6 Top Tips on How to Handle HMRC Winding UP Orders

Shareholders and directors who think the game is up and the only option is insolvency and liquidation, please, think again. With experience and skill it is perfectly possible to legally trade through a winding up petition to emerge ready for profitable growth.

I would like to share with you my recent visits to the High Court to represent clients who are subject to a winding up petition from HMRC. While at Court I see the production line, often of between 100 and 200 per session. A majority of the Petitions are presented by HMRC, at the hearing HMRC officers claim that in spite of repeated attempts, they have not heard from the company and the Petition results in a Winding Up Order granted without being defended.

Each week the High Court is full of companies represented by their directors who turn up having not spoken to anyone, neither HMRC as petitioning creditor nor to their own advisers. In most instances when the director turns up, if they want their company to survive, they will be granted an adjournment giving them time to pay or find a solution.

Two or three weeks later, when they turn up for the adjourned hearing, they often tell a story about why they haven't paid, it is possible they may get a further adjournment but mostly the level of preparation and information is inadequate. To retain control and prevent winding up of the company by the official receiver the company needs to mount a defence that shows they have a plan and a likelihood of satisfying the creditor.

The level of unpreparedness and ignorance is breathtaking. A director arriving in Court having paid the Petitioning creditor can sometimes get a shock when they learn that another creditor has adopted the petition. An ill prepared director, and many are, should expect their company to be wound up. The human life stories can be tragic. When a director has paid HMRC using personal funds only to lose his company due to another creditor adopting the petition he has simply wasted his money.

Let's face it, most Company Directors are effective in good times but totally ill equipped to handle matters when a company gets into financial or legal difficulty. In smaller businesses the flow of financial information prepared by the director stops, because the director is overwhelmed with work dealing with other issues arising from difficulty the accounts get left. The shortage of cash leads directors to think they cannot afford advice. That is almost certainly wrong. It is precisely because he is in trouble that he MUST get help.

Knowing what the responsibilities are or where to find help is not easy. Many directors assume they are protected by limited liability, they fail to realise that a limited liability company protects shareholders, not directors. It is often not in the company's or the directors best interests to take advice from the usual sources. A banker will always seek to protect their capital, and accountant may see more value in the balance sheet at winding up than from fees and the lawyers will want to collect fees not join a list of creditors. So who then should a director turn to for advice? The answer is a company doctor specialising in turnaround management. A good turnaround manager will quickly assess the difficulty, understand the interests of the company and arrange a restructuring plan that protects the interests of the company and uses a range of specialist legal tools to handle any challenges whilst the restructuring stabilises the position of the business.

Whilst best not left until there is a winding up petition, a turnaround practitioner will often be able to save the business and almost certainly improve the outcome for shareholders and directors. If wound up, the assets of the company are normally all consumed by the winding up administration process and creditors usually leaving nothing for shareholders and the lenders calling in personal guarantees. In a business turnaround the value is normally retained in the company better protecting shareholders and directors whilst debt is restructured.

The six top tips for handling a winding up petition are; Have a current business plan; Keep your accounts up to date and know your plan actual performance, particularly for cash flow; The law about directors obligations when short of cash is clear and it is vital to know what they are; Seek advice early; Keep talking openly with creditors and inform them of progress. If any of these are not possible, find and take advice from a professional turnaround practitioner, they are good at what they do and on your side.

In the Service Department it is All About the Numbers!

"The Numbers." Everybody is always talking about "The Numbers". We live and die by "The Numbers" in the car biz, don't we?

In the Service Department we live and die not only by the monthly numbers but by the daily numbers as well. Service Managers are constantly reading reports with HPRO and EFL and CSI plastered all over them and the Advisors, well the Advisors, they are watching the Managers read the reports so they know what to expect.

In the Service Department bad numbers are rarely a secret.

The Advisors know what bad numbers mean. It means meetings and monitoring. It means stress piled on top of stress. And many times they have no idea where or how those numbers are calculated or even compiled.

