Here be Dragons – or not?

Here be Dragons – or not?

As far too many founders have learnt the hard way, getting an offer letter is no guarantee of closing a deal. As exciting as the process is, those investors can disappear just as quickly as they arrived. By being adequately prepared for the due diligence phase, that risk can be minimised.

After years of (literally) blood, sweat and tears, an offer is on the table for your business. Whether you are selling the entire thing or just a portion of your shares, the offer letter is really only the start of the process.

Yes, the worst is ahead of you. Sorry for the bad news. Luckily, if all goes well, there is a significant pot of gold at the end of this…rainbow?

The rainbow isn’t fun and colourful

A due diligence process is no joke whatsoever. Fraught with danger and questions that will feel more invasive than your annual check-up at the doctor, being able to navigate this process is the difference between success and failure in selling a business.

Nobody really knows how many deals fail at the due diligence stage. At best, we have the results of surveys to fall back on. If that doesn’t work, the internet is full of invented statistics anyway.

From our own experience though, we do know that it’s about 50-50 once the offer letter is on the table.

The rainbow isn't fun and colourful - due diligence

Here Be Dragons – or not

Interestingly, this is corroborated by statistics from the Dragons’ Den TV series in the UK. Over the first eleven seasons, 143 deals were verbally completed in the den and only 76 actually went through.

Is this because the Dragons are frauds, or because they get cold feet? No, probably not.

It is likely that these entrepreneurs simply weren’t anywhere near ready to raise capital. Dragon’s Den is particularly geared towards early stage investments, so that makes it even more unlikely that the plucky founders were truly ready for investment.

Business Preparation bizval

Preparation. Preparation. Preparation.

These are the three Ps of dealmaking. If there was a fourth P, you could surely guess what it would be.

If you’ve never been through a due diligence (or possibly even heard the term), then how do you know what is coming? This is where you need to lean on experts who have been through this process.

For example, how empowered are you feeling right now to deal with questions like:

  • What succession plans do you have in place?
  • Can you internally fund your desired growth strategy?
  • What earn-outs are you prepared to agree to?
  • How will your senior managers be engaged going forward?
  • Do you understand your total addressable market?

Not so easy, is it? A due diligence is about more than rocking up at your offices to see if the receptionist took an early lunch.

bizval bootcamp

Get ready for bizval bootcamp

At bizval, our passion is bringing corporate finance skills to the section of the market that needs them most: SMEs.

Too small for the investment banks and far too big to be ignored, these businesses are the lifeblood of any economy. They are built by talented entrepreneurs who take immense risks along the way, often devoting their lives to these projects.

We have nothing but respect for that process, as we are on a similar journey ourselves.

Working with founders is what we love most, especially when we can help prepare them to run the gauntlet. In launching bizval bootcamp, our goal is to help founders understand where the pressure points will be in a due diligence.

Through a detailed assessment of the business across all the major focus areas for an investor, our goal is to put you on the front foot when you talk to investors.

Keep an eye out for further updates about our bootcamp offering. In the meantime, you should make time to watch the recording of our last webinar that dealt with some of the trickier concepts that come up in a due diligence. We were joined by Andreas Tsangarakis of STBB and Matt Smith of CleverProfits for this discussion:

bizval startup

Requirements

Less than 3 years old

Pre or post revenue

Business plan and forecasts available

Benefits

Bespoke valuation methodologies

Developed in conjunction with leading universities

Key valuation drivers unpacked

Scenario sensitivity analysis

Tech-and-touch approach

Personalized consideration and evaluation of results

Less than 10 day turn-around time

Access to bizval webinars and education sessions

bizval enterprise

Requirements

Business that provides services to other business owners

Benefits

3 valuation methodologies (DCF, EM and NAV)

Secure and confidential

Access to bizval webinars and education sessions

Priority support

Scenario sensitivity analysis

Personalized engagement and follow up

All the usual benefits with customized pricing for high-volume users

bizval exit

Requirements

Single or multiple business entity

Deep understanding of your business

Clear intention to sell or raise investment – now or in the future

Benefits

Proprietary bizval exit process and bizval exit scorecard

Includes a free concierge valuation

Less than 2 weeks from start to finish

Pesonalized engagement and follow up

Priority support

Customized deal readiness report

Heat map and recommendations to maximize valuation and ensure best chance of success

Secure and confidential

Access to bizval webinars and education sessions

Access to experienced professionals who know how to navigate the often scary world of deal making

Access to exclusive introductions to qualified investors

bizval concierge

Requirements

Single business entity

Basic business knowledge

2 years financial statements and/or management accounts

Benefits

Includes bizval exit scorecard

3 valuation methodologies (DCF, EM and NAV)

Secure and confidential

Access to bizval webinars and education sessions

Priority support

Scenario sensitivity analysis

Personalized evaluation of results

Less than 5 day turn-around time, once all information received

Quick and easy to use – Does not require detailed technical or accounting knowledge

bizval live

Requirements

Single business entity

Knowledge of key business and financial information

Benefits

Includes bizval exit scorecard

3 valuation methodologies (DCF, EM and NAV)

Secure and confidential

Access to bizval webinars and education sessions

Includes complimentary 15 min consultation

Unlimited access to Scenarios

Standard support

Access to valuation scenarios add-on

Instant valuation result

Unique bizval algorithm

Quick and easy to use – Does not require detailed technical or accounting knowledge