At some point, your business plans may require an outside investor, not always an easy prospect to accept for independent owners. But there are steps you can take to ensure the success of an investment relationship, says Bob Zamarippa, president and CEO of OneSource Distributors, Oceanside, CA, in A Different Exit Strategy. Heritage Partners was the ultimately the choice for OneSource, who took Heritage on as an investor while retaining majority control.
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(OneSource was recently sold to Sonepar.)
Put your goals down on paper: What do you want to accomplish with a potential transaction? Zamarripa used a six-point wish list as his guide for finding investors. Only investors who could meet his criteria were considered.
Find an investment banker tuned to your goals:"They'll tell you what you want to hear," says Zamarripa, but what they promise isn't always what they can do. Be diligent. An investment banker is your broker, and you will depend on them to find investors who meet your needs.
Refine your business model for optimum return on investment:The annualized return on capital investors will reap plays a big part in how much they will invest in your company. The more you are able to return, the less likely they will want to change the way you do things.
Be prepared for due diligence: Get all of your financial statements, accounting and business plans in order. "It really tests your patience as a private business person," Zamarripa says. But the more you prepare, and the more details you can provide, the better off you will be.
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