All they know is that when they are bad, people with frowns and hard stares start showing up around their work station with regularity.

If you are Mr. or Ms. Advisor, I'd like to take a minute and explain a few of those numbers.

HPRO stands for Hours Per Repair Order. You get HPRO by dividing the Gross Amount of Labor Sales (less discounts) by the number of Repair Orders you have written.

Now I have had some conversations with Service Managers who want to argue about the "Mathematical Formula" vs the "Flags Per RO" and all you have to do is ask yourself this question Mr. or Ms. Dealer Service Manager, at the end of the month does the Dealer Principal count up the flag sheets or the money?

Effective Labor Rate is calculated by dividing Total Gross Labor Sales by Hours Flagged.

If you are an Advisor, you probably hear a lot about these two numbers. Why? Because the Service Manager is monitoring these on a daily basis and he or she is holding you, Mr. or Ms.
Service Advisor for performance in these two areas.

Lastly, Gross Labor and Gross Parts Sales. These are two numbers that reflect the Advisors daily output. They are the total amount of Sales you have on the Repair Orders you have written and are calculated by dividing the Total Gross Sales by the number of Repair Orders.

So now that you know what the numbers mean and where they come from you can begin to see what areas you might need to improve in to meet the standards at your Dealership.

If you are having difficulty in achieving HPRO standards, then a Sales Training Course geared towards Service Advisors would be appropriate.

If it is EFL, then you might want to pay attention to how much you are discounting (Did I just see all the Service Managers heads turn around on that one?) on your ROs.

And if you are having difficulty in achieving Gross Labor and Parts Sales then a Sales Course and a Phone Sales Skills Course for Service Advisors would be the best action you could take.

Not taking action after you know where and how they are calculated along with your performance goals is not the right thing to do if you want long term employment!

Don't "die" by the numbers! Understand them and use them to change what you are doing so you can start meeting performance objectives!

What Investors Want - 5 Key Items

Prospective and actual investors in small and medium businesses seek five things that pique their interest enough to pursue initial or follow-on investment. This includes a base business valuation and a strong management team. This article provides an overview of each of the 5 key elements.

1. A strong return on investment. Ranges from 8% (friendly, debt) to 40%

-Different types of investors investing at various stages of the company's growth and development will have different expectations. (Notice the emphasis on and repeated use of the word different!) An angel investor who is taking on the most risk by investing when the company is still in its nascent (i.e., very early) stage and has yet to generate much revenue, if any, has no contracts, and has negative cash flow, will want the highest return of 40% or close to it. If the company is successful, due to the early entry stage, one would expect the company to generate at least that. Often, though, the angel investor will sell out during one of the subsequent financing periods. Rarely does an angel investor stay on board until the company reaches maturity.

-Venture capitalists come in later but still before the company is cash flow positive. Therefore, they typically want returns of 30-35%.

-Mezzanine financiers provide a mixture of debt and equity to more stable and established businesses so they expect blended returns of 16-20%.

2. A clear pay-off date (exit strategy) - typically 3 - 7 years

-Very few investors wish to wait indefinitely for their money. They are investing not to make you feel good but because they believe in you and your business and the ability of the business under your management (and sometimes with their additional efforts) to generate enough revenue and cash flow and/or grow large enough in value to return them their investment and their expected return within a specific time frame.

-This varies based on the investor. Angel investors prefer a shorter period of time (3 years). Private equity funds typically expect 4-5 years. Strategic investors derive a number of benefits so their investment timeframe tends to be the longest, with a trend of ~7 years.

3. A strong management team

There are many great ideas out there. It's not so much the idea that counts (look at all the inventors who never get anywhere) but the ability of the management team to capitalize on that idea and provide the leadership, strategy, sales, marketing, and operational skills and acumen to bring that idea to market. Or to apply those same skills to a purchase of an existing business and continue to generate similar growth if acquiring a high growth business or turn around the enterprise and grow it, if acquiring an underperforming company.

