the KPIs we have set together around revenue and growth in your business.
How will Tim Krotirs be involved
As outlined in 90 plans and then what…?, Tim has a heavy hand in building the strategy and direction of your business. He works with the Philotimo Partner Team and the Philotimo Performance Centre to drive his strategic vision for your business forward.
He is the visionary for Philotimo and for your business. This means he is not in the day-to-day of your business (or of Philotimo!). He points, and his Partner Team and Performance Centre shoot (and make it happen).
Once the vision and strategy are set, Tim is briefed (weekly) on your business, and receives monthly management presentations about your business progress. It is in these internal meetings that his involvement is at its peak. When requested by the Performance Centre, Tim will be in key sessions and workshops.
Please be aware that Tim being part of the “day-to-day” of your business is not something you should be aiming for. Just like you not being in the daily running of your business, high performance is knowing that you have the right people, in the right places, and key people running and overseeing your business success. Tim’s role is to set the direction and ensure the growth of your business is achieved. He has surrounded himself with the team that he trusts to do it for his business and as Partners, you get the same access for you and your business.
I’ve heard about Philotimo shared services – what is that for me?
As a Partner we will be looking at how to optimise operations in the back end of the business and shared services is where we can offer efficiencies. We have agreements with a number of trusted suppliers to either reduce costs of services or be provided with premium services for a lesser direct cost.
Using shared services allows us to better manage operations and systemise key areas of the business. These are optional and we will present business cases as we progress where we believe we can find an opportunity for the business.
With this Partnership, what is expected of me? Do I get a new role?
Ah, the Billion dollar question! What do I do when my time is freed up?
Time for the kind truth; we are partners, but this is your business. You will have support like never before. You will have a second (and third, fourth and fifth) pair of eyes on your business. You will have structures put in place. Concrete direction. New ways of looking at things.
But you don’t get to ride off into the sunset (yet). We have goals together. We have plans together. We have put our skin in the game and we will do everything we can to grow the business to new levels so that everyone wins. And (truth time) we expect the same from you; from our partner.
We’re not just your partner…you are our partner.
So, back to the question what do I do now? For now, it will be much of the same – but with more support than you’ve ever had. Philotimo will be reporting to you and helping you to drive the business forward. With each step forward we will get closer (and closer) to our goals, and you will see your role changing more and more. But – you ask – what is that role? We need to build what you want!
This is why in our first weeks together, we dive into your personal goals. What do you want, what does success look like for you, and how involved are you in your business? This is what we drive towards, together.
What if we need future funding and/or capital for expansion? What role does Philotimo play in that?
As Partners we address and evaluate every business challenge together. If funding is required, we evaluate the best method to raise funds vs associated risks. This funding may come from Philotimo or our connections, but each option will be evaluated on its own merits like partners would.
Where we believe Philotimo will add significant additional value is in access to different funding types, funding deal structures, and new approaches funding deals. This includes potential acquisitions and other opportunities that might present themselves.
Can we use your office each week?
Yes! We are partners. We have an ‘open door’ policy for all our partners. As with everything Philotimo, all we ask is that the workspace and the people in it are respected.
How do you get to your valuation of my business?
We base the valuation on a simple EBITA X multiple for the sake of simplicity.
To value a business in detail, a business needs to run sophisticated financial analysis as well as a number of scenario analysis. If the business is expected to have a higher valuation in the coming months, please offer an alternate valuation and how you calculated it. We are open to this, and are looking for a fair valuation between us as partners.
Please note, we are also placing a very simple valuation on our value creation and performance. The question should be asked, should we have a higher performance incentive? We prefer to have a fair valuation of both our assets and be all in together.
How did you decide on the percentage of shareholding in my business?
Our shareholding percentage is based on our minimum “return on effort and resources” that we allocate when evaluating a business for partnership and the minimum return we need to generate to meet our investment criteria.
This evaluation is based on the initial objective goal that we are trying to achieve in the option period and all parties being happy with the “return for equity”
In simple terms, if my business achieves this and I give you that, I will be very happy.
I have inventory, how is this calculated in the valuation?
Inventory is calculated in the overall valuation. This is reflected in the valuation price and ultimate option strike price. If you feel this needs to be discussed further, we are happy to discuss.
It is worth noting there are several factors that should be considered when a business is valuing inventory. The industry rule of thumb is as follows:
The Cost of Goods Sold (COGS) is affected by inventory, impacting the profitability and valuation of the business.
