Category Archives: investor

Celebrating International Women’s Day

Celebrating International Women’s Day 
The Past, Present, and Future of Women Leaders and Founders  

“We need women at all levels, including the top, to challenge the dynamic, reshape the conversation, to make sure women’s voices are heard and heeded, not overlooked and ignored.”  
– Sheryl Sandberg 

Yesterday, we celebrated International Women’s Day, highlighting the accomplishments of social, economic, and political achievements of women around the world. It’s no coincidence that we celebrate this day as a part of Women’s History Month. How can we celebrate the achievements of today and look forward to the progress of tomorrow, without acknowledging the determination and sacrifices of the past? While there is no shortage of influential women leaders today, they stand on the shoulders of hundreds of others who paved the way.  

A Look into the Past 

Unfortunately, we cannot list every courageous woman leader from the past (not to mention those we each have within our own families and friends), but here is a celebration of a few, intended to honor all: 

  • Sojourner Truth, after being born into slavery and escaping with her infant, became an abolitionist and women’s rights activist. She later became known for her “Ain’t I a Woman?” speech regarding racial inequalities in the year 1851.  
  • As a young girl, Louisa May Alcott worked in the mid-1800s to support her family financially, something unheard of at the time. She later wrote “Little Women,” one of the most treasured novels in American history. 
  • In the mid-1900s, Marguerite Higgins became the first woman to win a Pulitzer Prize for Foreign Correspondence after working as a war correspondent for the New York Herald Tribune during WWII, The Korean War, and the Vietnam War.  
  • Rosa Parks became one of the most famous, influential women of the civil rights movement when, in 1955, she refused to give up her seat on the bus to a white man. Today, she’s known as the “Mother of the Freedom Movement.” 
  • Sandra Day O’Connor was the first female justice on the Unites States Supreme Court (1981-2006). 

The list, of course, goes on in all government and private sectors, industries, and facets of life. These women and thousands more played prominent roles in advancing women to where they are today. And, as we celebrate women this month, we share in our gratitude for them all. 

The Here and Now 

There is no doubt that progress continues for women leaders and founders. There have been great successes in the government, sports, finance, and corporate worlds. Women are breaking records every day, but there is still a long way to go. In 2019, the proportion of women in senior management roles globally grew to 29%, the highest number ever recorded (same percentage in 2020). On the one hand, we love breaking records. On the other, at only 29%, there is much room for improvement and many more glass ceilings to crack. 

The gap doesn’t just exist within the boardroom. It is also very apparent in female founders and funding. We need improvement in women led companies locating and securing the funding they need to scale their companies. 

While there was already a significant gap in funding, according to Crunchbase, global venture funding to female-founded companies fell further in 2020. Whether this is the result of COVID-19 is unclear; however, there is data that suggests the pandemic has disproportionately impacted women in the workforce. 

Through mid-December, 800 female-founded startups globally had received a total of $4.9 billion in venture funding in 2020, representing a 27% decrease over the same period in 2019. 

Mindy Barker | Barker Associates Image Credit: Crunchbase

Optimistically, early 2021 Crunchbase data shows improvement. In fact, 30% of investments in U.S. companies at Series A and B stage between January and mid-February went to teams with female or Black founders. While it is a brief study period, this trend is worth watching over the coming months.  

Overall, while female entrepreneurs are still far underrepresented in startup funding tallies, at least there are some signs of, and initiatives to, continue that progress. In fact, there is a new target set by All Raise (an organization that advocates for female investors and founders) of growing seed and early-stage funding amounts from the current 11% to 23% by 2030 for U.S. companies with a female founder. 

Tomorrow 

So much has been accomplished, yet, it’s clear we still have a long way to go. According to the World Economic Forum, global gender equality is not estimated to be achieved until 2133. So, as we celebrate the great women leaders of yesterday and today, we do so with an understanding that thousands more women will be standing on our shoulders tomorrow. And the forward momentum that is women’s leadership continues on. 