-The management team is the most important component. A great management team can make a good idea or a so-so company into a great company. But a great idea may never make it off the ground with poor management and a great company can go rapidly downhill with mediocre management.

4. A base valuation of the company

You don't want to approach investors with no idea of what your company is worth. How do you know if the investor is proposing a good price for the portion of their investment? Angel investors sometimes are not highly financial savvy and can't do their own valuations. So you need to do one or have one done for your company and be able to explain it to the interested investor. You need to show them in these pro-forma financials how their investment will help move your business to the next level. And they need to see in this valuation how the requested investment amount was determined. Venture capital firms will do their own valuation but you should have your own in order to understand the financial impact of your company's strengths. This will facilitate your negotiations with these firms.

-Since they usually deal with existing stable businesses, mezzanine firms and private equity funds expect you to tell them what your firm is valued at, how you arrived at the numbers, and what amount you expect from them to invest. They will run their own valuation but want something to compare it to. Also, if your firm has $10 - 20 million or more in revenue (typical for companies that attract this type of equity investment), your management team should have someone with financial acumen -a CFO - or have access to someone (a consultant,...) who can do this. Otherwise, your ability to financially manage the company could be called into question.

5. A business plan to accomplish goals

- You need an abbreviated business plan. If you have a full strategic business plan, that's even better. If you also have an operational business plan, that's all the more impressive. But you need something that provides an overview of the market, background on the business, industry and competitor assessment, management overview, sales and marketing plan, risks, financial snapshot, goals, and the strategy to accomplish these goals. Most investors only want to see an Executive Summary - 3-5 pages - to determine if they're interested. Then, once they've expressed full interest, they'd like to see the complete business plan.

-Remember, the business plan is an ongoing work in progress. The purpose is not to clearly map out exactly what you'll do but to chart a course for what you'll do that enables you to respond to market changes and new information that may differ from the assumptions you made. If you're not fully aware of your ideas of the market, competitor, and customer behavior, then you don't know what to do when things don't go as expected. A business plan gets you to think creatively.

-Review your business plan on a quarterly basis and make changes semi-annually as needed. Remember, the business plan shows an investor that you treat your business seriously and have thought about what it takes to get to where you need their money to help you go. The business plan says to the investor, "Here's what I'm going to do with your money to make sure you get it back with the return you seek".

Hiring a Turnaround Coach to Recover Your Business

If your business is distressed and you have decided to handle most of the turnaround process in-house yourself, a turnaround coach can be an invaluable resource to supplement your efforts.

A turnaround coach can be located remotely from your location and act as a sounding board for ideas and plans. If you decide to perform the turnaround yourself, a coach can make the difference between success and failure.

The benefits of a turnaround coach are as follows:

- They will be a sounding board for your ideas
- They can help you make difficult decisions
- They will offload some of the responsibility for difficult decisions
- They can give you leadership from experience
- An inexpensive alternative in comparison to a consultant

To locate a turnaround expert, you can check with your accountant or lawyer (external to your company). You can also check with your banker. Many turnaround consultants find work through bankers. If your bank is a large one, your local banker may be able to locate a turnaround expert by making contacts higher up in his organization.

One caveat, however, if you take this route: banks and turnaround consultants sometimes have a cozy relationship. The consultant may get all his or her work from the bank, so they may ultimately put the bank's interests before yours.

There is often a need for discretion, and if this is so in your case, you can always advertise in popular business magazines or hire a top consulting firm to perform a search. For the amount of money that is at stake, this level of action is justified.

Turnaround Your Retail Business

Turning around a retail business is simple, far more simple in fact than the many books written on the subject. Once you cut away all the fluff, it really comes down to some basics. Get these right and you can the concentrate on the more complex ideas.

The top six ideas for turning around a retail business in difficult times are:

USP. Ensure that the business has a unique selling proposition, products, services or other factors which make the business unique from others in the same field. If you do not has a USP why should people shop with you?