Inventory is valued at the lower of cost or Net Realisable Value (NRV), which is the estimated selling price in the ordinary course of business, minus any costs of completion, disposal, and transportation.
Inventory that is no longer sellable is written off or discounted, as adjustments for obsolete or slow-moving inventory affect the overall inventory valuation.
Inventory timings and value (standard across business buying)
Under 3 months old: 80% valuation
3 – 6 months old: 50% valuation
6 – 9 months old 30%
9 – 12 months old: 10% valuation
12+ months old: 0% valuation
As partners, we are also hedging our bets on the businesses ability to move inventory, and this is also part of our valuation calculations. As an FYI, if this was a valuation for business sale, any inventory in the business over 12 months old would be deducted from the sales price!
You are buying into my business without putting physical money in… please explain!
Our investment in businesses is based on being able to provide an absolutely unique and proven business performance infrastructure only available through Philotimo Partnership. This service infrastructure, support and access to people would require $300,000 - $400,000 per year at a minimum plus management of this.
We need to generate a return of investment of 4:1 to make working with anyone feasible so investment in the Partnership is only in businesses and people where we believe that we can achieve this return and are aligned in ambition and values.
For owners of the business, we believe this not only equates to significant financial returns but acceleration of your business of approximately 5 – 10 years against your current growth expectations and performance.
We see deal option as Philotimo taking the financial risk as we:
Still have to buy into the business if results are not generated fast enough (no loss to you at the current valuation and option)
We have invested significant time and resources that are not compensated (our risk)
We are paying for all the resources, people, infrastructure and expertise that is freely available in this partnership.
We are buying into the business and we do it as a delayed option agreement. As the owner, you know that we are incentivised to accelerate the business as fast as possible in order to increase the value of the option asset (your business!) that we are buying into.
How do I know if Philotimo is a cultural fit for my business? What do you do to integrate yourself in with my team.
We have a culture of high performance at Philotimo, and we are the first to say that we are 100% accessible, but we aren’t for everyone. We have expectations that everyone we work with will perform to their best. What you have experienced with Philotimo to date is largely our culture.
Duty. Honor. Care. We are your friend who is there in good times and bad. We are there for your team when they need us.
When you become a partner we add three words to Duty Honor Care: Guide. Protect. Defend.
We Guide Protect Defend your business. We will keep you, your team and Philotimo accountable. We will expect the best each person has offer every day, and we will give all the support we can to ensure everyone is looked after and reaching their goals.
Our culture becomes your culture. What you allow in your business is what your business will become. We bring in high performance by providing a clear and accountable path, and helping people to be the best version of themselves.
90 plans and then what…?
Within the plan for the first 90 days we will move through crucial components, foundational development and ongoing development. The crucial components are the reason for the business being in existence, ensuring that the next five years is clear and backed up with the data, ensuring business model profitability, and reviewing and re-establishing business drivers.
As crucial components are worked through with Stuart Brookshaw and Tim Krotiris, your Philotimo Partner Team will focus on the foundational development of the business. Led by Elana Harari in the Philotimo Performance Centre, this focus is driven by having you – as the owner –in full control of your time and your life, while bringing the high performance mindset in your business.
Within these foundational developments, the Philotimo Partner Team works with your internal team to ensure they understand the business direction, see their impact within the business plans, and know their role and how they can be best assist within the business for the next phase of growth.
Crucial components and foundational development ensure that the business is being built in a clear, accountable, and confirmed as profitable manner.
Once critical and foundational elements have been locked away – within the first 7 weeks – we then move into a focus on ongoing development phase. Once again led by the Philotimo performance Centre, this focus is on the must have elements of a successful business and is in the form of growth, people, financial accountability, essential infrastructure and business optimisation.
This is all part of the day-to-day running of the business and includes elements such as reporting, the team infrastructure and accountability, and an ongoing sales focus.
Layered over the top of the ongoing development and working beside it will be the ongoing strategy focus. Led by Stuart Brookshaw and driven by Tim Krotiris, this looks at the big picture strategy, the innovation, the blue sky thinking… the reason why you got into business!
When a new partner joins with Philotimo, Tim, Stuart and Philotimo Partner Team run a series of sessions, workshops, half days, (and whatever is needed!) in order to ensure the decided direction is clear and understood.
Week by week internal Philotimo flows.
