Scholar Workbook
Mod 8:
Being Bankable
RCP Case (E) – October 2014
Proprietary & Confidential
Page 1
Table of Contents
Introduction: Being Bankable ..................................................................................................... 3
Mod 8_1: Funders’ Panel........................................................................................................... 4
Mod 8_2 Exercise RCP: CASE (E) ............................................................................................ 5
Mod 9 Pre-Work: Scholar Final Presentation – Growth Pitch .................................................. 10
Introduction: Being Bankable
Being Bankable incorporates much of the learning from the earlier modules and is designed to move you
closer to the completion of your growth plans and prepare you to access the capital that might be needed
to achieve your growth goals. The main goal of Being Bankable is to help you describe your growth
opportunities using financial terms and other metrics and then determine potential sources of funding.
The day begins with the Funders Panel. This panel will be made up of local professionals that represent
the types of funding available in your local ecosystem. This panel will help you understand the variety of
funding options and what is important to know and understand of each.
After a debrief of the panel, you will help two scholars evaluate their 5-year forecast discussing the
struggles in developing a forecast and the lessons learned.
The day will then move into discussions on business valuation and what tools can be used to value your
own business.
The remainder of the day will be spent presenting and refining your Funding Pitches. We will have outside
guests from the community who will observe your pitches and advise on how to improve those pitches.
Learning Goals & Objectives





Understand the different funding options available for scholars’ businesses, including the
difference between debt and equity and the pros and cons of each
Finalize financial forecast and understand the elements in a good forecast
Develop a funding strategy and plan for attracting the necessary capital
Use relative valuation techniques to estimate the value of a business
Practice communicating the financial aspects of a growth opportunity
Mod 8_1: Funders’ Panel
Description
Panel Selection
The participants on the Funders’ Panel to be selected by the GS Program Officer and CC team as
representative of the types of funding available in the local entrepreneurship ecosystem. Three
particularly types of funders are always included: 1) the local 10KSB partner for access to capital, an
equity provider (angel or venture capitalist), and 3) a local bank with a strong SBA loan guarantee
program. Each participant should be pre-screened as to their ability to communicate about their
programs and services in an engaging and informative manner.
Learning Objectives
Please note this panel is a key learning unit in the day, and the overall learning objectives we hope to
achieve are as follows:





Understand and delineate between the variety of funding alternatives
Understand the components of a properly formatted funding request
Understand, distinguish and discuss SBA, Commercial Bank and CDFI loan parameters
Understand and discuss equity investor parameters
Understand the importance and the required actions to build a good banker/investor relationship
Panel Process
Panel participants should be asked to arrive 30 minutes prior to the start of the panel for a briefing. The
goal of the panel is to move beyond “talking heads” in order to have a highly interactive discussion
between the business support service providers and the scholars. The panel participants will be provided
the opening questions prior to their arrival.
Mod 8_2 Exercise RCP: CASE (E)
Financial Statement Fundamentals: Valuation
By Richard T. Bliss and Michael Fetters, Babson College
Background
At the end of 2013, Reuse Consumer Products (RCP) was in a tenuous financial position and
the company’s survival was in question. In the (D) case of the RCP series, the focus is on
turning the company’s five-year strategy into a financial forecast for the period 2014-2018. The
(D) case also considers two scenarios and their impact on 2014 financial performance and the
need for funding. The objective is to evaluate the feasibility of RCP’s turnaround strategy.
In this case, we turn to the valuation of RCP. Valuation is important to all businesses large and
small, and is often a critical factor in raising capital. Rather than look at the company in 2013,
when the financial picture was bleak, this case asks the question “What might RCP be worth in
five years if they are able to successfully execute the turnaround strategy described in the
base case five-year financial forecast?”
Introduction
There are many approaches to valuing a business, including the following:

Liquidation

Asset replacement

Discounted cash flow (DCF)

Comparable analysis (multiples or relative valuation)
The most widely used are DCF and comparables analysis. In this exercise we will use
comparable analysis as it is often used to value small or new ventures and is computationally
straightforward. There are two approaches to comparables analysis

Transaction multiples – merger and acquisition (M&A) transactions or firms going
public (IPOs) are used as the benchmark

Trading multiples – comparable public companies are used as the benchmark
The methodology is similar for both approaches:
1. Select the transactions/comparable companies most applicable to the venture being
valued.
2. Collect relevant financial data on the comparable transactions/companies.
3. Calculate the appropriate multiples for the comparable transactions/firms
4. Apply the multiples to the venture being valued and interpret the results
Figures 1 and 2 below contain data needed for two types of analysis:

Comparable M&A transactions

Comparable IPO transactions
Please note that in all cases, the selection of benchmark companies is subjective and no
comparable is exactly like RCP. In fact, many differ significantly. For the M&A and IPO
transactions in Figures 1 and 2, all of the deals are in the Consumer Discretionary & Staples
industry, yet there is a wide range of segments, business models, transaction sizes, and dates.
In practice, valuation methodologies should both recognize and accommodate these data
limitations.1
Figure 3 contains RCP’s 2014-2018 financial forecast which is taken from the (D) Case.
Assignment
1. Which set of data (Figures 1 and 2) would you recommend using to value RCP at the end
of 2018? Explain the factors behind your choice.
2. Using the data in Figures 1 and 2, estimate the value of RCP’s equity at the end of 2018
based on the following:
a. M&A comparables (transaction multiples)
b. IPO comparables (transaction multiples)
3. Explain any significant differences in your results from Question 2. Which valuation
estimates do you think are most reliable? Why?
1
Sometimes valuation methods will be dictated by the data available and in these cases adjustments to the
calculated valuations can be applied. For example, if data availability necessitates using publically traded
companies, valuation professionals often discount the calculated value by 20%-35% to reflect the size differential
and lack of marketability of a smaller, private company. For more detail, see Valuing a Business, 5th edition,
Shannon Pratt, © 2008, McGraw-Hill.
Figure 1 – Recent M&A Transactions: Consumer Discretionary & Staples Industries
Capital IQ Transaction Screening Report
Screening Criteria
1)
2)
3)
4)
All Transactions Closed Date: [6/1/2011-12/31/2013]
Merger/Acquisition Features: Acquisition of Majority Stake
Industry Classifications (Target/Issuer): Consumer Discretionary (Primary)
Consideration Offered: Cash
Purchase Price
Close Date
08/31/2011
04/22/2012
Target Data LTM (last 12 months)
Target
Concorde Career
Colleges, Inc.
($millions)
Buyer
Revenue
EBITDA
Net Profit
$114.4
Liberty Partners
$90.89
$8.07
$4.20
New Orleans Nights
$4.9
Rick's Cabaret International
Inc.
Peterson Partners LP;
Sorenson Capital
Enliven Marketing
Technologies Corporation.
$4.05
$0.82
$0.46
$60.34
$8.41
$4.45
$5.03
$1.12
$0.92
07/16/2012 MITY Enterprises, Inc.
$79.1
10/30/2012
Springbox, Ltd.
$9.8
11/04/2012
Back Yard Burgers,
Inc.
$43.6
Cherokee Advisors LLC
$45.43
$4.25
$1.34
01/03/2013
Fox Factory, Inc.
$85.0
Compass Diversified
Holdings (NYSE:CODI)
$98.73
$9.20
$8.53
01/27/2013
Marlin Firearms
Company, Inc.
$48.5
Remington Arms Co. Inc.
$71.47
$5.38
$2.58
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Figure 2 – Recent IPO Transactions: Consumer Discretionary & Staples Industries
IPO Transactions (Consumer Discretionary & Staples)
Year of IPO Announcement ($000s)
Announced Date
Target/Issuer
Market Cap @
IPO ($000s)
07/11/2011
Tootie Pie Company Inc (OTCBB:TOOT)
$4,760
$1,540
$295
$1,000
09/01/2011
Heelys, Inc. (NasdaqCM:HLYS)
$134,930
$69,310
$14,200
$21,560
06/20/2012
$132,000
$99,300
$12,350
$34,120
07/06/2012
Vitacost.com, Inc. (NasdaqGM:VITC)
Ulta Salon, Cosmetics & Fragrance, Inc.
(NasdaqGS:ULTA)
$153,710
$43,500
$19,850
$39,270
07/26/2012
K12, Inc. (NYSE:LRN)
$108,000
$32,450
$11,900
$12,360
08/10/2012
Healthy Fast Food, Inc. (OTCBB:HFFI)
$5,100
$2,350
($682)
($550)
05/02/2013
Mood Media Corporation (TSX:MM)
Grand Canyon Education, Inc.
(NasdaqGS:LOPE)
$26,650
$11,400
$4,215
$126
$126,000
$120,500
$17,900
$23,600
05/13/2013
06/30/2013
Revenue
EBITDA
BV of Equity
$9,550
$4,690
$2,350
$1,265
12/18/2013
ID Watchdog, Inc. (TSXV:IDW)
Mead Johnson Nutrition Company
(NYSE:MJN)
$720,000
$235,700
$123,500
($6,850)
12/22/2013
Bridgepoint Education, Inc. (NYSE:BPI)
$141,750
$76,320
$35,900
$29,560
Faculty Guidebook Mod 8 – Updated July 2015
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Figure 3 – RCP Financial Forecast: 2014-2018
Income Statement
Revenues
CGS
Gross Profit
Selling
G&A
Development
Operating Profit (EBIT)
Interest
EBT
Tax Expense
Net Income
Balance Sheet
Assets
Cash
Accounts Receivable
Inventory
Total Current Assets
PP&E, Gross
Less: Accumulated Depreciation
PP&E, Net
Other Assets
Total Assets
Liabilities
Accounts Payable
Accrued Expenses
Credit Card
Line of Credit
Other Liability (Loan from Executive)
Total Current Liabilities
Long term Debt
Total Liabilities
Stockholders' Equity
Common Stock
Retained Earnings
Total Stockholders' Equity