Cost management. Make sure that business costs are managed, that you are not spending money on non-income generating activities. If your costs are not managed and are indeed out of control then you need to sell more to cope with this.

Employ people who want to work there. Cheerful employees help you sell more products. Selecting the right people is vital to making any business more successful.

Competitive offer. Your product mix and pricing need to demonstrate that your business is competitive. If your prices are not good or your product mix not right then why would customer shop with you?

Traffic generation. It is vitally important to market the business outside its four walls. How you do this will depend on the business. Too often, businesses in trouble are spending nothing or very little on marketing their businesses. External marketing could be a free sign on your car, a billboard or a self made flyer.

Being customer friendly. Ensure that your retail business is laid out to suit customers and to help them spend money.

These tips are non traditional because they are simple and focus on very basic ideas. While there are plenty of other ideas for turning around a retail business, if you do not have these basic ideas right then the more complex and time consuming ideas will not help.

if your retail business is in trouble, start immediately to take action. Doing something, anything, is better than nothing and worrying. The ideas in this article are designed to get you thinking about steps you can take without spending money.

How to Effect a Company Turnaround in the Credit Crunch

Company turnaround has been described as a three stage process, Rescue, Restructure and Recovery. When a debt advisor first takes a call from a company looking to turnaround its fortunes, they first look and see if they can rescue it. It will be likely that when they are called, the business has been in decline and difficulties for quite some time, and on occasions, years. With the credit crunch putting pressure on all businesses, they are finding that this pattern of failure of escalating. Usually the first task is to see if they can raise finance, and if so from where. If they can do that, they will ascertain where that is best allocated. A trading fund will be essential if they are to have the time to implement phase two. At this stage they will also talk to stakeholders, such as shareholders (if different from the directors), employees, creditors and customers.

With the immediate future of the company settled, they can now turn their attention to the medium and longer term position of the business. They will review all elements of the company structure, its trading and operations and seek efficiency savings where they may be found. Cost reductions will be a key element in producing profit which will then contribute to a secure future for the business. In addition they will investigate current and potential trading markets, assess management, and if need be, take the hard decisions required to make sure the future of the company is secure. Future financing is important and they have access to a full range of funders so that they will be able to place your requirements.

Once they have placed the company on a firm footing they will withdraw from the operation and complete a hand back. An advisor may not exit completely, as they are happy to offer ongoing support, on a consultancy basis.

All advisory services will be payable on a basis to be agreed, and an advisor will agree with you how their fees are to be funded. It will not be a cheap process, but when compared to contemplating the cost of failure of the business, it will appear significant value for money.

6 Top Tips on How to Handle HMRC Winding UP Orders

Shareholders and directors who think the game is up and the only option is insolvency and liquidation, please, think again. With experience and skill it is perfectly possible to legally trade through a winding up petition to emerge ready for profitable growth.

I would like to share with you my recent visits to the High Court to represent clients who are subject to a winding up petition from HMRC. While at Court I see the production line, often of between 100 and 200 per session. A majority of the Petitions are presented by HMRC, at the hearing HMRC officers claim that in spite of repeated attempts, they have not heard from the company and the Petition results in a Winding Up Order granted without being defended.

Each week the High Court is full of companies represented by their directors who turn up having not spoken to anyone, neither HMRC as petitioning creditor nor to their own advisers. In most instances when the director turns up, if they want their company to survive, they will be granted an adjournment giving them time to pay or find a solution.

Two or three weeks later, when they turn up for the adjourned hearing, they often tell a story about why they haven't paid, it is possible they may get a further adjournment but mostly the level of preparation and information is inadequate. To retain control and prevent winding up of the company by the official receiver the company needs to mount a defence that shows they have a plan and a likelihood of satisfying the creditor.

