Go Figure!

Ever wonder just what investors are looking for when they pore over all those numbers in your financial statements?

In a period of boundless opportunity, it seems unlikely that a company would attempt to find explosive growth in an established industry. But that's what Lynnfield, Massachusetts-based Investors Capital Holdings has done.

Since the company started in 1995, Investors Capital has doubled its revenue every year by providing financial services to consumers-a business where even some giants have stumbled. Co-founder, president and CFO Tim Murphy says a key component of Investors Capital's success (the company had $34 million in annualized revenue in 2000) is a "commitment to good old-fashioned customer service and intensive recruiting." The result is a sales network of 1,200 representatives, a force even some brand-name competitors might envy.

"We're ready to turn up the heat with Internet-based financial services, expansion of our mutual fund [offerings] and the opening of more company-owned offices," says Murphy. But expansion requires capital. To meet the plan's needs, Investors Capital filed for an $8 million initial public offering.

In making the transition from a private company to a public one, Murphy says, Investors Capital had to open its books to investment bankers considering the offering. What were the bankers looking for? What did they find there that made them commit to the deal?

The answer is in the company's financial statements. Owner and CEO Ted Charles has always found great benefits in keeping good financials. "[Preparing financials] gives you a great perspective on where the company is-you can see the numbers because you're auditing things constantly and setting goals," he says. Now the company's financials have played a bigger role, conveying the business' strengths to investors.

One of the tricks to raising money is knowing what investors look for in financial statements. Jim Twaddell, director of corporate finance at the Providence, Rhode Island, office of Schneider Secu-rities, was the investment banker who liked what he found in Investors Capital's books and agreed to do the deal. "Equity investors and lenders look at finan-cials differently," he says. "Lenders are seeing if a company can repay a loan. Equity investors are seeing if a company will grow, and what that will take."


David R. Evanson's newest book about raising capital is called Where to Go When the Bank Says No: Alternatives for Financing Your Business (Bloomberg Press). Call (800) 233-4830 for ordering information. Art Beroff, a principal of Beroff Associates in Howard Beach, New York, helps companies raise capital and go public, and is a member of the National Advisory Committee for the SBA

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This article was originally published in the January 2001 print edition of Entrepreneur with the headline: Go Figure!.

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