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.
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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
Originally published in the January 2001 issue of Entrepreneur Magazine
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