The Missing Piece: How Doescher Group Complements Investment Banking
Imagine you wake up and realize you’ve outgrown your house. It was great, but now it’s too small, or too big, or requires too much maintenance. You’re ready for broader vistas and new adventures. It’s time! Today is the day!
Do you call the first realtor whose number you see on a park bench, sign a contract immediately, and hope for the best?
Of course not!
Photo by Pavel Danilyuk: https://www.pexels.com/photo/for-sale-direction-sign-in-hand-7937763/
You do your research. You talk to friends who’ve recently sold. You interview prospects.
This is a big deal! You want to pick the right team to represent you for this significant transaction.
You’ll quickly see that the good ones pull market data and suggest a selling price range for your home. showing you what that means in your pocket after you pay off your mortgage and cover transaction costs.
The best ones will have a holistic marketing plan for creating the best possible listing with photos, drone videos, beautiful property descriptions, etc. And the full plan for properly staging your house to highlight the best aspects of the property. At the same time, they might point out some items they recommend you address before selling, and even some they wish you could address before selling, even though they know it’s a big ask. But before you stick that sign up in your lawn, you will almost certainly decide to make some repairs and improvements (however small) to achieve maximum sale price.
Your realtor helps you package and market your sale.
Your contractor helps you maximize the value of what you’re selling.
You need both! And while ideally, they work in tandem, they play very different roles. Doescher Group is like a contractor for businesses, and the investment bank is like your realtor. (And we can introduce you to the best ones.)
This is why it’s so important to work with us before you engage an investment bank.
When you go to sell your company, your investment banker will take what you’ve created and put together the best marketing plan and materials they can to market your business. They are experts in creating the competitive tension necessary to get someone to pay the highest price on the best terms.
But just like a realtor can’t alter the structure of your home, an investment banker cannot structurally alter the characteristics of your company.
The structural characteristics of your home include things like:
Number of bedrooms and bathrooms
Square footage
Floor layout
Kitchen and bath quality
Finished basement
Driveway and roof condition
Landscape and hardscape condition
Location
These are characteristics that your realtor cannot alter, but they will have a major impact on the value of your home.
However, with enough time and financial resources you can impact all of them if you want to optimize your home for sale. For example, you can update your kitchen and finish your basement. You can add curb appeal with landscaping. And you would be wise to do so.
Now, let’s take a look at a few structural characteristics of your company:
Physical location
Industry
Size and growth trajectory
Profitability
Customer and vendor concentration
Sales channels
Key employees
Documented processes
Intellectual property
Like a realtor reviewing your home but on a much deeper level, a quality investment banker will want to know everything they can possibly learn about your business. Your investment banker cannot fundamentally alter these characteristics, but they can highlight the best aspects and downplay any issues.
What your investment banker cannot do is fix or enhance areas of your business that will likely dramatically impact the value of your company.
For example, they cannot change your key employees or make your business less owner-dependent.
Just like the role of a realtor is distinct from a home improvement contractor, the role of your investment banker is distinct from Doescher Group.
Now you might be thinking, but before I pay for a bunch of renovations, I would talk to a realtor to make sure they will actually impact the sale of my house. So shouldn’t I talk to the investment bank first?
You can, but you don’t need to. As part of our process, Doescher Group helps you ask the right questions, getting the most out of consulting with leading Investment Banks on a blind basis regarding ways to maximize the value of your company and we include those insights in our recommendations to our clients.
On the surface, they might seem similar. We both work with owners looking to sell. But that’s where the similarities end. Rather than offering overlapping services, we offer complementary services.
An investment banker will tell the best possible story they can with the company you provide them to sell, whereas Doescher Group will guide you down the path to fundamentally improve what the investment banker is provided to sell.
Photo by RDNE Stock project: https://www.pexels.com/photo/people-sitting-on-chair-in-front-of-table-5922204/
Back to the home analogy. The right real estate agent is hoping to fetch you an extra 10 or 20%, whereas a home improvement contractor might be looking to increase the value of your home by 2-3x depending on the level of the renovation. We are talking about incremental increases v. vastly increasing the value by changing the core of the asset.
In the perfect scenario, Doescher Group works with your company for long enough to see a large increase in value and then assists with selecting the best investment banker for your business to get a further incremental increase, which is the cherry on top!
We all know there are neighborhoods where it just doesn’t make sense to renovate for investment purposes. If you’re in a cookie-cutter neighborhood with a clear high end of the price range, it makes no investment sense to build something that could be worth 2x the high end of the price range because nobody will want a house in that location for that price.
Similarly, before undertaking a large improvement project for your company, it’s important to determine if your business is in the right “neighborhood.” In this case, we think that your industry is a key consideration. To take a historical example, in the mid-2000s internet search engines were destroying the Yellow Pages phone book business. At that time, it would have been foolish to invest heavily in such a company. While in prior decades, the Yellow Pages were viewed as stalwarts of Corporate America.
Once you’ve determined that your business is investable and the “juice is worth the squeeze”. Now might be the perfect time to make some long-term investments that will pay off for you when your time to exit arrives.
When renovating a home, you might decide to:
Excavate, expand, and/or finish your basement
Increase the square footage and rooms via an addition
Overhaul your kitchen and bathrooms
Replace the driveway and/or roof
Invest in landscaping and hardscaping
Likewise, with your company, you might:
Organize your sales & marketing activities
Build up your management team
Diversify your sales channels and customer base
Understand and manage your profitability more closely
By taking these actions proactively, which can take months or years to accomplish, when the time comes to start reaching out to investment banks, you will not only have a much better company to sell, but you will attract the interest of better and better investment bankers. The good news is that, if done right, you will already have created most of the value, then it’s just a matter of finding the group to get you the incremental extra value from running a great process.
Recommended Read: What’s Your Business Worth?
To sum it up:
Great investment bankers are superstar realtors for companies.
Doescher Group is your home improvement contractor for your business, and we know the best “realtors” and what they are looking for.
Both serve important roles, and when managed well together, the results can be fantastic!
Reach out to us to learn more about how we can help you fix up your business!