The level of unpreparedness and ignorance is breathtaking. A director arriving in Court having paid the Petitioning creditor can sometimes get a shock when they learn that another creditor has adopted the petition. An ill prepared director, and many are, should expect their company to be wound up. The human life stories can be tragic. When a director has paid HMRC using personal funds only to lose his company due to another creditor adopting the petition he has simply wasted his money.

Let's face it, most Company Directors are effective in good times but totally ill equipped to handle matters when a company gets into financial or legal difficulty. In smaller businesses the flow of financial information prepared by the director stops, because the director is overwhelmed with work dealing with other issues arising from difficulty the accounts get left. The shortage of cash leads directors to think they cannot afford advice. That is almost certainly wrong. It is precisely because he is in trouble that he MUST get help.

Knowing what the responsibilities are or where to find help is not easy. Many directors assume they are protected by limited liability, they fail to realise that a limited liability company protects shareholders, not directors. It is often not in the company's or the directors best interests to take advice from the usual sources. A banker will always seek to protect their capital, and accountant may see more value in the balance sheet at winding up than from fees and the lawyers will want to collect fees not join a list of creditors. So who then should a director turn to for advice? The answer is a company doctor specialising in turnaround management.

A good turnaround manager will quickly assess the difficulty, understand the interests of the company and arrange a restructuring plan that protects the interests of the company and uses a range of specialist legal tools to handle any challenges whilst the restructuring stabilises the position of the business.

Whilst best not left until there is a winding up petition, a turnaround practitioner will often be able to save the business and almost certainly improve the outcome for shareholders and directors. If wound up, the assets of the company are normally all consumed by the winding up administration process and creditors usually leaving nothing for shareholders and the lenders calling in personal guarantees. In a business turnaround the value is normally retained in the company better protecting shareholders and directors whilst debt is restructured.

The six top tips for handling a winding up petition are; Have a current business plan; Keep your accounts up to date and know your plan actual performance, particularly for cash flow; The law about directors obligations when short of cash is clear and it is vital to know what they are; Seek advice early; Keep talking openly with creditors and inform them of progress. If any of these are not possible, find and take advice from a professional turnaround practitioner, they are good at what they do and on your side.

In the Service Department it is All About the Numbers!

"The Numbers." Everybody is always talking about "The Numbers". We live and die by "The Numbers" in the car biz, don't we?

In the Service Department we live and die not only by the monthly numbers but by the daily numbers as well. Service Managers are constantly reading reports with HPRO and EFL and CSI plastered all over them and the Advisors, well the Advisors, they are watching the Managers read the reports so they know what to expect.

In the Service Department bad numbers are rarely a secret.

The Advisors know what bad numbers mean. It means meetings and monitoring. It means stress piled on top of stress. And many times they have no idea where or how those numbers are calculated or even compiled.
All they know is that when they are bad, people with frowns and hard stares start showing up around their work station with regularity.

If you are Mr. or Ms. Advisor, I'd like to take a minute and explain a few of those numbers.
HPRO stands for Hours Per Repair Order. You get HPRO by dividing the Gross Amount of Labor Sales (less discounts) by the number of Repair Orders you have written.

Now I have had some conversations with Service Managers who want to argue about the "Mathematical Formula" vs the "Flags Per RO" and all you have to do is ask yourself this question Mr. or Ms. Dealer Service Manager, at the end of the month does the Dealer Principal count up the flag sheets or the money?
Effective Labor Rate is calculated by dividing Total Gross Labor Sales by Hours Flagged.

If you are an Advisor, you probably hear a lot about these two numbers. Why? Because the Service Manager is monitoring these on a daily basis and he or she is holding you, Mr. or Ms.

Service Advisor for performance in these two areas.

Lastly, Gross Labor and Gross Parts Sales. These are two numbers that reflect the Advisors daily output. They are the total amount of Sales you have on the Repair Orders you have written and are calculated by dividing the Total Gross Sales by the number of Repair Orders.

So now that you know what the numbers mean and where they come from you can begin to see what areas you might need to improve in to meet the standards at your Dealership.
 
