I recently decided that on my next set of business cards I would change my title from co-founder to translator. Why? Because, while I did co-found what I knew at the time to be the only investment banking firm focused solely on women owned and run companies, what I really do all day long is translate.
I translate fabulous marketing plans and sales strategies, written by Venetians—women—into numbers that represent investment opportunities to be read by Martians—men. Often times I find myself translating the story of the little company that could, into the dynamic acquisition target for a strong strategic buyer. Why am I a translator and not just an investment banker? Let me give you some examples.
The Language of Business Is Money
Not long ago, a woman came to me because she wanted to find an investor to help take her company to the next level. She had carved out a great niche for herself, and done much with very little in the way of resources. During our meeting I discovered that she had no business plan, no financial projections, had done no research into the size of her market, or how she stood compared to her competitors (she claimed she had none), nor could she answer the most basic of financial questions I put to her:
- What was her profitability (EBITDA),
- What percent had she grown that number year over year (CAGR),
- Who were her top ten clients,
- What percent of her sales and profits did each of these clients contribute?
What she did have was a great brand name in her market, fabulous visibility and a genuine desire to continue growing the company. She did not want to handle the business piece.
As we talked, I laid out how we, as investment bankers, handle the process of bringing in investors or strategic partners. We would start by doing a through job of due diligence, not merely so that we understood the company inside and out, but to make sure that nothing would come up down the road that we would not be prepared to address. We would do valuation work so that we could easily demonstrate why we thought the company was worth what was claimed. We would run a process—in essence a horse race—to get the best candidates to the table, and let them compete for the property. And then we would negotiate the terms of the deal so that they favored our client. How would we be paid? We would take a retainer on the front end with the bulk of our fee based on our success.
She wanted our help, but despite the fact that we had vast experience in these types of transactions, she didn’t really think we needed to go through the entire diligence and valuation process. She felt that if she could personally talk to these investors they’d see how great her company was and she could work something out. She decided to go it alone.
It's All About Dollars and Cents
We liked this woman, and although we doubted she’d become a client; we offered to introduce her to a private equity group that we thought would be a good fit. I asked to be included in the conference call, which she agreed to. For over an hour I listened to the story of her company, its promising future and past successes. At length, she described new markets she could enter, different product lines that could be introduced, but not once did she give a financial data point.
It was fascinating to watch this scenario play out. Of course, the response came back from the private equity group that the opportunity sounded interesting but “we really don’t know anything about the company.” They knew everything—except the dollars and cents, and in business it’s all about the dollars and cents.
Afterward I told her, you’ve got to get someone to help you to present your company in the language that bankers speak. You need to understand how they will look at an opportunity, and present yourself and your company in terms they can understand.
Focus on Earnings
The next example that comes to mind is a woman whose company is doing phenomenal sales. She’d gone from zero to twenty million in three years. She was making waves for some of her larger competitors and they were making inquiries as to whether or not her company was for sale. The problem is, she’s not making any money. If I told you the name of the company you’d recognize it—that’s what a great job she’s done on the marketing side.
When we began to look at the company, it was clear to us that she needed to diversify her distribution channels. She had a money-maker, she was just focused on the wrong thing—she needed to focus on earnings, not sales. She had one distribution channel and they were not allowing her the opportunity to make money. The scary part was she and her husband had financed this entire venture themselves, pledging their home and securities as collateral. They came to us because after three years of working day and night, they decided that it would be nice to explore other distribution channels and even a potential sale. The trouble was it’s hard to sell something that’s not making money. It’s not impossible, but you’re not going to get what you think you deserve.
Again, we went through the explanation of what it would take to run a valuation process and what needed to be done before we could even start down the path. Their decision was to pursue another marketing plan. But, because they didn’t look at what makes a company like theirs investable, bankable, and therefore ultimately saleable for a premium, they’re spinning their wheels—and in this case risking all of their assets.
Use the Language of Business to Your Advantage
I tell these stories because they are perfect examples of the mistakes I see women make every day, and they’re easy to avoid. Women are master marketers and networkers, and they do a great job of taking care of employees. Where they don’t do a good job is understanding how bankers—mostly men—look at a company before they buy or invest. Nor do I find that they really understand the dynamics of what gives a company the greatest value. Roughly translated it’s all about the numbers not the words. It’s about understanding the language of business and using it to your advantage. And it’s about being OK with having more than one right answer, or not knowing the answer and asking for or hiring help—something I have seen men do in business time and time again.
Men take the team approach, assembling their accountants, lawyers and bankers to make sure they field the very best team.
In her book Play Like a Man, Win Like a Woman, author Gail Evans points out that men play to win and women play to keep everyone in the game. Business is a sport where there are winners and losers. It’s a game with rules and it has its own language. Business is also a sport where stakes are extremely high both financially and emotionally. You must speak the language, field the best team, and play to maximize your single largest asset if you are to win.
About the Author
Julie Garella, together with Hugh McColl, the former chairman of the Bank of America, founded McColl Garella, an investment banking firm dedicated to woman owned and run companies across the United States. For more information please visit www.mccollgarella.com. Julie can be reached at