Are you a woman founder looking for funding? Are you ready to be a part of that 23% target? Schedule a free 30-minute consultation with this link to my calendar to talk about how we can work toward getting you the investment money you need.  

A Successful Pitch May Come Down to Your Words

A Successful Pitch May Come Down to Your Words  
What to Say and What to Avoid 

Mindy Barker | Barker Associates

Lately, we’ve been talking a lot about pitching investors. We talked about the importance of your story coming through loud and clear and why you need two pitch decks. And with all this “talk,” it now comes down to your actual words.  

You have a limited time to tell your story and make the best impression. Knowing what will resonate with potential investors, and perhaps, more importantly, what will not resonate with them, can make all the difference in whether you receive funding. Even if your pitch deck is perfect, it can easily be derailed by poor word choice. How you choose your words says a lot about you, your views on your business, and how you would fare as a potential partner.  

Overall, your pitch will tell your story, including information about the problem (briefly), target market, revenue or business model, early successes and milestones, customer acquisition, team, financials, competition (briefly), funding needs, and exit strategy. As you’re talking about each, there are words and phrases you should avoid, as what the investor hears when you say them will be entirely different than what you intend. Take the following chart as an example of some of those situations. 

Words/Phrases to Avoid What the Investor Hears/Thinks 
Buzzwords (i.e. disruptive, visionary, innovative)  Disingenuous; insincerity 
Solo entrepreneur No one can do it alone. This person will burn out. 
No competition  No market or you have not done your   research 
“No brainer”  Arrogance 
Guarantee  Amateur – there are no guarantees in investing. 
Any word or phrase you cannot explain well Unprepared 

A Quick Note on Buzzwords  

People tend to use them because they think it will make them sound like they know what they’re talking about. But those people aren’t fooling anyone, particularly sophisticated investors. A “buzzword” is defined by Merriam Webster as “an important-sounding usually technical word or phrase often of little meaning used chiefly to impress laymen.” By the definition alone, you should see why you should exclude them completely. You want to impress the investors (who are not laymen) the right way – with legitimate numbers and proven strategy, not by trying to sound impressive. 

Powerful Words/Phrases that Strengthen Your Story 

Instead of the above words and phrases, focus on the following powerful ones that show you mean business: 

  • Customer Acquisition Cost (CAC) – explain how much your customer acquisition strategy costs and how it can be reduced over time. 
  • Lifetime Value – explain how your customers will eventually cover the cost of operations. 
  • Churn – explain how efficient you are about retaining your existing customers (eventually generate enough value to pay back their acquisition cost and help you generate a profit). 
  • Burn Rate – explain how much cash you have remaining to operate and how efficiently you are operating your business.  
  • Cost of Goods Sold (COGS) – explain the sum of all costs that go into offering your product. 
  • Gross Margin – explain how well your business is performing. 
  • EBITDA – understand what this means and have projections to back it up. 
  • Use of Proceeds – explain how the investor’s money will be spent and make sure it is not to increase the existing C Suite or Founder’s salary. 

These are the terms investors want to hear. Not only do they demonstrate that you know your business inside and out, but they also give more credibility to your numbers. A win-win for investors! 

Other Pitching Tips 

Now that you understand the words and phrases to avoid and those to focus on, other pitch tips include: 

  • Stay professional 
  • Be on time and respectful of your time limit. Show that you value the investors’ time. 
  • Be confident, but not arrogant. 
  • Focus on the solution, not the problem. 
  • Don’t attack the competition. Instead, focus on your strengths. 
  • Think and talk long-term. Investors are not interested in quick wins. They’re looking for companies that are going to make an impact on their industry. 
  • Communicate your “why” passionately and infectiously.  
  • Understand that there is a difference between creating a great pitch deck and creating a great pitch. 

Going into any pitch is a nerve-wracking experience. Even with practice, you may struggle to find the right words, which is why focusing on them from the start is so important. There are many available pitching tips out there, but word choice alone can make or break the deal. At the very minimum, they can give some extra positivity, and who doesn’t need that on pitch day?  

