Buyout

The Insider’s Guide to Buying Your Own Company

Buyout

Author: Rick Rickertsen , Robert E. Gunther
Pub Date: 2007
Your Price: $24.95
ISBN: 0814406262
Format: Hardcover

 


Tactical Tips for Approaching Investors from Rick Rickertsen’s BUYOUT: The Insider’s Guide to Buying Your Own Company

As a venture capitalist for fifteen years, Rick Rickertsen has been involved in more than fifty corporate buyouts. In his new book BUYOUT, Rickertsen offers managers inside advice on how they can buy their own companies.

1. Keep the Business Plan Tight

  • Offer sound bites that clearly convey the potential value of the business.
  • Be thorough, not wordy. A forty-page plan probably has too much detail.
  • Work hard to write a simple summary. The more thinking that goes into boiling down the case for the business, the better it will be and the more easily you will be able to communicate it.

2. Make an Executive Summary the Focus of the Business Plan

  • Begin with an executive summary in bullet point form with headers.
  • Give the reasons why investors should invest, what the market opportunity is and how the management team and the firm are poised to take advantage of it.
  • Detail how the deal will create value and how that value will be put back into the pockets of investors through a clear exit strategy.
  • Convey the entire value of the project in two pages of bullets (if you can’t, your idea isn’t well conceived).

3. Do Sufficient Research before Writing a Business Plan

  • Before you write one word of your business plan, complete extensive research.
  • Know your competitors and their strategies well.
  • Know the size and growth rates of the markets you’re attacking.
  • All of the information you need is available on the Web or from your investment banker or stockbroker.

4. Never Try to Spin Investors—Credibility Is Everything

  • Never say, “We have little or no competition.” The phrase implies that either the managers are too dumb to recognize that they have competitors or that they believe the investors are too dumb to know better.
  • Be aggressive, but realistic. Do not overestimate the projected value of your project.
  • Make projections that can be supported by real-world math. Don’t use numbers that look like they were pulled out of thin air.
  • Don’t build your case around an IPO. Your goal should be to build a great, long-term business. The IPO is a by-product of your business success, not an end in itself.

5. Be Tenacious in Following Up with Investors
No matter how good the plan is, it cannot sell itself. Be tenacious in following up. An unreturned call should not be taken as a “no.” Your expectations should be as follows:


  • If the VC (venture capitalist) is your spouse, he or she may return your first call.
  • If the VC is an in-law, he or she won’t ever return your call.
  • If the VC is your best friend’s spouse, he or she will return your fourth call.
  • If you met and took a business card from the VC at a conference, he or she may return your seventh call.
  • If you cold-mailed the plan to the VC, you will have to call at least six times before even the secretary will call you back. You may need to stalk him or her at the grocery store.

Rick Rickertsen is Chief Operating Officer of Thayer Capital Partners, a Washington, DC-based venture capital firm. He has led more than fifty corporate buyouts, including SAGA Software, the Ritz-Carlton Hotel Company and ePlus. Rickertsen has appeared in the Washington Post and on CNNfn. He is a regular contributor to the Washington Business Journal and has written for Washington Techway.

This article was adapted from Buyout: The Insider’s Guide to Buying Your Own Company by Rick Rickertsen (AMACOM, April 1, 2001).

*Adapted from Chapter 5: Strategy for the Business of Rick Rickertsen’s BUYOUT: The Insider’s Guide to Buying Your Own Company (AMACOM, $32.95).

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