From The Editor...
If you have ever watched the popular television show "Shark Tank", the business owners in the Tank pitching their Company almost always start out by making a statement about how much money they are looking for and then follow that up by offering a percentage equity position in their company. Some presenters are realistic with their offers, while others throw out a percentage that makes the Sharks roll their eyes or almost fall out of their chairs.
Putting a high value on their Company is a typical position business owners take. They have put in many long hours, spent sleepless nights worrying about making that next payroll and faced the challenges of being an entrepreneur every day. However, investors look at the offer from an entirely different perspective. Investors are analyzing how much return they can get on their investment, for very little risk. That is why investors are looking for at least a somewhat proven track record of revenues and profits.
Most investors are in a high tax bracket, so they factor in what their true net return after tax may be. As an example: For every $1,000 return on their investment, their true net return may only be $650 after taxes. Thus, investors wanting a 50.0%, 100.0% or even higher return on their investment is not out of line. Further, investors typically are not in any investment for the long haul. They want out in three to five years, maybe seven years tops.
Here are some tips that may help you when presenting your Company to an investor:
Do your homework first. Know your numbers backwards and forwards. Be realistic in the valuation of your Company. Be positive, but don't oversell. Offer an exit timeframe. Consider what else the investor can and is willing to bring to the table other than just money. Finally a word of caution, if you have to give up more than 50% ownership in your Company, it is no longer your Company. You then become an employee with some ownership in the Company.
You also may need assistance from an outside experienced business advisor, consultant, or mentor; so before you seek out an investor for your Company, contact a Silver Fox Advisor. Remember, having experience on your side always helps.
We encourage you to visit our Website at www.silverfox.org or www.silverfoxadvisors.com to select a Silver Fox Advisor and also to learn more about the Silver Fox Advisors, our Associates and their businesses, as well as our great programs and community outreach endeavors.
Richard T. Hendee, Editor
The Silver Fox Advisor