Barker Associates has extensive experience with assisting companies in preparing their pitches, including the keywords they want to use (and to avoid). Schedule a free 30-minute consultation with this link to my calendar to talk about how we can work toward getting you the investment money you need.  

The Pitch Deck – Something so Important, You Need Two of Them

The Pitch Deck 
Something so Important, You Need Two of Them 

Mindy Barker | Barker Associates

As someone who regularly helps others prepare to pitch to investors, I see one situation far too often. This may all sound a little too familiar to you as well. You are an entrepreneur who has done everything right. You developed a product or service and turned it into a successful business, that business began generating revenue, and now you are ready and willing to scale, but need investment money to do so. Then, you seem only to hear a resounding NO from the investors you approach.  

Why? More often than not, it’s because the investors have no indication of what you are actually offering them. And understanding what you offer comes down to two simple words, with not so simple connotations … “pitch deck.” Yet, if I can share one piece of advice with you, as I do in my book, Pitching to Win: Strategies for Success, it’s that one pitch deck is never enough. If you are serious about scaling your business by pitching to investors, then you must have two pitch decks – one to send to investors and one to use in your presentation (or pitch).  

Let me explain. Some investors will not agree to meet with you until they have first reviewed your pitch deck. As such, they may ask you to email it to them before scheduling an actual pitch. And just as much as an email is not the same as standing in front of someone delivering a presentation, your pitch decks likewise cannot be the same.  

Understanding how they are similar, and how they are different, is key to getting that next phone call, presentation, or meeting. To that end, I have put together the Top Five Tips for ensuring you have two pitch decks that will get you the right attention when you need it. 

Pitch Deck Creation: Top Five Tips 

1. Be Proactive 

Research the investors who are already investing in similar products or services. If they have similar interests, they are the ones most likely to invest in you. Try to determine what types of questions they asked before and incorporate the answers into your pitch decks from the start. 

2. Create Pitch Deck #1 

This is also called the “Handout Pitch Deck.” It is the one that you will email to investors when asked for a copy. The key to this pitch deck – it must stand alone. It cannot rely on your verbal explanation of the content because, quite simply, you will not be there to explain it.  

The Handout Pitch Deck must quickly communicate with words (but not too many), numbers, and graphics your “Why me?” to potential investors. 

3. Create Pitch Deck #2 

Use Pitch Deck #1 as a foundation to create Pitch Deck #2. Pitch Deck #2 is the “Presentation Pitch Deck.” This version is based on you delivering your pitch, aided by high-level slides with few words and many images. It does not, and should not, stand on its own. Pitch Deck #2 will have very few words and numbers, if any. Instead, it will function much like a television or movie screen, as your priority is having the audience focus on you and your messaging, rather than reading slides. Remember, at the end of the day, this pitch deck is a sales presentation.

4. Ensure that Both Decks are Concise, Professional, and have Visual Appeal  

Pitching is never the time to get into the intricate details of your past experiences or even your product or service. Get to the business of what investors want to know:  

(a) what your business is all about and  

(b) most importantly, how it is going to make enough money to return 

      multiples of the amount of money you are asking them to invest. 

5. Update Both Pitch Decks Regularly 

Consider this scenario: a potential investor asks you to send your pitch deck via email or present it to a group of investors. You respond that you will get it to them in a couple of weeks. Chances are that when you finally prepare your pitch deck, the investor will have already moved on to other projects and entrepreneurs who are ready to take their money

You want to be able to distribute Pitch Deck #1 or present Pitch Deck #2 at a moment’s notice. Just as every professional has an up-to-date resume to present at any time, a growing entrepreneurial company should have both pitch decks ready to email or present at any time.   

The creation and management of your pitch decks are critical parts of the capital raising process. Remembering that the difference between the two decks comes down to your voice is of the utmost importance. Pitch Deck #1 must stand on its own, capturing your voice, without the benefit of you speaking, while Pitch Deck #2 exists to bolster your voice as you present. Barker Associates has extensive experience with assisting companies in preparing their pitch decks. Schedule a free 30-minute consultation with this link to my calendar to talk about how we can work toward getting you the investment money you need. 

