Will additional capital today enable your future company sale
Ask yourself these questions:
- What is the general valuation of my company today if I were to try and sell it to a third party?
- What is the general valuation amount I’d like to receive one day for my company in a sale to a third party?
If there is a negative gap here, could raising outside capital be an effective strategy to help you accelerate closing of the gap? Consider whether your current business model (what you sell, how you sell it) is working well and whether just putting fuel in the tank would accelerate the financial performance of your business…to close the valuation gap you may have.
Here are additional food for thought questions if you have a negative gap from the first two questions:
- What is the primary barrier to accelerating your business performance and growing your valuation?
- Is this primary barrier something that could be addressed by having additional capital?
- Is your business model proven and showing good promise so that you could excite a third party to loan you capital or take even small equity in your business to provide you the desired capital?
- Do you have a business plan documented that articulates the opportunity ahead of you, what you’d use the additional capital for and what type of performance your company could realize with that capital?
If the valuation you’d like to receive one day isn’t looking in the cards for your business, then considering taking in outside capital could be a strategy to employ. Staying the course and investing in your own business might get you to one level, but what level could you bring your company to if you supplemented your capital with that of a third party? Talk with your CPA or give us a call and we can help you think through whether raising external capital is a way to accelerate your path to a future euphoric exit event.
