How would you find an investor ?

Discussion in 'General Business Forum' started by Mike wells, Oct 10, 2019.

  1. Mike wells

    Mike wells UKBF Newcomer Free Member

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    I'm in business with a guy that wants out of the business (my business partner ). Where would be the best place to find another business partner ? . It was recently valued at 3.7 m and makes 750k profit per year . With a little investment I'm sure it could make double .
     
    Posted: Oct 10, 2019 By: Mike wells Member since: Mar 31, 2019
    #1
  2. Clinton

    Clinton UKBF Big Shot Free Member

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    1. It's going to cost you a lot more than UKBF is charging. Be prepared to spend at least £30K - £50K in advance fees if you want proper advice on this. The best places to find an investor are...beyond your reach. You need the right people to get you there.

    2. Never, ever say things like this:

    It marks you out as being extremely naive at this fund raising malarkey and you'll get eaten alive by the real sharks in the market. The difference in knowledge between seasoned investors and people like you is ...scary!

    Please go back to point #1 and get an expert.

    Who did your valuation? And what's the basis for that figure?

    What percentage of shares are you selling? If it's not a majority share i.e. not above 50% it'll be extremely difficult to impossible to find an investor unless your business is showing a serious growth trajectory, has extremely valuable (and protected) IP or there is some other exceptional factor.
     
    Last edited: Oct 10, 2019
    Posted: Oct 10, 2019 By: Clinton Member since: Jan 17, 2010
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  3. Mr D

    Mr D UKBF Legend Free Member

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    Besides buying him out yourself, best people to try are family and friends.
    Failing that, you presumably want an investor who will not seek to get it all.
    So restricting your potential investors.

    You could try making the business attractive to investors then trying to sell the investment to rich people.
    From what I am told the rejection rate is very high.

    If you do find someone - great. Figure out what to say when they ask what you bring to the table. Not the business, you.
     
    Posted: Oct 10, 2019 By: Mr D Member since: Feb 12, 2017
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  4. billybob99

    billybob99 UKBF Regular Free Member

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    You won't be finding an investor any time soon.
     
    Posted: Oct 10, 2019 By: billybob99 Member since: Apr 23, 2013
    #4
  5. Mark T Jones

    Mark T Jones UKBF Big Shot Full Member

    3,480 1,045
    As has been pointed out, the world of investment is a complete shark tank and you will get eaten alive if you go out blindly looking for ‘investment’

    some of the questions you need to be thinking about before you even start looking:

    what input do you want said investor to have?

    what are you seeking financially & what shares are you offering?

    what is the exit strategy?

    what makes you investable?

    why is the other guy leaving?

    no need to answer on here but you will need to address this type of questions with solid, verifiable facts at some point
     
    Posted: Oct 11, 2019 By: Mark T Jones Member since: Nov 4, 2015
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  6. Financial-Modeller

    Financial-Modeller UKBF Regular Full Member

    394 111
    Clinton beat me to it:

    But also, you're looking for somebody with the time, experience, capability etc to replace your business partner's input to the business, AND buy out your business partner, which will be very small population.

    Probably better to look for a complete sale of the company, but make yourself available on an ongoing basis to the new owner(s).
     
    Posted: Oct 11, 2019 By: Financial-Modeller Member since: Jul 3, 2012
    #6
  7. Clinton

    Clinton UKBF Big Shot Free Member

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    That's very sensible advice and would considerably improve your chances of sale.

    Just so you're aware, 80% of businesses going to market do not find a buyer. With large brokers like K3 (Knightsbridge) the success rate is, as I've estimated here from their publicly disclosed accounts, less than 10%.

    That's a freaking scary statistic for someone who's going to hand over £30K - £50K in advance fees.

    But you still need someone who can take you through a due diligence exercise, identify and fix the holes, package the business, put together a proper information memorandum (this is so NOT a "sales brochure"!), draw up profiles of potential buyers, and interest them in the investment opportunity etc. You need someone who speaks their language.

    No, the ideal buyers are not out there hunting on Daltons Business or BusinessesForSale.com. They need to be identified and approached individually. And they will almost never take a cold approach from the vendor himself because you won't have the right information, you won't have it presented in the right way, you won't be able to put together a merger model spreadsheet to quantify the synergies you're claiming.

    Also, you're too emotionally involved.

    If you try to do it yourself some of them will engage with you and they'll be rubbing their hands in glee that you're doing this yourself without professional assistance.

    And once all the base work is done, you really, really need a smart and savvy operator to defend your corner, negotiate a good deal and advise you all the way through (including with protecting confidentiality).
     