Pitch and Storytelling According to “Schitt’s Creek”

Pitch and Storytelling According to “Schitt’s Creek” 

A Successful Pitch is the Result of a Good Story 

Recently, I have been watching the Schitt’s Creek series on Netflix … for the second time, and enjoying it even more this time around. When I watched it the first time, I found myself getting irritated. But several Schitt’s Creek fans I knew encouraged me to stick it out, and I am so glad I did. What I learned watching the entire series twice is that each character surprises you from many different dimensions throughout the six seasons, representing numerous similarities to the world of pitching investors.   

The story centers around an ultra-wealthy family that loses everything. The first episode shows the authorities taking all of their possessions, forcing the family to move out of their large estate. They soon learn that they can retain a small town they purchased as a joke years earlier. So, they get on a bus with their suitcases and head to their new life. They are immediately immersed into a stark contrast from the luxurious lifestyle to which they had been accustomed. Yet, despite the lack of luxury, their experiences in this small town teach them many lessons they never would have learned before about life and business, including how to pitch to investors. You can see why my interest was piqued! In fact, I was so interested in the story that I watched an interview with the two creators. 

One of the creators insisted on developing the backstory of each character for hours prior to starting the script, while the other got increasingly frustrated with the time and energy “wasted” on backstories when they had an entire script to write. However, he soon realized that the investment of time in creating those backstories was one of the primary reasons for the success of the series.   

The parallelism to pitching to investors was uncanny. An essential element of a successful pitch to investors is having a compelling backstory. It is far beyond the “script,” or in this case, pitch deck. Working on the story behind the company so that it is authentic and backed by sustainable facts is the key to reaching investors. And connecting with them authentically through your story, coupled with ensuring you are the right fit for their investment criteria, will ultimately secure the investment!  Success! 

I recently became an investor in the Seattle Angel Group and immensely enjoy the education the group provides for both investors and companies preparing for pitch competitions. Bob Crimmins, a repeat successful entrepreneur, was one of those educators, and he was fascinating. He called successful stories “Cogent Stories,” as they are believable and can help an investor understand how they are going to invest their dollars now and receive a significant return three to five years later. As I watched Schitt’s Creek, I thought a lot about Bob and the impact of “Cogent Stories.” Apparently, they work for more than investor pitches. They are also what is behind a hugely successful series. 

Now, back to our regularly scheduled programming! (Spoiler alert here – if you have not watched the entire series you may not want to read further, but schedule a chat with me (link to my calendar) to discuss your backstory and pitch deck.). 

In the show, Johnny Rose (the family patriarch), Stevie (the hotel clerk), and Roland (the mayor of Schitt’s Creek) are business partners and pitch investors, achieving success at the end of the series. There are many circumstances that bring these individuals together, and their collective growth leads to the overall success of the pitch. 

Johnny Rose had been a successful businessman and made a lot of money with his business “Rose Video.” The events that led to the loss of his fortune were based only on his business partner’s actions. The business itself was successful. While Johnny’s story is fictional, similar stories happen every single day in the “real world.” What happened to Johnny could happen to anyone if they are not paying attention to governance, controls, and  financials.  Yet, the loss of Johnny’s fortune was itself a growth experience. 

Stevie was working the front desk at the hotel in Schitt’s Creek, feeling like she was a failure.  In an effort to “get her life together,” she decides to branch out and interview for a professional position with an airline. After she secures the position, she learns it is not for her after all.  This experience actually creates a huge appreciation for who she is, her talents, and her previous role. Similarly, for the C-Suite to be successful, confidence and self-identification for the position must exude when the investors begin their due diligence.  

Roland is the mayor of Schitt’s Creek, which is a position filled with pride, in part, because it was bestowed upon him through birth rite.  Roland struggled with who he was, and there were many times that his self-discovery process irritated Johnny and Stevie. But despite all of those irritations, he showed he was trustworthy and loyal to them in many ways as their relationship grew.   