Your business strategy is worked on weekly by the Philotimo Partner Team and the Philotimo Performance Centre, with Monday meeting to review progress, changes required and the upcoming month and quarter.
Every week, the Partner Team and the Performance Centre report to Tim on the progress of your business. Tim reviews key elements of your business weekly and provides real time direction, strategic changes and interventions as required.
Tim is heavily involved (hands on) in the first four weeks of strategic, innovative, and big picture thinking. From there, he is brought into sessions and workshops based on the speciality that he can bring. The same goes for the rest of the Philotimo Partner team. Specific team members will be brought in at key times and on key projects to ensure your business is getting exactly what it needs when it needs.
What happens after the first 90 days
With the structure of the business set in stone, key reporting in place, the team on board, key meetings and accountabilities locked in, your time going where it should be going and high performance just being how your business is run, we get into the ‘real life’ of business. They day to day.
For this, the Philotimo Partner Team and the Philotimo Performance Centre work with you and your team on achieving the strategy we have set together. While all businesses are different, we focus on the Philotimo Five each Month: Business Strategy, Business Innovation, Growth, SLT, and two key elements from your business strategy (the SOT).
Each week we work to achieving monthly milestones that line up with quarterly objectives. All of these are driven by achieving the KPIs we have set together around revenue and growth in your business.
How will Tim Krotirs be involved
As outlined in 90 plans and then what…?, Tim has a heavy hand in building the strategy and direction of your business. He works with the Philotimo Partner Team and the Philotimo Performance Centre to drive his strategic vision for your business forward.
He is the visionary for Philotimo and for your business. This means he is not in the day-to-day of your business (or of Philotimo!). He points, and his Partner Team and Performance Centre shoot (and make it happen).
Once the vision and strategy are set, Tim is briefed (weekly) on your business, and receives monthly management presentations about your business progress. It is in these internal meetings that his involvement is at its peak. When requested by the Performance Centre, Tim will be in key sessions and workshops.
Please be aware that Tim being part of the “day-to-day” of your business is not something you should be aiming for. Just like you not being in the daily running of your business, high performance is knowing that you have the right people, in the right places, and key people running and overseeing your business success. Tim’s role is to set the direction and ensure the growth of your business is achieved. He has surrounded himself with the team that he trusts to do it for his business and as Partners, you get the same access for you and your business.
I’ve heard about Philotimo shared services – what is that for me?
As a Partner we will be looking at how to optimise operations in the back end of the business and shared services is where we can offer efficiencies. We have agreements with a number of trusted suppliers to either reduce costs of services or be provided with premium services for a lesser direct cost.
Using shared services allows us to better manage operations and systemise key areas of the business. These are optional and we will present business cases as we progress where we believe we can find an opportunity for the business.
With this Partnership, what is expected of me? Do I get a new role?
Ah, the Billion dollar question! What do I do when my time is freed up?
Time for the kind truth; we are partners, but this is your business. You will have support like never before. You will have a second (and third, fourth and fifth) pair of eyes on your business. You will have structures put in place. Concrete direction. New ways of looking at things.
But you don’t get to ride off into the sunset (yet). We have goals together. We have plans together. We have put our skin in the game and we will do everything we can to grow the business to new levels so that everyone wins. And (truth time) we expect the same from you; from our partner.
We’re not just your partner…you are our partner.
So, back to the question what do I do now? For now, it will be much of the same – but with more support than you’ve ever had. Philotimo will be reporting to you and helping you to drive the business forward. With each step forward we will get closer (and closer) to our goals, and you will see your role changing more and more. But – you ask – what is that role? We need to build what you want!
This is why in our first weeks together, we dive into your personal goals. What do you want, what does success look like for you, and how involved are you in your business? This is what we drive towards, together.
What if we need future funding and/or capital for expansion? What role does Philotimo play in that?
As Partners we address and evaluate every business challenge together. If funding is required, we evaluate the best method to raise funds vs associated risks. This funding may come from Philotimo or our connections, but each option will be evaluated on its own merits like partners would.
Where we believe Philotimo will add significant additional value is in access to different funding types, funding deal structures, and new approaches funding deals. This includes potential acquisitions and other opportunities that might present themselves.
Can we use your office each week?
Yes! We are partners. We have an ‘open door’ policy for all our partners. As with everything Philotimo, all we ask is that the workspace and the people in it are respected.