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'd like to tell you about one of my prospective
clients, Karen, one of those inspirational entrepreneurs
who started with nothing and yet managed to grow
a manufacturing company to $20 million.
A
sudden demand for her products caused her business
to take off in a serious way. Now, with a company
value in excess of $50 million, she knows she needs
to make a move - but which one? She doesn't
want to make a wrong decision, and she is frantically
busy running her existing contracts, servicing customers,
and managing operations on a day-to-day basis.
She
has come to the conclusion that, at this moment,
she simply doesn't have time to grow. She's decided
to wait until she has the time to do the legwork,
gather all the information, and ponder all the options.
In
my experience, she'll be waiting forever. By the
time she does decide she has the time to do something,
it will probably be too late.
I
don't want to sound like the voice of impending
danger, but there really is something to the saying,
"Strike while the iron is hot." There's a right
time for the right action. But, faced with the daunting
task of identifying, evaluating, structuring, and
"doing the deal," many women business owners have
a tendency to take the riskiest road - taking
no action at all.
The
High Cost of Inaction
There are a lot of reasons why women entrepreneurs
suffer from inertia, all of them based in fear (fear
of the unknown, fear of being tossed aside, fear
of the company growing too big and losing that "family
feel") and avoidance of a process perceived to be
messy and stressful. It seems there's a comforting
misconception that to maintain an enterprise at
existing levels of growth is to play it safe and
sane.
The
truth is, while you might stay in one place, market
demands, competitive strategies, economic trends,
not to mention unforeseen events such as Sept. 11th
and war with Iraq, can place your company in a very
different position in a relatively short period
of time.
As
an investment banker, one of the things I help clients
explore is what the "cost of inaction" will be.
In other words, if you don't do anything, what are
the potential financial outcomes for your company?
A
good example is a nurse staffing company I know
- a successful one in what has been one of
the decade's hottest growth industries.
Two
years ago, at the height of the market, this particular
company had $5 million in earnings and could have
traded at 10 times its EBITDA (earnings before interest,
taxes, depreciation and amortization), or $50 million.
But,
the owner, anxious and confused about how to propel
her company forward, decided to continue building
her business and "think things out." While she was
considering her options, larger companies in the
industry were busy, gobbling up smaller companies
and contributing to the trend of industry consolidation,
a practice that tends to cause a drastic drop in
trade value.
As
a result, that same nurse staffing company's value
went from $50 million to $20 million - all
in just two years. That's the cost of inaction.
It's a heavy price to pay for sitting still.
You
Don't Have to Go it Alone
One
option for the business owner who is motivated,
but not fully confident of getting all facets of
the job done, is to seek out an investment banking
firm.
Investment
banking firms can provide a disinterested third
party whose job it is to provide strategic counsel,
identify and explore opportunities, crunch numbers,
and negotiate the deal. Such firms are partners,
not service providers; they take on only clients
they believe are marketable and poised for growth.
They do charge a fee - a modest retainer
and a percentage of the transaction - but
generally, those that use their services find it
to be well worthwhile.
Another
option is to network within women's business organizations
and learn from those who have already been there,
done that.
There
also are no shortage of books and courses in this
area. But, the bottom line is that you have to be
willing to make a commitment to growth and take
the first strategic steps toward moving your company
to the next level.
It
may seem scary, but the investment in time and effort
is far outweighed by the financial, personal and
professional gains you can enjoy once the deal is
done.
JULIE
GARELLA is co-founder of McColl Garella LLC
(www.mccollgarella.com), a Charlotte, NC, investment
banking firm specializing in women-owned businesses
and serving clients nationwide. She can be reached
at 704-333-0183 (e-mail: jgarella@mccollgarella.com).
(This
article is reprinted from the Winter 2003 edition
of Enterprising Women magazine. Copyright 2002 Enterprising
Women Inc. Reproduction in whole or part is prohibited,
except by permission of the publisher.)
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