Total Liabilities & Stockholders' Equity
EBITDA
2013 (act.)
$4,200,000
($2,800,000)
$1,400,000
($720,000)
($520,000)
($150,000)
$10,000
($60,000)
($50,000)
$0
($50,000)
Forecast
2014
2015
2016
2017
2018
$4,578,000 $5,173,140 $5,690,454 $6,088,786 $6,332,337
($2,929,920) ($3,259,078) ($3,528,081) ($3,714,159) ($3,799,402)
$1,648,080 $1,914,062 $2,162,373 $2,374,626 $2,532,935
($766,240) ($813,851) ($855,236) ($887,103) ($906,587)
($520,000) ($553,800) ($581,490) ($601,842) ($613,879)
($137,340) ($155,194) ($170,714) ($182,664) ($189,970)
$224,500
$391,216
$554,933
$703,018
$822,499
($68,250)
($64,750)
($56,000)
($45,500)
($43,750)
$156,250
$326,466
$498,933
$657,518
$778,749
($54,688)
($114,263) ($174,626) ($230,131) ($272,562)
$101,563
$212,203
$324,306
$427,387
$506,187
2013 (act.)
2014
2015
2016
2017
2018
$20,000
$500,000
$350,800
$870,800
$662,000
($140,000)
$522,000
$20,000
$1,412,800
$32,326
$457,800
$390,656
$880,782
$700,000
($170,000)
$530,000
$20,000
$1,430,782
$62,235
$517,314
$434,544
$1,014,093
$730,000
($200,000)
$530,000
$20,000
$1,564,093
$186,798
$569,045
$470,411
$1,226,254
$760,000
($230,000)
$530,000
$20,000
$1,776,254
$551,009
$608,879
$495,221
$1,655,109
$790,000
($260,000)
$530,000
$20,000
$2,205,109
$1,034,072
$633,234
$506,587
$2,173,892
$820,000
($290,000)
$530,000
$20,000
$2,723,892
$405,000
$66,000
$75,000
$300,000
$150,000
$996,000
$450,000
$1,446,000
$366,240
$71,179
$75,000
$250,000
$150,000
$912,419
$450,000
$1,362,419
$407,385
$76,142
$50,000
$250,000
$50,000
$833,527
$450,000
$1,283,527
$441,010
$80,372
$25,000
$175,000
$0
$721,382
$450,000
$1,171,382
$464,270
$83,580
$0
$175,000
$0
$722,850
$450,000
$1,172,850
$474,925
$85,522
$0
$175,000
$0
$735,447
$450,000
$1,185,447
$1,580,000
($1,613,200)
($33,200)
$1,412,800
$1,580,000 $1,580,000 $1,580,000
($1,511,638) ($1,299,434) ($975,128)
$68,363
$280,566
$604,872
$1,430,782 $1,564,093 $1,776,254
$1,580,000
($547,742)
$1,032,258
$2,205,109
$1,580,000
($41,555)
$1,538,445
$2,723,892
$30,000
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$421,216
$584,933
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$733,018
$852,499
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Mod 9 Pre-Work: Scholar Final Presentation – Growth Pitch
The formal course component of our Goldman Sachs 10,000 Small Businesses initiative is coming
to a close in Session 9, and each of you will have the opportunity to present your Growth Plan
Pitch to the entire class.
As you prepare for your pitch, keep in mind that this exercise is meant as the beginning of the
next steps you will take to grow your business.
You’ve learned the importance of having a clear understanding of how your business operates
your goals for the business, your plan to grow your business through both revenues and job
creation. You’ve also learned how to measure your progress along your chosen path, and how
you will tactically act to achieve those goals and objectives. Part of the focus of this final mod is
to practice how to clearly and succinctly communicate these ideas to investors, partners,
employees, vendors, clients and colleagues in - (drum roll here) an efficient, effective, and
compelling manner.
Your pitch should be completed, reviewed and practiced (multiple times) before the session so
that you are comfortable with all the material and are able to speak to the issues and concepts
clearly and in an easy to understand manner. Please plan on crafting a ‘Rocket Pitch’ of your
pitch in MS PowerPoint which should be 3 slides in length and should cover a maximum of 3
minutes time.
A ‘Rocket Pitch’ is simply an abbreviated, ‘to-the-point’ pitch that covers only essential material in
very clear and direct format. The goal is to ‘get your point across’ quickly, simply and effectively
so that all listeners will understand completely and be inspired by the message you wish to
convey. Thus, it does not contain jargon,
Your Final Growth Plan Pitch should include a statement of “What is your Business” followed by
these 3 components:
1. What are the 3 Key Points of your Growth Plan?
2. What are the Critical Success Factors you identified to Track through your Dashboard?
3. What are the 3 Key Steps you will next execute to Grow your Business?
The best pitches include specific metrics that allow the audience to understand your business and
where you are going to take that business, as well as the how.
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Proprietary & Confidential
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