If you are having difficulty in achieving HPRO standards, then a Sales Training Course geared towards Service Advisors would be appropriate.

If it is EFL, then you might want to pay attention to how much you are discounting (Did I just see all the Service Managers heads turn around on that one?) on your ROs.

And if you are having difficulty in achieving Gross Labor and Parts Sales then a Sales Course and a Phone Sales Skills Course for Service Advisors would be the best action you could take.

Not taking action after you know where and how they are calculated along with your performance goals is not the right thing to do if you want long term employment!

Don't "die" by the numbers! Understand them and use them to change what you are doing so you can start meeting performance objectives!

Desperate Owner Directors Unable to Get Paid

The oft uttered phrase of 'fat cat' about anyone who is a company director from mid-ranking private sector employees and public sector workers, whose maximum risk is that they might one day be made redundant, now sounds more hollow than ever. The fact is that the vast majority of company directors are small or medium size business owners who, for the most part have not been paying themselves properly for months, if ever. So, if the owner directors are poor as church mice, who are the fat cats now?

Limited liability protects shareholders, but not directors. When orders reduce and other costs cannot be cut the only place left to go is to cut directors drawings from a business. There is no minimum wage for an owner director. Perhaps surprisingly, most owner directors have become the lowest paid, or not paid at all, employees in their company. In an often vein attempt to sustain their business through the 'credit crunch' they are working all hours and often borrowing on their personal account. Business is still being done but, with more businesses and sole traders chasing fewer orders, margins have been squeezed to the point where sales revenues no longer cover the full cost of the service provided.

Directors unable to make their pension contributions and then to pay themselves (properly), are two early indicators that a business will soon fail and become insolvent. Sadly, because the symptoms are a shortage of money the usual response of the director is to seek more money sometimes in the form of more sales. Breakfast networking groups are currently bursting at the seams with new members all desperate for scraps of leads for new business.

Unusually, when faced with a shortage of funds the response is to find help. However, the usual trusted advisors, the bank, the accountant, possibly even an insolvency practitioner, all have vested interests that are not in alignment with those of the business. An independent and better source of advice are business coaches or specialist turnaround management firms. This 'better response' is rare indeed. The logic for that is, the business is short of cash, so how can paying an expensive advisor help? How would they get paid?
The fact of the matter is that a key difference between a small company and a large one is normally the completeness of their management team. The smallest usually have only a full-time striker and part-time goal keeper. Whilst the largest have a full team and often a well stocked subs bench. They have the capacity to respond better to all of the non-core issues and can organise to find time to think about strategy and restructure. Bigger companies do reorganise quite frequently.

Running out of cash and working all hours for little or no pay is miserable. It soon becomes demoralising and the associated behaviour towards trading partners and employees can lead to the further loss of profitable business or the ability to satisfy it. A good turnaround manager will rapidly assess the state of a business through an examination of the finances, performance and behaviour. Frequently, some structural change and direct speaking with trading partners will allow the business to adapt to a form that can return to success and become capable of attracting investment and financial support. In critical situations, the tools of the turnaround manager using the legal framework and insolvency devices might be used to protect and reshape the business in order to allow it to go profitably forward.

Naturally, if a business no longer has a reason for being and has no prospect of recovery it should be liquidated. It is a sad truth that the vast majority of liquidated businesses lost their value in the liquidation process and with restructuring would have enjoyed a prolonged and profitable life. Owner directors should be aware that there is an alternative to liquidation and that good turnaround managers are capable of both realising a proportion of that value for shareholders and being paid themselves.

What Investors Want - 5 Key Items

Prospective and actual investors in small and medium businesses seek five things that pique their interest enough to pursue initial or follow-on investment. This includes a base business valuation and a strong management team. This article provides an overview of each of the 5 key elements.

