Become a Finance Ace Business Strategies and Financial Tips for Everyone


Payday loans reflect your financial abilities

This statement reflects your ability to trust that your partners will do what they promise. Trust is built incrementally over time—people say they will do something and then they do it. The more often this occurs, the higher the trust level. But when we don’t trust them to do what they say, we feel compelled to check up on them. This statement might also reveal a past orientation. If we’ve had a bitter experience and have low trust, we begin to expect to be let down by everyone.We need to think about how we can begin to expect people to live up to their agreements.

If you’re willing to give up something that’s important to you, ultimately it will come back to haunt you. Compromise sets up a lose-lose dynamic because in compromising, both parties lose the energy to resolve the conflict in a  collaborative way that will end it. Rather than giving in to the compromise, partners should try to figure out how to use
the energy to create a new solution in which both partners win.

When we hear a comment about ourselves that we don’t like, it often means that it has hit a nerve. We may recognize the trait being described quite well but adamantly deny it. The ability to accept feedback is closely associated with self-disclosure. Remember, feedback reflects as much on the giver as it does on the receiver. Be open to the feedback. And then see if others provide you with similar comments.


Payday loan is a mechanism hard to break

If you prefer to use the same techniques on each task, you may end up making the same mistakes over and over. This may indicate that you’re comfortable with the status quo and are unwilling to try something new. People with a past orientation rely on the status quo to resolve new issues—and often find themselves repeatedly confronted with the same problems. This may also reflect a low level of comfort with  change. The two dynamics often collude to create a reinforcing mechanism that is hard to break.

When a person is always accommodating others’wishes, resentment builds up. And when this resentment reaches a critical stage, the accommodator begins to act out the resentment, often resulting in passive-aggressive behavior. That is, the accommodator will act passively toward the person being accommodated and then aggressively work to undermine whatever project they engaged in. This type of sabotage is a sure partnership killer.

People who tend to keep personal information strictly personal are often uncomfortable with self-disclosure.While we all have boundaries between our personal and business lives, it’s normal to talk about one’s spouse, loved ones, children, and outside activities. People who are so closed that they cannot share famil  information send a nonverbal
message to others. That message is generally perceived as mistrust and a lack of candor. People respond to this message by shutting down communication themselves. Ultimately this will hurt the partnership.


Make credit decisions based only on solid data

We are the same people at work that we are at home. We may alter the facade, but our core values do not change. This statement indicates reluctance to disclose parts of our personal life to others. If we hide a part of ourselves from others, people sense we are not being fully genuine. Humans have a sixth sense for knowing when someone is not sharing information with them. This starts a cycle of mistrust between people: If you don’t share something with me, then I’m not going to share something with you.

While it’s true that we can learn a lot from history, to make decisions based solely on historic data would be a mistake. People, events, and partnerships change. I use the analogy of driving a car while looking in the rearview mirror. It may be useful to see where you’ve been, but it’s more important to know where you’re going. If you believe that past history is a better predictor than a future plan, you may have a past orientation. You may also feel uncomfortable with change and therefore prefer to maintain the status quo.

While meeting people for the first time can sometimes create mild anxiety for people, if you get very nervous, that may indicate that you have a problem with change. New people bring new and often unexpected challenges. If you are uncomfortable dealing with change, meeting new people may heighten your anxiety. This may be true for you in partnerships as well.


When you don’t trust a credit, demand proof

This statement provides insight into your feelings about depending on other people. There are those of us who must drive ourselves everywhere and those who are willing to share the ride. If you are comfortable depending on others, you are comfortable making arrangements for others to provide you with transportation. But fiercely independent people, regardless of the transportation options available, feel compelled to provide their own mode of transport—one they can “depend” on. This statement also reflects your level of comfort with change, since depending on another may include a change in plans. It also touches on your ability to trust since you must trust that another will do what he or she says when you make such an arrangement.

When there is low trust, people demand proof. While this is not inherently a bad thing, if you’re unable to believe someone without examining the facts, this demonstrates an inability to trust. In relationships, people’s feelings and perceptions are their facts.When business partnerships achieve quantum improvements, many decisions are based on intuitive knowledge and feelings. How are you going to prove the facts in these situations? Partnerships need unconditional trust, which frees people up to take risks and move into the creative zone without restrictions. Businesses that have the foresight and courage to develop this kind of trust within their partnerships are the ones that will succeed.This statement may also reflect your comfort with change. If you demand to see the “facts,” you may not be willing to change without extensive reasons for changing. And this may indicate discomfort with change.


Consider only the important aspects of a loan

VCs will look for the same aspects in a business that is being considered for an MBI as they will in an MBO. The only difference is that where the CEO or management is not deemed to be worthy of their support they will need to bring in someone (usually at CEO level) whom they are prepared to support and whom they are confident will achieve the business targets that have been set.