Through trial and error, often hysterical ups and downs, these three professionals began to trust each other. They respected the talent and contribution they each brought to the team. Johnny knew that Roland would always have his back, and vice versa. One of my favorite episodes is when Johnny and his wife, Moira, are celebrating their wedding anniversary, and they run into some of their old “rich” friends, along with their new friend, Roland. The encounter is a life lesson in itself. Johnny and Moira attempt to fit in like they used to, but soon get irritated and offended when their old friends begin to talk negatively about Schitt’s Creek. Johnny, standing up for Roland, who is even more offended, mentioned that while their so-called friends never reached out once after they lost everything, Roland and Schitt’s Creek welcomed them with open arms.  

This episode reminded me of the loyalty, communication, and respect needed among team members working toward pitching to investors. Working as a team to strategize and execute a fast-paced growth company takes perseverance, intellect, the ability to deal with ambiguity, and many other attributes that can only be achieved when there is open communication among team members who trust each other.  At the end of the day, it must roll up into an authentic story about who these people are because that’s what investors are investing in … the people behind the company.  

When you are preparing to pitch to investors, the best thing you can do is work on your “Cogent Story.” Take the time to create all aspects of your strategy prior to the pitch, similar to how the creators worked tirelessly on creating the backstories of their characters on Schitt’s Creek.  Your story will be more authentic, your confidence will increase, your team will be stronger, and your chances of success will increase exponentially. Barker Associates has extensive experience with assisting companies in developing their backstories and preparing pitch decks. Schedule a free 30-minute consultation with this link to my calendar to talk about how we can work toward getting you the investment money you need. 

At the Intersection of Financial Infrastructure and a Global Pandemic

How a Pre-Pandemic Shift Left Companies Vulnerable 

Mindy Barker | Barker Associates

At the Intersection of Financial Infrastructure and a Global Pandemic

How a Pre-Pandemic Shift Left Companies Vulnerable

Pre-pandemic (do we even remember that time?), the investment world had experienced a huge shift. Unfortunately, this shift did not help prepare companies or investors for what was to come. Priorities had shifted from a company’s sustainability and infrastructure to avenues of increasing revenue as quickly as possible. However, sustainability and infrastructure were exactly what was needed most during a global pandemic.    

What Supply and Demand? 

Everything we had learned in our earliest economics classes about supply and demand seemed to be irrelevant. I remember those classes –training my brain to think of opposites – supply goes up, demand goes down, and vice versa. However, that concept no longer applied to venture capital and private equity firms. The number of firms that were chasing deals with buckets of money created a huge supply of investor dollars. But the number of successful high–growth companies to invest those dollars did not increase at the same pace.   

The result? Investment firms began expanding their reach. They started to invest not only in the usual entrepreneurial high-growth companies, but also in companies that would have typically received funds through stock sales in the public markets or through traditional bank financing. These companies needed to move into the investment firm world to fill the gap that had resulted in too much money and not enough companies. Additionally, investment firms began relaxing the guidelines associated with the due diligence process. 

These changes forced a decline in the regulatory compliance surrounding the movement of investment dollars, financial audits, and other financial items. With the focus almost exclusively on top–line revenue growth, there just didn’t seem to be a need for them. Further, companies with contracts that brought in recurring revenue were trading in the investment world based on multiples of revenue (some as high as ten times what their revenue was currently).   

A Lack of Infrastructure Meets a Global Pandemic 

Enter COVID-19. With so much time and attention previously focused on quick revenue generation, many companies lost the infrastructure to produce the quality financial data and reports needed to make informed decisions for ensuring sustainability. However, infrastructure and sustainability were what was needed to survive the pandemic. 