    Posted: Oct 11, 2019 By: Clinton Member since: Jan 17, 2010
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  8. JEREMY HAWKE

    JEREMY HAWKE UKBF Legend Full Member

    4,031 1,276
    It is also worth remembering that for every investor there are 200 opportunities . So your opportunity will have to be good .
    For no reason at all I attended an investors workshop and presentation and I discovered as some on here will know that there are not really that many investors at anyone point in time
     
    Posted: Oct 11, 2019 By: JEREMY HAWKE Member since: Mar 4, 2008
    #8
  9. The Byre

    The Byre UKBF Ace Free Member

    8,978 3,507
    There are two types of companies that want to purchase other companies -

    1. Those that want what you have and need that to grow.

    2. Those that are just looking for a return on their money.

    A happy purchaser is usually type-one. You have that key bit of software or a patent that they need to grow, or you have that plot of land that they need to complete their development plans, or you have that TM and customer base for a higher quality that they need to complement their product pallet.

    Random people with too much money looking for your SME are few and far between. Lottery winners soon get picked clean!

    For that reason, if you want to sell your company, the chances are that you know and are working with the people that are most likely to buy your company already! They may be your biggest customer, or a supplier, or a rival, or just another company working in a similar market who would like to expand into your market.
     
    Posted: Oct 11, 2019 By: The Byre Member since: Aug 13, 2013
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  10. Mr D

    Mr D UKBF Legend Free Member

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    I daresay a number of us could introduce him to someone.
    The someone may not be a suitable investor. Some of them ask questions.
     
    Posted: Oct 12, 2019 By: Mr D Member since: Feb 12, 2017
    #10
  11. Clinton

    Clinton UKBF Big Shot Free Member

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    Good luck to him if he wishes to follow up on that. I'd be extremely suspicious of a first time poster who is (or happens to know) an investor. And even more suspicious if this "investor" is looking for vendors who aren't professionally represented (given that this isn't the £500K market, it's a circa £4m deal).

    But maybe the OP should ignore me, I'm just a cynical old sod :) and you've told him exactly what he wants to hear! Some OPs love it when people tell them exactly what they want to hear.
     
    Posted: Oct 12, 2019 By: Clinton Member since: Jan 17, 2010
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  12. John Hemming

    John Hemming UKBF Regular Full Member

    157 19
    Perhaps I am more sceptical than you, but that is the only point I disagree with in your advice. I would be surprised if it were to turn out to be that high.
     
    Posted: Oct 12, 2019 By: John Hemming Member since: May 23, 2019
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  13. Clinton

    Clinton UKBF Big Shot Free Member

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    I didn't say that the business is worth £3.7m. But that is the OP's expectation so that's the starting point for this "investor".

    Actually, there are a lot more investors out there than most people appreciate. The problem is a shortage of good, reasonably priced businesses, a severe shortage relative to the number of investors (and also the amount of dry powder awaiting deployment).
     
    Posted: Oct 12, 2019 By: Clinton Member since: Jan 17, 2010
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  14. Mark T Jones

    Mark T Jones UKBF Big Shot Full Member

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    mid ever you needed proof that telling someone what they want to heAr isn’t the same as supporting them, this forum is it.

    I know loads of investors and none that are reputable would remotely entertain the OP at this stage - not because the business or owner isn’t investable but because at this moment there isn’t a thought-through proposition.

    anyone making positive noises at this point would be either desperate or dodgy. The second is far more likely.
     
    Posted: Oct 12, 2019 By: Mark T Jones Member since: Nov 4, 2015
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  15. Clinton

    Clinton UKBF Big Shot Free Member

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    Posted: Oct 12, 2019 By: Clinton Member since: Jan 17, 2010
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  16. Royce McCutcheon

    Royce McCutcheon UKBF Newcomer Free Member

    5 0
    If it's making that sort of profit, surely a share buyback would be a better option? This way you gain all of the equity and don't have the uncertainty of an unknown new investor/partner breathing down your neck.
     
    Posted: Oct 15, 2019 at 8:57 AM By: Royce McCutcheon Member since: Jul 24, 2019
    #16
  17. Chris Ashdown

    Chris Ashdown UKBF Legend Free Member

    10,637 2,151
    What often happens in small local companies is a merger of some form, where two competing business combined, make economy of scale, so that might be a area you could investigate

    In our local town there seems a constant amount of oil related companies, growing in competition and then merging, or buy outs by slightly larger companies either locally or expanding to new area's
     
    Posted: Oct 15, 2019 at 9:57 AM By: Chris Ashdown Member since: Dec 7, 2003
    #17