Déjà Vu All Over Again? Business Owner: 3 Actions to Take.

Yogi Berra was credited with saying, “It’s like déjà vu all over again.”  The market rout this afternoon (Tuesday, August 25, 2015) felt a lot like 2008.  How should a business owner react?

While the 2008 crisis was triggered by credit issues in the United States, today’s crisis trigger is China and a plunge in commodity pricing.  Some of the commodity price pressure was also caused by a China slowdown, so at least for now, China is the epicenter of the crisis, rather than the US.

If you are a business owner considering selling some or all of your business, or if you want to raise equity or debt capital, what does this mean to you??

If we go back and look at a variety of financial calamities, there is one common denominator.  Whether it is the Russian debt crisis, the Asian currency crisis, the 1987 market meltdown, or the more recent 2008 Lehman Brothers, Enron financial meltdown, or last month’s Greece default and China today, investors step back to see what will happen next.  In stock investing, one learns not to try to catch a falling knife – it can be painful.

Banks always react after the crisis is out of control. 

Greece: Potential Implication to Selling Your Business

If you’re like me, you’re tired of hearing about Greece and how this tiny part of the EU is upsetting equity and debt markets worldwide.  But if want to sell your business in 2015 or 2016, then you need to be alert to what’s happening beneath the headlines.

As I write this today, the equity and debt markets are the strongest and most available since early 2007.  Private equity and corporate cash is at record levels and we are seeing more interest in good deals than perhaps at any time in the last 10+ years.  Debt is plentiful, cheap and relatively easy to get.  Prices are at or near record levels for private companies.

Simply put … this may be the best time in at least 10 years to sell.

But that could change in an instant.  If we take a look under the covers of the financial markets and talk to the decision makers, people are getting nervous.   Nervous is bad … all equity and debt markets rely on confidence.  What we all experienced in 2008 was confidence being flushed down the drain.  If someone in Greece doesn’t have confidence in their bank,

Lessons of the Italian Perspective

In the past six months we have had the great opportunity to travel outside the US three times – to the Dominican Republic, Belize and now, Italy. I’m writing this shortly after 1pm on our seventh day of this beautiful country – sitting outside with a mozzarella and tomato sandwich watching the people go about their daily business, which at this time of day principally means eating lunch.

Unlike the Dominican Republic, Belize and the rest of the Caribbean and Latin America, life in Italy is a different paradigm and it holds some valuable lessons for those of us living in the American culture.

Our first day was in Rome set the stage for six days in the Tuscany region of the country. Rome was important as a first stop in that the age of the country & culture was reinforced everywhere we looked. Our tour guide explained that one area we visited was a “new” section of Rome – meaning that the buildings were just 200 years old. It took me a while for that reality to sink in to my American brain. Most of what we saw was over 500 years old, and much of it in excellent shape.

3 Keys to Expanding Your Company Vision

Working with successful entrepreneurs is a blast.  Yet if I step back a moment and reflect on the #1 thing that most entrepreneurs fall short – it is vision.  Entrepreneurs often need to expand their company vision.

Let me explain.  When running a business, what is the focus of the CEO when he/she wakes up?  We think about what needs to be done today.  We prioritize in our mind, or on paper … these are the 5 or 10 things that we need to accomplish today.

Is there any vision for the future on that list? No.  The vision for the business is typically something focused on at the early stages, and from time to time over a glass of wine.  It’s more dreaming than vision.  It’s a little like, “what do you want to be when you grow up” vision.

Entrepreneurs rarely set aside serious time to think … strategize … or consider a vision for the future that hasn’t been pre-determined in the past.

Example: I talked recently with a CEO who has built a nice company with a couple of retail locations.  His desire is to add a couple more offices –

Is a 9 to 1 Increase in Company Valuation Acceptable?

If we could work with you to increase the value of your company by $1,000,000, would it bother you if we were paid $100,000?

And we don’t want to get paid until you get paid, so we’re not asking to get paid on some theoretical increase in value, but an increase that comes from a recapitalization or sale transaction.

In fact, if we increased your value by $10,000,000 – would you really care about the $1,000,000 we would be paid. If you’re smart, wouldn’t you want us to get paid $5,000,000?

The way we look at this is that you get 9x what we get, yet we are in a joint venture / partnership where we assist your company. If we yield zero value, we get zero. If we help you create value, we get 10% of the increase – not 10% of what your company is already worth – that’s all yours – but 10% of the increase in value.

Can we do this for anyone? No.

We need to be highly selective about the companies we work with for the simple reason that we still only have 24 hours in a day,

Medway Air Ambulance – A Home Run

It’s my pleasure to announce that Medway Air Ambulance has completed a recapitalization resulting in a significant liquidity event for its owner, and a growth capital infusion by Merit Capital Partners and American Working Capital.

In just over two years, we worked with Rick Moore, Medway’s CEO, to double the revenue, more than double the profitability and increase equity value by more than 5x. After the recapitalization, Rick continues to own a significant piece of the company and remains CEO. It is my personal expectation that Medway can double its revenue again over the next three years, and potentially triple over the next five years.

It has been great to work with Rick and to assist him in adding the financial discipline, debt financing and to jointly create a growth vision for the company. When we first talked about a joint venture in 2012, he thought I was crazy … this would never happen. We started with a good company at the end of 2012, and over the next two years created a world class company.

My congratulations to Rick for the great job he has done, and to Merit/AWC for the opportunity they have to work with Rick and his excellent staff to take the company to the next level.