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. or 904.394.2913

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