When the pandemic hit, every stakeholder (board members, investors, CEOs) immediately shifted their focus to cash flow analysis and sustainability. Chief Financial Officers have all noted that their interaction with other managers, officers, directors, and investors increased literally overnight. While no one could have predicted the full cash impact of the pandemic; in particular, the need for short-term cash flow, they could have been better equipped. The companies best prepared to analyze the situation were the ones that had the appropriate level of infrastructure prior to the pandemic. The stakeholders wanted to know if the entity would survive. While most had the ability to enter ‘survival mode,’ one has little to do with the other. Survival mode is simply not sustainable for any extended period … in any situation. 

Next Steps 

The pandemic taught us once again that knowledge is power. Infrastructure is crucial when analyzing different scenarios to make decisions quickly. Chief Financial Officers should take advantage of the temporary dynamic brought on by the pandemic. Using this time to get the right type of infrastructure in place will help prepare them to make critical decisions at any moment. 

There are many companies that were forced to make difficult decisions to lay off employees, not renew leases, discontinue software development, or even close their doors for good. Unfortunately, most had to make these decisions without the confidence that they possessed all of the information. Full knowledge is mandatory for a sustainable future and for the success of any company overall. 

By leading from a position of knowledge, which comes from having the right infrastructure, companies will have an edge over others whose directors or CFOs are blindly making decisions. What does that type of infrastructure mean? We’ve talked about it before – most recently in Oh No Not Again – but essentially it means having an Enterprise Resource Plan, CRM, General Ledger, Cash, HR System, and Payments. A clear vision and financial roadmap on how to achieve that vision, along with cash and a strong general ledger, are the foundation of an essential infrastructure. 

Times have changed, or have they?

Mindy Barker | Barker Associates

Since March nearly everyone in the world has experienced change in their lives beyond our average experience. Some of the changes have been stressful and devastating; some have been positive. Most people with whom I have spoken have found times of joy in spending more time with their loved ones, having the time to cook, play games and just talk.

However, the negative impact on so many businesses seems almost unbelievable. Eight months ago no one would have predicted that restaurants, retail stores and gyms would have to completely shut down.

What has not changed are the core fundamentals of business. In order to survive, a business must have a product or service that solves a problem and can financially make a profit. From what I have seen, many businesses that will not survive until the end of 2020 were not sustainable prior to the pandemic because they did not understand which products or services were making money and which products were losers.

The core metrics and accountability required to run a profitable business were overshadowed by the exuberance of the economy and the unrealistic valuations private equity and venture capital firms were paying for investments. These valuations stemmed from the limited supply of investment-worthy companies and the requirement for investors to invest in order to stay in business.

The firms being capitalized had the Seven Essential Tools® – and knew how to use them to attract investors.

Check out my Seven Essential Tools Road Map®, which shows the steps to preparing to pitch to investors. Along with the Seven Essential Tools® details, you can position your company for growth or simply gain a better understanding of where your company stands financially.

Mindy Barker | Barker Associates

Investors are focused more than ever on the core attributes of a business when evaluating it for investment. The good news is that the information they want to know is the same information that is critical for you to run your business successfully.

If you are a founder or a C-suite executive of a fast-paced, growing entrepreneurial company, are you confident you have the Seven Essential Tools® you need to pitch to investors? 

The Seven Essential Tools® are available in my book, Pitching to Win: Strategies for Success, where I guide you through each step of planning and executing the actions to prepare to pitch.

If you aren’t ready to jump off the cliff to prepare to pitch, let’s set up a 30-minute free consultation to discuss your unique situation in more detail.

Negotiate from a position of knowledge

Mindy Barker | Barker Associates

How would you respond if someone made a legitimate offer for your business? Would you know if the amount is what the market would pay? Even if the offer sounds like more, or less than you imagined, you want to respond from a position of knowledge, not sticker shock.

Valuation is the value an investor would place on your company if you were to seek investment funding. From a negotiating standpoint, it’s better for the prospective buyer to say a number first so you have an indicator of how serious they are. Prepare yourself – arm yourself with the knowledge of a realistic valuation so you can effectively negotiate.

