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Investment Banking Fees Vs. Consulting Fees

Investment bankers typically raise capital using one of two formulas.  These formulas are referred to as the Lehman Formula, or Double Lehman Formula, and are calculated via the incremental dollar value of the capital raise – typically a percentage descending from 5-10% for the first five million, and thereafter a 1-2% percentage of the remaining capital raise. The first million dollars raised using a “finder”, “investment banker”, “broker” is 5%-10%, the second million dollars raised is 4%-8%, the third million dollars is 3%-6%, the fourth million dollars is 2%-4%, and the fifth million and beyond is 1%-2% of the capital raise.  […]

What If We Eliminate Late Fees?

The Weekly What If…Chronicling companies that transformed their business by Exploring What if Praised for its clever business model, it was really this What if that started its massive growth.  Based on its market value and number of customers, there is a good chance you use, Netflix. I do. Their mail order driven business model kicked Blockbuster’s drive up business to the curb! Since its meteoric rise the company has garnered a huge valuation and the esteem of strategic thinkers like the authors of the Blue Ocean Strategy for its ability to take a completely new approach to video delivery. […]

Weekly What If: What If We Change The Revenue Model

20 Year Old Software Company Unlocks Explosive Growth with this “What If” A small, well respected technology provider (name witheld) had logged years of constant technology innovation for its bank and retailer customers. As an example, this company was one of the first to enable instand credit and credit card applications directly from the department store counter. That type of continued innovation led to steady growth and a marquee list of customers. However, despite their technology achievements and customer satisfaction, the company was still relatively small and appeared to lack much real growth potential. A big challenge for the company […]

10 Strategies To Raise Capital Effectively

Attached is a link to a popular article Lantern Advisors posted with CFO.com.  It is most relevant to entrepreneurs and CFOs of high growth companies that have already achieved some level of success and are considering a capital raise as part of an effort to substantially grow the value of their business (and equity.)  For example, this is highly relevant to any profitable, $10 million revenue business that has the potential (with additional capital) to reach or exceed $100 million in revenue. This article address the key components contributing to a successful capital raise, such as a quality business plan, understanding of financing alternatives and how creating competition between potential investors can improve the pricing and terms […]

The (Pricing) Power of Competition

The Power Of Competition We recently completed a $25 million management led buyout for one of our clients. Even after doing this for many years, I am always surprised by what I learn or what I am reminded of. In this case its, the power of competition. Or more precisely, the pricing power of competition. Without getting into details, my client was doing a management buyout. In our process, we always send the business plan out to as many financing sources as we can find. This typically means at least 50. In this case, one of the first meetings we […]

Exit Strategies Selling Your Company To Management

Exit Strategies For business owners, selling the company to management can be overlooked as a viable owner exit strategy. However, in many cases selling the company to management can be more personally and financially rewarding than selling to another company or private equity firm. The advantages of selling to management can include a higher company valuation, increased motivation and accountability for management, and the opportunity for the (selling) owner to stay involved with the business on their own terms.  Our white paper titled “Creative Management Buyout Strategies” discusses these advantages and financing considerations for selling a company to management via a […]

Facts On High Growth Companies: What is A High Growth Company?

What is a High Growth Company?  When someone says ‘high growth company’ they immediately tend to think of classic venture capital focused businesses like technology companies, biotech and software. But reflecting on our experience, more than half of high growth clients came out of traditional, often boring old industries, like manufacturing, business services and distribution. Our experience though is not unique to the broader picture. Attesting to this, a Washington think tank organization, the National Commission on Entrepreneurship published a report entitled “High Growth Companies: Mapping America’s Entrepreneurial Landscape” in July 2001. The report was based on their exhaustive review […]

How To Get Funding Sources Interested In Your Business

How To Get Funding Sources Interested In Your Business Entrepreneurs have great ideas, and know how to execute the idea.  Typically they are visionaries, and excel at articulating their business proposition, know who they are going to go after, and can sell their product to those that have a need for what they’ve got.  Entrepreneurs are the most interesting people to work with, because they are the ones in the room what weren’t afraid to explore what was out there, to try something different outside of how everyone else was doing it, and are constantly soaking up information to transform […]

Message To Management: Don’t Wait!

Last week I got a call from a CEO of small software company. His parent was in the process of selling his company. The process of selling the business was taking longer than expected and the price was below the range the seller really wanted. He called to ask me if he thought he could lead a management buyout. After talking to him and reviewing the numbers, I told him – yes. Two days later he had a meeting with the parent and they had just accepted an offer from another buyer, and was starting due diligence. The morale of […]

Smart Money Doesn’t Ensure Success

VCs are often called ‘smart money,’ because they are more selective about investments than the average angel investor or friends/family member. However, that doesn’t mean everything they touch turns to gold. A 2009 WSJ article listed companies that raised substantial sums of money only to fail in a fairly short period of time thereafter. Equally disturbing the brief article mentions that several had raised so many rounds of financing, the original owners lost control of the business. To me, the reminder is that business owners of promising companies should always do a “gut check” on the likelihood of success on […]