The Value Equation

Chapter 14The Essential Ingredient

Without question, equity returns lie at the heart of corporate wealth creation. In turn, quality business models lie at the heart of corporate equity returns. Such business models are conceived, adopted, and executed by founding corporate entrepreneurs and business leaders, often with material assists from company management and staff. While much of the focus on this book is centered on the financial dynamics and basics of corporate wealth creation, business models do not execute themselves. Human effort drives business model creation and execution. It is the essential ingredient.

The Growing Restaurant Illustration

In chapter 10, to illustrate the power of OPM equity, I presented a case of a growing restaurant enterprise. The sample company starts with a single location funded with YOM and OPM in year one, adding a second location in year two funded with OPM equity and OPM. Over the next three years, the company adds another eight locations that are funded with retained equity cash flows and OPM. The case study is feasible, and I have witnessed companies successfully embark on similar aggressive growth strategies.

Do not take my rosy corporate scenario to mean that I believe execution to be easy. There are more restaurant locations in the world than any other service or retail establishment. The restaurant industry is mature and highly competitive, with new restaurant successes typically won at the cost of market share taken from other ...