Companies
- Setting up company shares in the listing module
- Writing a business plan
- The IPO "Road Show"
- Company classification
1. Setting up company shares in the listing module Some guidelines for filling our listing module.
First, you have to estimate the value of your company. It may be a new one, or an existing one. Ask yourself this question: "How much is my company worth?" (try to be real, here).
Next step is to subdivide that value into "shares" and assign each of them a value. Let's say we think our company to be worth 10 millions L$, assigning each share a value of 1L$, we would then have 10 millions shares. We would recommend to assign each share an initial value of 1L$ or even 0.50L$.
One of the most important decisions is how many shares should the CEO get.
2. Writing a business plan
Writing a good business plan serves two major purposes:
- To provide you, the entrepreneur, with a detailed roadmap to the company goals.
- To convince people looking for investment opportunities that your company has what it takes to fulfill their expectations.
Before you start, please make sure that you have at least some knowledge of the business world and its practices.
Also remember that a good business plan relies on a good executive summary (business description).
The executive summary, or business plan summary, or business description, is a compact version of the big plan. In straightforward prose, you should answer the following questions:
- What sort of company is it?
- What's the product/service, and what's special about it?
- Who are the managers?
- How much money do you need? In what stages? What will you use it for?
Avoid at all costs hype, excessive optimism and "sales vocabulary" terms. Stick to the hard facts and be concise. Do this before undertaking the task of writing the business plan.
The core of the business plan
(Depending if yours is an already extablished business or a start-up company, some items may not apply to you)
- Company Description. Here's your chance to tell about the history of your company. Most business plans deal with the expansion and improvement of existing businesses rather than with the funding of start-ups. Now's the time to tell about how you transformed a small business into a company that's going to offer its shares to the general public. Here are some things to include:
- Tell them how you got started and how the company has grown.
- Provide a history of sales, profits, and other important numbers.
- Lead up to a description of where you are now, and what plans you have for the future.
Make this an honest account; investors will doubt the credibility of someone who appears never to have run into any problems. Talking about how you had initial challenges and then overcame them with flying colors will make you look all the better.
- Product/Service. Describe the thing in jargon free-language. How does it smell? What does it do? What differentiates it from all the other similar products or services out there? How does it improve people's lives? What prevents someone else from doing the same thing more cheaply? What kind of equipment do you need? Do you have, or can you get, patent protection? Put yourself in the shoes of the investor and ask yourself what you yourself would want to know before agreeing to part with any amount of virtual money.
- Market Analysis. In the next few sections, you're demonstrating that you're a clever old salt who's been hanging around the coffee machine long enough to know all about things like distribution problems, government regs, technological opportunities, and employee relations in your chosen line of work. Market analysis includes your sagacious discussion of industry characteristics and trends, projected growth, customer behavior, complementary products/services, barriers of entry, and so on. To do this effectively, you'll have to do a ton of research. Talk about how similar products/services have done well in the market, how you're fulfilling an obvious need, and exactly who you expect to purchase your products/services.
- Marketing Plan. Following your exposition of what the market is like comes your grand strategy of how you and your fellow managers intend to sit atop this market. In other words, you have to detail exactly what steps you will take to ensure that customers know about your product/service and prefer it over the competition. Be as detailed as you can, and give several different tactics (start off with the cheapest marketing tactic, and proceed to the most expensive).
- Operations Plan. You gave them vague assurances in your executive summary that you'd be able to run your business; now they want to understand precisely what's involved in running the show. Location, bricks and mortar, equipment needs, and labor requirements are laid out here in black and white.
- Financial Plan. The numbers. Maybe you're not too fond of financial tables. Yet, even if you have a very fine accountant whom you trust as your best friend, it's a wise idea to acquire a rudimentary knowledge of sales forecasts, profit-and-loss statements, cash flow projections, balance sheets, and standard biz ratios. Investors will expect you to be completely independent in this important area of knowledge; if they call you saying they'd like to set up a meeting with you, they will as you questions about your financial plan and you will be expected to act intelligently.
- Management. Never underestimate the importance of the collective genius of your management team. Savvy investors will take a great management team with a mediocre business model over a great business model with mediocre management any day of the week. If you have somebody in the team (or at least on your board or among your advisors), who's had serious entrepreneurial success, you'll earn double bonus points from investors.
3. The IPO "Road Show"
Quite often, company managers do not understand the importance of the "Road Show". Many times it can make or break your IPO.
About 3 weeks prior to the IPO starting date and for the whole period it's running, the management team is going to have to go on the road. This is commonly referred to as the "Road Show" or the "Dog and Pony Show".
This is supposed to be difficult and it generally is. It's a test of management's mental and physical endurance as well as their competence. It will involve meetings in several different places and timezones over a short period of time. Management will be questioned by brokers and analysts, as well as other institutional analysts, portfolio managers, and institutional traders.
Part of these meetings is to show off the company to potential investors which will hopefully improve price performance in the aftermarket. However, the other part of these meetings is to see how well the management team holds up under intense questioning by seasoned professionals.
During these meetings the management team has to present all the good and bad information about the company to the participants in the meeting. The management team has to explain what their market position is, how the business plan explains how and what the company will be doing and the impact that it will have. The management team needs to "show off" the high quality of the management team. Keep in mind that analysts consider top management to be one of the most crucial aspects of any company. Some meetings will be large and some will be small. They will take place early in the morning through late at night. Never has the expression, "you never get a second chance to make a good first impression" so true.
Be credible at these meetings. Credibility is far easier to build than it is to rebuild. Don't make optimistic forecasts if asked for them. Be conservative in presenting estimates. The presentation part of these meetings will be rehearsed. However, the question and answer part will be spontaneous. The management team needs to be well prepared, well spoken, more knowledgeable than anyone else in the room about the industry and the competition. And remember that you're not allowed to give revenue and earnings forecasts at these meetings. However, the participants will want to know about historic earnings growth, revenue growth, R&D expenditures, % gain in market share, growth in return on equity, growth in assets, and financial condition. And they are going to ask very detailed questions about your markets, competition, and aspects of the business plan.
4. Company classification
Since early March 2008 the VSTEX has introduced a new "classification system" for listed and transferring from other exchanges companies.
The system, based on the company market capitalization (market cap), is subdivided in groups and classes.
| Group |
Class |
Market Capitalization (Millions L$) |
Directors |
Income
statement |
A
Large-Cap |
1 |
200+ |
3 |
MQY |
| 2 |
100+/200 |
| 3 |
75+/100 |
| 4 |
50+/75 |
B
Mid-Cap |
5 |
35+50 |
2 |
| 6 |
20+/35 |
| 7 |
15+/20 |
| 8 |
10+/15 |
C
Small-Cap |
9 |
8+/10 |
1 |
| 10 |
4+/8 |
| 11 |
2+/4 |
| 12 |
1+/2 |
D
Micro-Cap |
13 |
0,75+/1 |
1 |
| 14 |
0,5+/0,75 |
| 15 |
0,3+/0,5 |
| 16 |
0,1+/0,3 |
| 17 |
0/0,1 |
