by Kim Lavine
All we had agreed on at the previous meeting was the value of the company. This accomplishment can not be underestimated, the most critical part of the process.
Without an agreement on valuation, all the other discussions which followed would never have taken place.
The Art of Valuation
I had been discussing valuation for at least three months, and they never made one move past a very low figure that they had proposed at the very beginning.
Smart Money did in five minutes in a back room what I couldn’t do in months. He was an expert at valuation—having done it for dozens of other companies before— and they knew it, so their extremely conservative interpretation of EBIDTA got them nowhere.
Art, Not Science
He had already earned his shareholder stake, but he would go on to earn it at least a dozen times more. He had in mind a business plan he had recently seen presented at the Michigan Business Challenge held at the University of Michigan. A start-up business, founded by a graduate business student, had managed to raise close to a million dollars in nine months, on a business plan that proposed selling printed sweatshirts and athletic gear featuring high-school and college logos.
If they could raise this kind of money with an untested business model with absolutely no sales experience or history behind them, then my company, with over two million dollars of sales, a constant stream of new creative products distributed through the nation’s top retailers and an experienced, passionate President was worth more.
I don’t know where I would have been without him; my banker agreed.
An Excerpt from MOMMY MILLIONAIRE
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