1. A strong return on investment. Ranges from 8% (friendly, debt) to 40%

-Different types of investors investing at various stages of the company's growth and development will have different expectations. (Notice the emphasis on and repeated use of the word different!) An angel investor who is taking on the most risk by investing when the company is still in its nascent (i.e., very early) stage and has yet to generate much revenue, if any, has no contracts, and has negative cash flow, will want the highest return of 40% or close to it. If the company is successful, due to the early entry stage, one would expect the company to generate at least that. Often, though, the angel investor will sell out during one of the subsequent financing periods. Rarely does an angel investor stay on board until the company reaches maturity.

-Venture capitalists come in later but still before the company is cash flow positive. Therefore, they typically want returns of 30-35%.

-Mezzanine financiers provide a mixture of debt and equity to more stable and established businesses so they expect blended returns of 16-20%.

2. A clear pay-off date (exit strategy) - typically 3 - 7 years

-Very few investors wish to wait indefinitely for their money. They are investing not to make you feel good but because they believe in you and your business and the ability of the business under your management (and sometimes with their additional efforts) to generate enough revenue and cash flow and/or grow large enough in value to return them their investment and their expected return within a specific time frame.

-This varies based on the investor. Angel investors prefer a shorter period of time (3 years). Private equity funds typically expect 4-5 years. Strategic investors derive a number of benefits so their investment timeframe tends to be the longest, with a trend of ~7 years.

3. A strong management team

There are many great ideas out there. It's not so much the idea that counts (look at all the inventors who never get anywhere) but the ability of the management team to capitalize on that idea and provide the leadership, strategy, sales, marketing, and operational skills and acumen to bring that idea to market. Or to apply those same skills to a purchase of an existing business and continue to generate similar growth if acquiring a high growth business or turn around the enterprise and grow it, if acquiring an underperforming company.

-The management team is the most important component. A great management team can make a good idea or a so-so company into a great company. But a great idea may never make it off the ground with poor management and a great company can go rapidly downhill with mediocre management.

4. A base valuation of the company

You don't want to approach investors with no idea of what your company is worth. How do you know if the investor is proposing a good price for the portion of their investment? Angel investors sometimes are not highly financial savvy and can't do their own valuations. So you need to do one or have one done for your company and be able to explain it to the interested investor. You need to show them in these pro-forma financials how their investment will help move your business to the next level. And they need to see in this valuation how the requested investment amount was determined. Venture capital firms will do their own valuation but you should have your own in order to understand the financial impact of your company's strengths. This will facilitate your negotiations with these firms.

-Since they usually deal with existing stable businesses, mezzanine firms and private equity funds expect you to tell them what your firm is valued at, how you arrived at the numbers, and what amount you expect from them to invest. They will run their own valuation but want something to compare it to. Also, if your firm has $10 - 20 million or more in revenue (typical for companies that attract this type of equity investment), your management team should have someone with financial acumen -a CFO - or have access to someone (a consultant,...) who can do this. Otherwise, your ability to financially manage the company could be called into question.

5. A business plan to accomplish goals

- You need an abbreviated business plan. If you have a full strategic business plan, that's even better. If you also have an operational business plan, that's all the more impressive. But you need something that provides an overview of the market, background on the business, industry and competitor assessment, management overview, sales and marketing plan, risks, financial snapshot, goals, and the strategy to accomplish these goals. Most investors only want to see an Executive Summary - 3-5 pages - to determine if they're interested. Then, once they've expressed full interest, they'd like to see the complete business plan.

-Remember, the business plan is an ongoing work in progress. The purpose is not to clearly map out exactly what you'll do but to chart a course for what you'll do that enables you to respond to market changes and new information that may differ from the assumptions you made. If you're not fully aware of your ideas of the market, competitor, and customer behavior, then you don't know what to do when things don't go as expected. A business plan gets you to think creatively.

-Review your business plan on a quarterly basis and make changes semi-annually as needed. Remember, the business plan shows an investor that you treat your business seriously and have thought about what it takes to get to where you need their money to help you go. The business plan says to the investor, "Here's what I'm going to do with your money to make sure you get it back with the return you seek".