Creating exit value in startups making sure you get paid for your hard work
Getting Paid for Your Hard Work:Creating Your Desired Exit ValueJackie Hutter, MS, JDDecatur, GA404-797-8124www.LeanLegalTeam.comTwitter @ipStrategist
Why Are You Working SoHard? Most entrepreneurs today say they want to exit from their business within 1-3 years ◦ Key to a suce$$ful exit is to get an acquirer to love your business as much as you do!
The Goodwill “Problem”Goodwill is that value of your businessattributable to intangible assets• Example • You think your business is worth $50 Million but accountants can only find $10 Million in “hard” assets • Where does that $40 Million come from?Goodwill is often in the eye of thebeholder• You are responsible for demonstrating why your business is worth all that extra money!
Where is Business Value Today?70 % or more of business value in form of intangible assets • For “information” companies, likely much higher • If you do not own real estate or equipment, you have mainly intangible valueBUT-this value does not exist because we say it does • Entrepreneurs (and all business people) must take affirmative steps to realize the value Realize Leverage Protect Capture Identify
To Realize Value MustMake Your Intangible Assets TANGIBLE Goal to be able to demonstrate to investors orpotential acquirers that your Business Value is REAL
How Do We Identify Your IntangibleAsset Value? 1. What makes Your Business different from its competitors? • What is your unique competitive advantage? • Identify each and every one 2. Would Your Business be harmed if this difference was lost to a competitor? • If so, you must capture and protect it so that you can realize it! Important qualifiers • Copying is legal and appropriate if you don’t protect your competitive advantage • Some things are not protectable, but knowing this is the case allows you to plan accordingly
Possible Sources of Your BusinessCompetitive Advantage Patentable Inventions Others Trademarks Specific to Brand Business Equity Model Your Business’ Intangible Asset Value Employees Business Processes Relationshi ps (Customer/ Suppliers)
Intangible Asset Business Strategy Process1. Determine 3 . Develop 4. Ensure thatshort and long- cost effective, • You and yourterm business 2. Understand executable team has thegoals those elements intangible skills necessary for strategic plan’s• Immediate and of business asset execution likely future model that management • Appropriate legal competitive issues create strategy to and business (if• Investment competitive allow to necessary) opportunities resources• Exit strategy advantage maximize long- identified and term business obtained value
Bonus from Intangible AssetStrategy Those who can articulate their business value will be perceived by potential investors or acquirers as having better management skills ◦ Will allow you to standout from others