Investing To Be Invested In

By Ryan O'Neil


Jennifer had a dream.

A dream to one day grow her small floral company into a full-service event business and then continue to grow to a point where she could sell it for millions of dollars and, one day, be a stay at home mom. From the time she started her business, she worked tirelessly to make this dream a reality. She got up before the sun arose to go hand select the freshest flowers at the local market and going to bed late just so she could finish the last of her administrative work. As she established a reputation for developing stunning arrangements from local suppliers and had an abundance of clients, she decided it was time to expand her services and hired her best friend, Matt, as a chef to start developing a catering branch of the company.

Within a couple of years, the company exploded into the full-service event business she imagined and she was starting to consider different offers to buy it. There were a few key things the potential investors needed to know before the papers could be drawn and Jennifer could live out her true dream of being a stay at home mom for her two little ones, who were now 2 years and 2 months old, respectively.

How does your business perform financially?

Whether you're at a point where you need an investor to provide some capital to help you grow, or are ready to sell your business and retire, the first thing all investors will look for is financial performance. You need to prove to potential investors that your company has excellent financial performance. How much are you growing each year? What is your COGS (Cost of Goods Sold) to Revenue ratio? Do you have any debt? If so, what's repayment look like? Are you all caught up with your taxes? 

As you're pitching to potential investors/buyers, be prepared to show proof that your company's current assets are enough to cover current or short-term liabilities and be prepared for them to evaluate every aspect of your financial reports to make sure that they're going to have a strong return on their investment.

Need help organizing your financial reports? Check out Curate COGS

Do you have an effective business plan?

A solid business plan demonstrates to potential investors that you’re serious about your business and have plans in place to help the business continue to grow once you've sold the company. While your business plan alone won’t be enough to convince someone to buy or invest in your company, no one will be writing you a check without one. 
Among other things, your business plan should include: 
  • Your intended market, with data to show why that market is your target
  • Data-based, hard number financial projections
  • Sales channels, with data to show why those channels will be effective
  • Marketing plans and goals, with data to show why those plans will be effective
  • Analysis of the competition for your product or service
  • Projected timeline for when you’ll start making money
  • Potential obstacles and your plans for dealing with them

Are you indispensable to the business?

If you were hit by a truck today and couldn't work, could your business survive in your absence? Entrepreneurs like Jennifer can be especially guilty of making themselves the central cog of their business so that their business is incapable of succeeding if they were to leave. From a buyer's perspective, that's a huge red flag, especially if you'll be leaving the company once it's under new ownership. The processes and practices you have in place have to be replicable and involve a variety of team members so that the company does not rely on any single person. One way to do this is to have everything in a centralized platform that the whole team can access and utilize.

Lee Sontag of Downtown Blooms was recently in a position where it was time to sell the company. Looking back on his experience, he said that choosing to invest in Curate was "the best decision [he has] ever made for [his] business." This is because it allowed him to take the bulk of daily processes off of his plate and train his team members to handle the daily work of processing new inquiries, creating new proposals, managing inventory, preparing arrangements, and creating financial reports. Essentially, he made himself dispensable to the business and increased the value of the business because it was still a well oiled machine when he finally sold the company.

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Concluding thoughts: what have you invested into the company?

You're making investments into your business everyday. Sometimes those investments are financial and sometimes they're time based--like waking up early like Jennifer to get those fresh, local ingredients or training a new employee to take things off your hands so you can do more. The question is: what's the true value of the investments you're making?
If your daily level investments are not producing a strong return, it's time to re-evaluate the way you're doing things so you don't have to revisit them when you're ready to sell. It's important to invest in things that are going to make your company more effective and efficient if you ever expect for someone else to take the plunge and invest in your company.


Tags: Efficiency, Curate, Corporate Cate, Established Ed


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