Jun 18, 2020
Zane Tarence answers questions about buying and selling businesses and companies and shares tips from his book 17 Reasons Your Company is NOT Investment Grade and What to Do About It.
Zane Answers Questions about Investment Banking, and Buying and Selling Businesses
Zane is a partner and managing director of Founders Advisors, and he authored a new book~ 17 Reasons Your Company is NOT Investment Grade (and What to Do About It)~which can be found here on amazon. On a side note, Zane happens to be my husband:-)
Zane appeared on The SavvyCast to talk about his book, 17 Reasons Your Company is NOT Investment Grade (and What to Do About It). You can go here to find the podcast and show notes for this episode.
Listeners to the first podcast were asked to submit questions to Zane about buying and selling businesses and companies. This podcast addresses these questions in detail.
If you had $30K cash to invest, what would you do with it for the quickest return?
It is all about your growth strategy. Think: Where can I put this money that will help my company grow faster?
Is it true that you have to “have money to make money?” If not, where do you start?
There are a lot of companies that do well without capital. However, it can be done faster with capital.
Zane, how do you choose the companies you want to invest in? And how do you negotiate?
I look fro a company that is relevant, growing, and won’t be driven out of business by its competitors. One reason that I wrote his book is to show what kinds of companies investors are interested in.
Negotiating is a process, and everyone has their own style. Negotiating requires good communication and an understanding of what both sides need/want.
Do the “17 Reasons” apply to all types/sizes of businesses?
Yes. (Details in podcast).
What about non-profits? Do the “17 reasons” apply to them?
Yes. (Details in podcast).
Is it good to have an investment banker relationship even if you are not raising capital or planning on selling in the short-term?
Yes. For example, it is good to have a relationship with a physician even when you aren’t sick, and the same goes for investment bankers.
Does an investment banker represent the buyer, seller, or both?
An investment banker can represent a buyer and a seller, but not at the same time.
How do investment bankers get paid?
They get a little retainer and a success fee (which is a percentage of the overall value of that company). Similar to a broker of a house where you pay a certain percentage of the sales price. Then, investment bankers give the retainer back against the success fee, so the seller only pays the success fee.
How do I know what my company is worth?
A business is worth what a buyer is willing to pay. An accounting firm, investment banker, or a business evaluator can help discover your company’s evaluation.
Which is more important for driving value in my business: revenue growth or profit growth?
Both. There is a balance between revenue growth and profit.
How has the pandemic affected your business?
Many businesses do not want to make transactions during a time of uncertainty, so the first 6 weeks of the stay-at-home order were incredibly tough for investments. However, some businesses who have proven to persevere through this pandemic are trading more now than they were pre-pandemic, because they have shown they can overcome tough times.
Resources Related to this Episode:
The book: 17 Reasons Your Company is NOT Investment Grade and What to Do About It on amazon.