Management/Employees acquiring 100% of the equity

It is difficult to generalise about what type of business the management and employees will be looking for in this type of buy-out, as the motivation for launching buy-outs will vary widely. However, it is safe to assume that management will be looking for all or most of the following before they will go ahead with the transaction:

Business must have sufficient growth potential for management to believe that buying it is a better option than being employed elsewhere.

The business owner must set a reasonable sale price and, where necessary, be prepared to offer terms of purchase.

The business must be able to support the purchase borrowings.

The management team must believe they can improve the business because of their expertise. Most management teams believe they can do a better job than the current owner!

A realistic, profitable exit strategy that will justify their risk and hard work.

Where a specialist EPO financier is assisting an employee buy-out, it will look for similar attributes in a business as are necessary for a traditional MBO.


No hard rules to estimate loan costs

There are no hard and fast rules to determine which businesses VCs and banks will support in a traditional MBO. Investment fashions are subject to change, whilst each financial institution will have its own particular investment policy. However, as a generalisation, VCs will consider a business that has the following attributes:

  • A reasonable asking price arrived at through an acceptable valuation method.
  • High growth potential, supported by a professionally produced business plan and a trading record that supports the financial projections.
  • In a high tech sector, such as medical and related industries.
  • Acceptable CEO supported by suitably competent and entrepreneurial management that is prepared to invest some of its own money in the buy-out.
  • The ability to borrow against its own assets.
  • Feasible exit strategy, preferably through a flotation or a secondary sale, within five to seven years.

Planning for a credit management success

All of the characteristics of a traditional MBO listed in the post above, apply to a company that is seeking to exit through an MBI with one very important exception: where there is no one suitable for the role of CEO, or other key management function within the business, the investors will insist that outside expertise be brought in to cover this deficiency before they will give the buy-out their financial support.

When planning for a management buy-out you should always be alert to possible management shortcomings. Where you recognise that your management is weak in some area, you will need to put someone else in place. If this is not possible, you need to accept that the VC investors will insist on bringing in a recognised industry expert as a part of the team.

This could completely change the dynamics of the buy-out team and your ability to negotiate the most favourable deal.


Looking for correct credit qualifications

It is not always easy to be sure in advance whether your buy-out will be a traditional MBO or an MBI, or whether the purchasers will be your managers and/or employees with or without any institutional partners.

But, before you consider this aspect in detail, it is probably a good idea to remind yourself of the three important general questions that need to be answered in the affirmative before you can seriously consider an MBO and, therefore, before you tailor your business for this exit. These are:

Does the business have suitable management?

Do historical financial reports and cash flow projections show that the business has adequate maintainable cash flows to service the requisite borrowings?

Does the business have strong growth prospects?

The importance of these characteristics will become clearer as we consider each type of MBO more closely. But first, consider articles below which summarises the qualifications of a business for a traditional MBO.


Find out your loan specifically to suit your needs

The only answer to this is to try to find out in advance who, specifically, your buyers might be. In many closely-knit industries this is not too dfificult. For example, if you have an optician’s business you might be aware that the most likely purchasers of your business are franchise groups who are looking for operations like yours with a view to converting them into franchisees. In this case, it is obviously worth your while to establish in detail what these groups are looking for in target businesses (both with regard to management structure and, perhaps, gross margin levels) and then to tailor your business specifically with these buyers in mind.

Besides senior management considerations, it is helpful for you to understand what VCs and Business Angels expect by way of return on their investment. VCs will be looking for a high return and a likely exit in five to seven years. They are attracted to businesses that have a chance of going public, or being on-sold at a significant profit. (You need to bear in mind, however, that very few private businesses have a realistic chance of taking the flotation route.) Business Angels are a mixed bag of individuals. Some of them take a professional investment approach by seeking high returns through a three to five year exit (and will keep at arm’s length from your business in the meantime). Others will be quite happy to be involved in the business in a non-executive capacity with no particular rate of return, or exit time frame in mind: these people might be, simply, looking for something exciting to do!


Strategic credit options should be your asset

Here your buyers could be competitors from your industry sector, larger institutions, or VCs. These buyers could be looking at your business not as a stand-alone entity, but one that has attractive synergies with (or addons to) their existing business. These synergies or add-ons could come from such things as gaining access to your customers, contracts or geographic market; adding your products to their own; taking over your management and staff (see below); or merging your overheads with theirs.

Where your target buyer is a larger institution, you could have a dilemma with regard to what you should do about senior management. In some cases,  the institution will wish to acquire sales turnover only and will strip away most of the overhead of the target business, including most of the staff. In this case, having senior management in your business will be an impediment to sale, because the purchasers will not wish to take them over and incur the cost of redundancies. On the other hand, some institutions might wish to keep your business as a stand-alone entity, thus relying on its senior management to keep it operating efficiently. In this case, not having senior management could be an impediment to sale!