So now you have Appreciated, Optimised and Engaged – now is time to get Serious!
The next three steps are all about Raising Capital, Acquisitions and Exits.
So, lets tackle Step Four – Raising Capital
Growing businesses can find their growth restricted by lack of capital. We all know how frustrating the banks are being at the moment, trying to reduce lines of credit instead of helping you grow by increasing them. I share your frustration that the Banks are saying that they are open for business but once you engage with them, they find any number of excuses not to provide the capital you require or they make you an offer on terms that would make Shakespeare’s Shylock blush!
You may need capital to finance your increased sales and marketing effort, to enter a new market, to bring a new product into your sales mix, for research and development. Whatever the reason, access to capital is critical.
I have been in the capital raising business since 1988 and I know how complex and difficult this can be.
In the Fourth of my Six Strategic Steps, I will teach you about the different sources of capital and how you organise yourself and your business to maximise your chances of raising the capital you need for your business.
You should think of Capital as the oil that lubricates your engine. Without it your business will seize up and grind to a halt. With sufficient capital of the right grade, your engine is capable of running at maximum revs and getting you to your destination faster.
Remember at this point you still have the choice of whether to hold or sell. When your business is in a strong position, you are the one making the decisions not accepting other peoples.
Step Five – Acquisitions
Making an acquisition is not for everyone. It carries considerable risk and takes up a significant part of managements’ time. I have organised dozens of deals over the past two decades and am well positioned to help you assess whether you should make an acquisition and to guide you through this complex process.
Its not all about knowing what to buy. When to buy, how much to pay, organising the negotiations, avoiding the pitfalls, closing the deal and implementing the post deal integration are all critical steps to a successful process.
Step Five will teach you all about this process and enable you to assess if and when you should consider making an acquisition.
While many acquisitions do not achieve their original objectives, you can reduce this risk by being well informed and prepared to take an opportunity if it presents itself. Remember that you may not be the only interested party and if you are badly organised, you may miss an excellent opportunity to accelerate the growth of your business in a low growth market.
An acquisition is more than buying a second car. It is more like changing the engine in your car for a bigger one with more power, more acceleration. However, it will also require more petrol, more oil, more servicing and your may need to go on an advanced drivers course to be able to handle it.
Step Six – Exit
The final step is all about realising the wealth you have created by following the previous five steps. Remember most overnight successes have been quitely grinding away for years before reaching their objectives and “suddenly” appearing in the limelight.
Selling your Company is a one off event. Either you do or you don’t. You need to have a clear view of whether your have achieved what you set out to do when you started the company. If you have not followed Steps One and Two which set the direction for your business, how can you know if you have reached your destination.
Selling at the right valuation is also a challenge. Each seller normally has a high target price seeking to get as much as possible for his business and a minimum beneath which they will not sell.
Each Buyer is trying to buy as cheaply as possible but has a level above which he cannot see any value in the deal for him. Knowing where these boundaries fall is critical to getting a deal done and normally requires both sides to compromise on their ideal objectives. As a seller, you should have a clear idea of where you stand.
Price of course is only one element of the deal. The complex terms and conditions associated with the deal need to be understood and negotiated. A clear understanding of what is reasonable and what is not reasonable is key here and knowing how to work with a good commercial lawyer can make a huge difference when selling your company.
A final point in this step and one often overlooked on the journey is the issue of ownership and dilution. When you set your business up you start by owning 100% of the equity. As the company develops and more people get involved, they often seek to get a share of the equity. While the pie may get bigger, the real game is making sure you get as big a slice as you can and sharing equity and dilution by investors acts against this.
Of course, enabling your key management as staff to participate in the equity of the company is a major factor which promotes loyalty, performance and aligns your interests with theirs. By understanding and keeping control of this process you remain in the driving seat right up until the point when you sell the car.
If you are interested to learn more about my Six Strategic Steps to SME Success I shall be launching a seminar programme both in London and down in Wiltshire where I live. Take this opportunity to become one of the People who Make Things Happen. Contact me today at jbdcolley[at]aol.com to find out how you can participate in the Seminar Programme.