Category Archives: investor

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.

Money is Everywhere, and You are a Rockstar!

Money is everywhere!  Banks, investment firms, and alternative lenders are getting incredibly creative with their marketing tactics to find companies to purchase and invest in. CEOs and Founders can become exuberant and confident they are the next best thing since Uber – Unicorn status is right around the corner in this market. They are a rock star!

These conversations often lead to discussions about high valuations, partnerships, and mentorship from the investment firm to help you grow exponentially.  It seems that a glorious relationship is in the development stage.

Money is Everywhere and You are a Rockstar

Then what happens next …

Investment firms and banks are run by people with whom you develop a trusting relationship.  Keep yourself centered, this friendly relationship that is developing is about business. Your business is held accountable by some sort of governance.  Lenders and investors must follow certain processes and procedures prior to sending you the money. For this relationship to succeed, each partner must meet certain parameters in building the foundation, specifically those related to your financials.

Here is the harsh reality. A number of these deals go poof, up in smoke due, to the inability to provide the bank or investor with the right due diligence information.  I met with a CPA firm today to discuss ways we can work together. One of the partners said he has seen more entrepreneurial growth company and private equity firm deals fall apart lately due to lack of infrastructure.  The business may appear to be solid, with a great growth trajectory yielding nice margins.  The list of substantiating documentation is long, and the money people require you back up your claims with evidence such as:

  • Customer records,
  • Accrual basis financials that are, at a minimum up to par for a quality of earnings report, if not an audit,
  • Analytics of any one-off revenue-producing events that may have caused a spike one month,
  • Employee records, with signed copies of employment agreements,
  • Organized stock ledgers with all warrants, stock options and stock equivalents available.

Business owners who can produce this information are Rock Stars.

Failure to produce these documents means that a deal with a lot of potential may quickly go up in smoke. Poof.

After the “poof” it hits you – while preparing for the due diligence process, sales may have dropped, employees got wind of the potential sale and left the company. You are faced with building your company back up.  The cost of not having the right reporting infrastructure and losing the deal will seem enormous at this point.

Selling your business may not even be on your radar but consider this.  What if someone approached you with an incredible price you would have never imagined, contingent on the due diligence process yielding favorable results? If presented with this opportunity, would your company be ready?

The way you look at your company financials for strategic decision-making is the same way that a buyer would look at them. By operating your business like it is going to sell tomorrow, you are more likely to be making informed decisions using timely, accurate data. If you aren’t making informed decisions from your financial data, go ahead and get the kerosene and light the match, because it will all go up in smoke one way or the other.

Barker Associates can help you be a Rock Star and achieve financial clarity of your company’s position. By working with us, you will know what the numbers say to potential buyers. Call or contact us to make sure you are ready. cfo@mindbarkerassociates.com or 904.394.2913

Deal Killer

Deal Killer

Have you ever prepared for your workout but realized you had not done laundry, so you had no clean clothes or you could not find your tennis shoes?  Were you still motivated to go for the run after you did your laundry and found your shoes? Many of us would have lost interest due to the time delay.  The same concept applies to a deal.  Time kills deals when too much of it passes.  

Start with the end in mind. Every business owner should begin building their business with the idea of seeking investors or selling in the future, which means laying your due diligence foundation.   

Have at hand the due diligence essentials.  Investors will ask for them – do you know what they are? Do you have then available at all times, are you solidly prepared for due diligence, are you in a position to secure investment?  Email me at cfo@mindybarkerassociates.com to get the list.

Then get your due diligence folder ready and keep it current.   

 

Start With Simple

What do making your bed and pitching to potential investors have in common? According to Admiral William McRaven, in his book, Make Your Bed (available at Amazon.com), it’s the simple steps, taken each day, that achieve great results.

To better link these two seemingly unrelated activities, consider this: Chief Executive and Financial Officers may feel overwhelmed by the need to focus on daily tasks and raising capital.  But by executing a simple task, such as making your bed each day, the tone is set for the rest of the day’s attitude and accomplishments.

Combine the responsibilities of a C level position with the priorities of kicking off a new year, and CEOs and CFOs may lack the required focus to also prepare to meet with potential investors. I suggest you personally implement one to two simple habits successfully, then move on to other new habits. The success of achieving even simple changes will reinforce your mindset for success.