Wealth Management

Voted #6 on Top 100 Family Business influencer on Wealth, Legacy, Finance and Investments: Jacoline Loewen LinkedIn Profile
Showing posts with label balance sheet capital structure. Show all posts
Showing posts with label balance sheet capital structure. Show all posts

July 15, 2009

5 Items to have ready for an investor

You are going to have to do a lot more than pray for money when seeking investors. You are going to have to get "investor ready" as once they look at you, like what they see, then they will want a whole truck full of information...NOW.
I get asked all the time, "Where do I find investors?"
That part is easy, actually.
The question everyone should ask is, "what will get the investor to put cash into my business?"
This is the part which separates the men from the boys (and the women from the girls.)
Before you begin looking for people, get yourself ready. As sure as the sun rises in the East, there are items that us investors will require from you. First up, let's look at the 5 items about finances that we will need to tell us more about your business or idea:
1. The income statement is paramount.
If nothing else, if, at the very least, we can look at the income statement from one year of history we can judge how big the company is and how large of a financing it can generate. We would simply look at the earnings, calculate the EBITDA and get a rough idea of the general size of the company
Multiplying this by 6 times would give a very rough idea of the valuation of the company (enterprise value) and how much financing it can withstand. Some people are saying multiple it by 3 times but I think that is a little cruel.
2. The balance sheet is also very important.
From this we can determine the capital structure of the company.
3. Then there's the structure.
Looking at the capital structure allows us to determine what the structure of the financing might look like. It also allows us to determine a more accurate valuation (equity value) and determine the amount of dilution to management.
4. Cash is king, as the saying goes.
Cash flow statements can be derived from having both of these statements, but it is helpful in determining things like how much money management must invest each year to maintain the operations of the company.
5. We are history buffs for a reason.
History: we like to get three years. This is because at least three years allows an analyst to see any financial trends in the company. Having more than three years is even better, but three years is the minimum for noticing trends.

If you are wanting to learn more and get a simple explaination on this in far more details, check out Money Magnet: Attract Investors to Your Business.
It's written by J. Loewen and is simple and, surprisingly, readable because it is written for business owners.