One measure of the value of your business is what someone will pay for it. Enterprise Value is a real number that investors calculate using your historical financial statements to arrive at a multiple of revenue, or EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization). Other factors influence the value that could actually be paid for the business.

For example, are you loading your books with personal expenses and other tactics to avoid paying taxes? When investors value your business, such expenses can lower your EBITDA and affect the sale of your company.

On the other hand, EBITDA can be higher when you keep personal and business expenses and bank accounts separate and run your business as a true entrepreneur. Large and small organizations alike are guilty of combining personal and business expenses. C Suite executives in large organizations without governance over their expense account can significantly impact the value of the business by deflating the run rate of profit. Smaller businesses sometimes pay their family members a salary without the family member ever doing any work for the organization. Neither of these examples are proper stewardship over the financial governance of the organization.

Then there is the value that the market will bear. Factors that can influence the actual value paid for your business include how scalable your infrastructure is – the people, processes, and technology. If a new owner wants to focus on growth, is the right infrastructure in place to support that or will the new owner have to invest in infrastructure first? How much debt are you carrying? Someone has to pay off debt when the business changes owners.

On the other hand, your approach to acquiring new capabilities – buy, versus build, versus lease – in some cases can raise the value that the market is willing to pay.

Your role as an entrepreneurial leader can also influence the market value of your business. Employing a strong team who lead and run your company with an eye to the future is much more attractive than a business operating with old, inefficient processes and no new product launches.

My goal with this post is to help you understand the importance of knowing the value of your business. You never know when someone is going to reach out to you with an offer you cannot refuse. Be ready by knowing the valuation of your company so you can speak intelligently – before you get on the emotional roller coaster of discussing a transaction.

Want to learn more about Enterprise Value – what it is and how to build it? Check out my post from awhile back – Look at Your Business Like an Investor. For an even deeper dive, including how to calculate EBITDA, download Pitching to Win: Strategies for Success from Amazon.

I would love to speak with you about your unique situation. I invite you to set up a 30-minute free consultation with me right now by clicking on this link to my calendar – let’s talk!

Essential Infrastructure

“Essential” has new meaning.

We have learned many definitions related to essential in 2020. The interpretation of essential has been heavily debated, including discussions over golf courses, liquor stores, restaurants, and bars. As communities open up, these debates are getting more interesting as the discussions center around who is allowed to be open.

My favorite debate about “essential” is the one where the attorneys representing Elizabeth Holmes, the Founder and CEO of Theranos, appealed to the court that they should be considered essential and allowed to meet at the office to work.

Mindy Barker | Barker Associates The right infrastructure is critical to generate the data about your business during the due diligence process with potential investors.

Pre-COVID, one meaning of “essential” described having the right infrastructure in place if a company wanted to raise capital. The right infrastructure is critical to generate the data about your business during the due diligence process with potential investors.

Here are a few examples of why this is important:

Revenue projections will be a key component of what the investor will look at when evaluating the business. The revenue in the projected income statement for the prior year probably represents an increase in the revenue over the current year. The investors will ask questions like: “How long does it take you to close a deal from the time you speak to a customer to close?” “How many deals do you have in the pipeline now?” “What is your customer churn rate?” “How do you charge customers – as SaaS, by transaction?” etc.

These questions will be asked during the initial discussion as well as during the presentation. Whatever answer you give, if the due diligence moves forward, must match the data in the general ledger, CRM (Customer Relationship Manager data base) and other systems.

I have known a C Suite executive falsely stating things like they have never lost a customer or they close a deal in 30 days. But when we drilled down on the historical data his statements are not supported by facts.

I have also experienced a C Suite Executive who stated that the projections were high because “that is what we need to close this deal.” False information may get the attention of a potential investor but it will not keep their attention when they drill down to the “essential” infrastructure and claims are not backed up by facts.

