Looking for an Investor or that Exit – start early

So you are looking for an Investor or Exit

Business owners, both young and old (by both their age and the age of their businesses) always have an eye on either new investor(s) or a buyer for an exit from the business.

Obviously, in any case the business needs to be attractive. The value proposition needs to be solid. The staff skilled and energized. The technology current. The processes smooth allowing for peak production. A business plan that is sound as well as budgets and forecasts that make sense. Lastly, on this list, but certainly not in a business, the accounting needs to be on the mark.
Too many businesses feel that accounting adds no value (sic, sales) and relegate it to the background and/or a minimal budget. Nothing will sink your pitch to a potential investor/buyer faster than sloppy accounting systems, controls, and books.

You want to be able to show a maximum valuation and a healthy EBITDA. You want to show a large loyal customer base that continually does repeat business. You want to identify add-backs; which increases your EBITDA (adjusted EBITDA). You want your business plan and budget tracking with your accounting.

In essence, you need a mean, lean, fighting machine to attract the most investment (for least percentage of ownership) or highest multiple possible for sale. Both situations will bring in top dollar.

Investor exit

None of the items previously mention happen overnight or in a bubble. They take time to amalgamate. They take money and qualified individuals to bring the ideas through their life cycle to implemented plans and success. Let us not forget the failures and setbacks that will happen along the way.

As the old cliché goes, Rome wasn’t built in a day, and neither will a company that is attractive for investor or buyer. I have seen too many companies whose pitch books are sleek, glossy, and attractive and say nothing. They do not provide the potential customer with a reason to move to the next step.

I looked at a pitch deck the other week that did not provide current financials (albeit even a very macro numbers). It did not include even the smallest subset of industry accepted Key Performance Indexes (KPI). My first impression was they were hiding something. They were, they have consistently lost money (newspaper and industry articles claimed in the neighborhood of 10 quarters).

Where do you start?

If you do not know, where you are or where you will be going, how are you getting there? You start with a strategic business plan and a budget.
If you are an existing business you do a GAP Analysis (or at least the first part, which creates a start point) and business process mapping. From there you can now create your tactical plans. New businesses have nothing to compare to, so they just need (easier said than done) to create tactical plans.

You look at your accounting. You start financial accounting. You then work on managerial accounting. Here is where you will capture your marketing information. You will determine what types of reports, metrics, and KPI’s.

Conclusion

This is a great stopping point. In order to accomplish a business plan and to determine your accounting needs requires a fair amount of time, great determination, and foresight.

The effort will pay off in the end.