Thursday, November 10, 2005

What's your box? (for me, its really more of a cubbyhole actually)

I remember the first time I heard that question from a banker. I wasn't quite sure what he meant. He clarified himself, what size transactions do you like.

My response, "Oh, I really don't have much of a box, more of a cubbyhole actually. I like small deals. Preferably under $100, 000."

The banker laughed at my response.

Why do I like small? Because small is good training for large. When you are working on small deals, you have to develop the skills (and mentality) to do things within a budget. There is no endless trough of public company funds for lawyers and consultants to munch on. There is no closing "dinner", just a closing "latte" and maybe a closing "biscotti", but that is about it.

We've learned to run a tight ship, a one room whore house if you will (No fucking overhead!) so that when we do grow, more money will flow back to our investors.

7 Comments:

Anonymous Daniel Nerezov said...

Good point!

I'd also add that in financing, bigger is not necessarily better.

There's always niche demand for smaller financing packages, (actually, it'd probably be the majority demand) plus smaller deals are quicker to organise, so you can do more deals and diversify risk.

1:24 AM  
Blogger Rand said...

Of course, the traditional counter-arguement is it takes nearly the same resources to do a small deal as to do larger ones. Diversification is also not always a great thing, because with reduced risk you typically get reduced or average returns.

11:44 AM  
Blogger Josh Kerbel said...

Small deals come in a variety of flavors. Small is also a relative term. $1 million is small when compared to $10 million. In this area, you are right, there are certain fixed costs that do not vary with deal size.

Small equity deals are a bitch.

Small debt deals are easier.

Small factoring deals are the easiest and give the financier the most control and security over the money. That is why I do them.

5:14 PM  
Blogger Rand said...

ok, ya got me. What are small factoring deals, some type of debt/equity hybrid?

3:29 PM  
Blogger Josh Kerbel said...

we finance invoices. Typically, most small businesses lack adequate working capital finance if they attempt to finance themselves through a bank.

Factoring, while costing more, provides access to much more working capital.

4:16 PM  
Anonymous Canadian Headhunter said...

What's your box? How can I use that in recruiting? As alternate for "What kind of money are you looking for?"

8:37 AM  
Blogger Josh Kerbel said...

How much money are you looking for, would be more appropriate.

8:39 AM  

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