Realizing the Cash Value of Your Company

1
Realizing the Cash Value of Your Company

• Moderator Bob Gray
• Panelists Billy Ladin
• Richard Scruggs
• Michael Holthouse

2
Picking Your Next Concept

• Billy Ladin
• Internet America

3
By age 62, you would think that I would have all
of the answers

• Surprise !
• I dont
• I can only tell you what I have learned from what
  I have done

4
How to pick your next concept

• Do what you know
• Do what you like
• Jump in with both feet
• Have confidence in yourself
• Be nervously patient

5
Its Simple but not easy

• Your areas of Interest and Expertise
• Themes - Immersion - Patience

6
A Partnership of Three Big Ones

• Technology
• Marketing
• Systems Operations
• But thats not my topic Today

7
What is your Interest ? Where is your
Expertise ?

• Dont waste your time doing something that you
  dont love

8
What is your Interest ? Where is your
Expertise ?

• Find out ASAP what you do best.
• And more importantly
• What you dont do well

9
Partial history as a Serial Entrepreneur

• 1975 Italian Restaurant
• 1977 ComputerCraft
• 1978 Jungle Importing
• 1983 Fax Machines
• 1988 SkyTel- 2way paging
• 1991 The ForeFront Group
• 1992 Document management
• 1994 Video Conferencing
• 1995 Digital BioMetrics
• 1997 PDQ.net (ISP)
• 2000 Home Automation
• 2004 Wireless Internet

• 1941 Born in Houston
• 1963 Brown University B.A. in Philosophy
• 1965 Pet Shops
• 1966 Computerized Stk Mkt
• 1967 Started Investment Banking firm
• 1968 Igloo Corporation
• 1969 LifeMark Hospitals
• 1970 Water Softening
• 1972 Mobile Communications
• 1974 Westside Tennis Club

10
Immersion

• One has to get to know everything about a new
  Technology
• Live and breathe it

11
Patience - Confidence

• You cant rush it, it will show up on its own
  time schedule.
• You can guarantee that it will happen, but not
  when it will happen

12
Recap Words of experience

• Do what you like
• Know your strengths
• Find the Themes
• Immerse yourself
• Have amazing Confidence
• Build a company with Technology, Marketing, and
  Systems

• Be quick to recognize if the concept wont work
• Add value to this world

13
Building CompaniesFunding The Transition

• Richard M. Scruggs
• Winston Sage Partners, Inc.

14
Align Solutions
1996 10 Founders Self-funded No clients
1999 250 Employees 4 Locations F500 Clients 27m
Revenue Sold / Took Public
15
Align Solutions
1996 Questions How are we going to fund our
growth? Who is going to provide the
financing? What and when is our exit?
16
Align Solutions
My 1996 Answers Stay flexible as to the who, how
and when. Focus on what matters. Do your job.
17
Focus on the Goal

• The goal should be the RESULT
• Reputation.
• Control and role.
• Value Realization.
• Not the MECHANISM
• Debt.
• Venture Capital.
• Sale.
• IPO.

18
Funding The Transition
REALIZE VALUE
THE TRANSITION
START UP
FINANCINGS
FINAL
INTERIM
Getting the best VALUATION and TERMS at each
point depends 100 on the VALUE created along the
way.
19
Value vs. Valuation

• If you focus on building VALUE
• Right products and services.
• Delivered with the right quality.
• Using the right processes.
• Performed by the right people.
• For the right customers.
• While achieving the right financial results.
• Youll get the best VALUATION
• Debt.
• Equity.
• Private or Public Transaction.

20
Interim Financings

• Strategic
• Customers, Vendors, Channel Partners, Potential
  Buyers, Management Team.
• Commercial
• Banks.
• Professional Investors
• Bridge Funds, Venture Capital Funds.
• Institutions
• Government Grants, Private Grants, Research
  Contracts.

21
Interim Financings
All rest on your
RESULTS
CREDIBILITY
22
Final Financing

• If you want alternatives
• IPO, planned sale, remain private.
• If you want the best deal at that time
• The key is in the transition
• Figure our what constitutes value.
• Focus on building value.
• Deliver value.

23
Align Solutions Building Value

• Align was an IT professional services firm in
  late 90s.
• Value meant
• Focus on Internet.
• Demonstrated track record.
• Quality clients.
• Repeat business.
• Reputation for quality.
• Talented team.
• Rapid growth.
• Financial results.

24
Your Turn

• Know your goal.
• Define VALUE drivers.
• Focus on building VALUE.
• Measure progress towards building VALUE.
• Explore all financing options.

25
Michael Holthouse Intuitive Homes
26
Focus

• Realizing Value

27
Start with your goals

• How long do you want to work?
• What do you want out of the business?
• When do you want to retire?
• How much time do you want to spend working?
• What is realistic?
• Investor expectations?

28
Options for Liquidity

• Sell to the Public (IPO)
• Sell to Employees (ESOP)
• Sell to a Financial Buyer
• Sell to a Strategic Buyer
• Sell to a Competitor
• Sell part of the business (Investors)
• Merge with a business

29
Timing on Liquidity

• Size Matters who would buy you
• Are you too big or too small
• Market Growth (PE)
• Tides float all boats (up and down)
• Industry Projections
• Positioning within the Industry
• Company Growth Rate
• Are you ready?

Timing is Everything
30
Value to Whom?

• Question
• What is something worth?
• Answer
• What a buyer and a seller agree that it is worth.
• How do to determine what its worth?

31
What is Mickey Mouse worth?
32
Determining Value

• Past, Present Future
• Cash Flow
• Assets (Buildings, Inventory, Patents)
• Revenue Stream
• Economies of Scale (Expense Reductions)
• Symbiotic Relationship
• Sales Distribution
• Integration Efficiencies
• New Technologies
• Future Sales
• Expected Market Growth

33
Products Company

• Patents
• Brands
• Bricks Mortar
• Sales Channels
• Inventory
• Distribution
• Relationships

34
Service Companies

• Do they need you?
• Great people can leave
• Processes
• Repeatability
• History of Success
• Recognized Brand
• Sales Momentum
• Good Will

The more they need you the less the company is
worth.
35
Paranet, Inc.

• January 1991 to September 1997
• 0 to 27 Offices in USA
• 0 to 1400 employees
• 0 to 110 million in Revenue
• Profitable every month
• Sold to Sprint vs. Going Public
• Repeatable Processes
• Market Timing
• Strong Reputation