To be honest, any business in this economy could use a cash infusion. Growing an underperforming business is a good step towards a sale or merger. The ever-increasing solution appears to be recapitalization. This process helps to finance expansion and insure a positive business sale.
How Recapitalization Works
Being a business owner often means personal financial ties to the business. This connection makes accessing additional capital difficult regardless the reasons. Getting to that money traditionally meant selling the business for a lump cash sum. Using a quick sale to gain capital will garner less cash then a well thought out recapitalization. Selling an interest in a company or partial sale of that company is the process of recapitalization. An outside investor will allow the business owner to pull capital from the company in a non-detrimental way while still maintaining ownership of the business. This control and gain is what makes recapitalization such an excellent choice.
Increasing the flexibility of your business and spreading out risk are just two benefits to recapitalization. The outside investor now present in your company will share decisions and responsibilities of the business. While they may not be present on a day-to-day basis, their background presence will allow the business owner more freedom. Not to mention the extra revenue from the recapitalization can be used in several ways. Perhaps a business owner needs to pay some personal debt or diversify retirement options. Regardless the reason behind recapitalization, this process allows business owners to retain stakes in the business while achieving personal goals as well.
Display True Potential
While a business owner is looking to recapitalize, sell or merge they should never neglect the display of potential. A booming business must not rely on the current bottom line alone, what is the future of the business? Likewise, a struggling business can display the true value of its assets, which may be greater, then the bottom line. Securing the highest value in a recapitalization rests in the display of potential. An investor must be confident that the business is worth the time and money they have. Will that time and money increase the business’ value or squander it? Performing and accurate company valuation is important before considering the next move. When recapitalization is decided upon, the next imperative idea is clarity. Make sure each term of the deal clearly states the terms and that everyone involved is comfortable. A successful recapitalization will provide the business owner with the financial reward desired and an enthusiastic investor. Together they will lead the business into a profitable future.
Need help brokering a recapitalization or sale of your transportation business? Call the Tenney Group. They have industry experts standing by to give you a free initial consultation: 817-274-0054
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