Burn rate – potential investors will ask what your burn rate is, i.e. what is the amount of cash the company requires each month. Burn rate is based on the cash leaving the checking account – not the pretax income. These are two different calculations and often commingled into one number for companies. If the C Suite executive states the monthly burn rate is $10k because that is the best guess he has during an investor presentation, but the historical cash spend is $15k per month, the investor will lose trust and the company seeking investment will lose credibility. Best guess does not get the job done.

According to the experts at Ernst & Young:

“Increasingly, buyers are looking for infrastructure that can help them identify, track, measure and report on a broad range of externalities. Being able to demonstrate actions taken to date, along with a path forward that helps buyers envision how the company can help address or mitigate global challenges and serve societal needs, can help them think more expansively about opportunities for creating value.”

In their article, the E&Y authors are directing their advice to Private Equity Firms to emphasize the importance of creating value for portfolio companies the PE may want to sell. The quote above supports my assertion that adequate infrastructure is essential for companies seeking investment.

You may say to yourself, I will build the infrastructure when I am ready to pitch to investors – we are not ready right now. If you have the ability to influence decisions about company spend, it is your fiduciary responsibility to insist the company has the right infrastructure. Not only will it position the company to prepare for the future, it will guide the entire management team in making the right decisions day to day.

Let’s dive into your essential infrastructure concerns – click here to set up a 30-minute free consultation to discuss your unique situation.

Look at Your Business – Like an Investor

Most founders and CEOs are certain their business is a good investment and that others should see it that way. Unfortunately, that is not the case in a high number of instances when we dive deeper into the aspects of a company.

We each have a unique set of characteristics that drives us and puts us in situations where we are comfortable. Every time we make a choice to put ourselves in a situation and stay in it, something about that situation is working for us. Solid self-awareness and emotional intelligence help us make choices in life that work for all aspects of our lives and align with our relationship with money and our core values. A culture is developed around that. In business, the governance over this culture is ultimately driven by the purpose of the investors, shareholders, or founder(s). They determine the “Why” of the organization.

The culture and purpose of an organization can be several things.

It can be a hobby, and you are okay with not making any money. I know many business owners who have built a lifestyle company that provides enough cash to pay their bills; they may also run all personal expenses through the company. They are examples of “Lifers.” This practice is great if they happily accept the annual income they produce and do not have any desire to sell the company one day.

How to Look at Your Business Like an Investor

Entrepreneurs who are aware they need to build Enterprise Value will focus on establishing and monitoring metrics with the understanding they are building a business that can survive in the ecosystem of the investor world. They do not commingle their personal and business expenses. They listen to experts and focus on the important aspect of building a business. They may not take a salary from the business in the early years, opting instead to reinvest in the business and build a loyal customer base and revenue.

The problem arises when the Lifer wants to raise money from or sell the business to an investor – which really means they want the investor to fund their lifestyle.

Which Are You?

Before you get ready to pitch to investors, evaluate which type of business owner you are and if pitching to investors is the right thing for you. Do not waste your time and energy if it is not.

Read Chapter 2 in Pitching to Win: Strategies for Success to get more insight and a self-evaluation to find out which one you are.

Pitching to Win: Strategies for Success Book Launch

I am excited to announce the publication of my new book Pitching to Win: Strategies for Success! During my more 30 years of experience as a CFO and financial strategist, I have come across many businesses who do not understand the concept of financial readiness. This is particularly important if they are attempting to ready a company for investors. Pitching to Win is a practical how-to guide for entrepreneurs that details how to get a business infrastructure-ready and how to create pitch materials. I am passionate about creating financial clarity to enable businesses to focus on the big picture. This book allows me to share my passion and expertise with a wider audience.

        

I could not have written this book without my former colleagues and Barker & Associates clients over the years who have provided me with a wealth of experiences and examples which you see throughout the pages of Pitching to Win. I am also grateful for the Jacksonville Women’s Business Center (JWBC) and the Athena PowerLink program, which has given me invaluable experience working with fellow entrepreneurs. Pitching to Win is currently available for download as an e-book on Amazon.com, and it will also be available in hard copy soon through Amazon.

Get the details and inspiration behind the book here on the website Book page.