The Fort Lauderdale-based company, a consolidator of commercial roofing companies, was forced to withdraw its IPO because of the unfavorable market conditions.
General Roofing shrugged it off and raised the money it needed from private investors -- getting $40 million from Continental Illinois Venture Corp. (CIVC) and a $50-million line of credit from NationsBank and Bank of Boston -- and continued business as usual. Revenues have increased by nearly $100 million since, and the company continues to grow through acquisitions. "I am just the happiest man in the world that we didn't go public," Wallick says. "It's allowed us to put the company together properly, without the earnings pressure" of Wall Street.
For many startup companies these days, particularly Internet and technical companies, IPOs have become somewhat of a Holy Grail. But while many entrepreneurs see an IPO as the badge of success, a failed IPO is a stigma for many companies, says Bob Boehm, a corporate attorney with Akerman Senterfitt in Miami. "You get a black eye."
Raising money privately through investment or borrowing avoids issues that come with a public offering, which include ongoing Securities and Exchange Commission reporting requirements and the pressure of answering to Wall Street.
Daniel Bartley, a partner in Boca Raton-based BackBone, a consulting firm, says companies that can achieve desired growth with conventional financing are almost always better off with that approach.
IPO Checklist: What Every Entrepreneur
Should Know
Sure, we've all heard the stories about people who have made millions when their companies went public. But more often these days, stories are surfacing about IPOs from hell -- those in which the stock is trading well below its offering price.
Many companies go public before they're ready, experts say. And not every company or entrepreneur is IPO material. Some things to consider:
-- Is your company's idea or product one that the market is seeking? "They should take a realistic view of what they're trying to accomplish," says Daniel Bartley, a business consultant and partner in BackBone. Investors are looking for companies that can generate hundreds of millions of dollars in gross revenue.
-- How much money do you need, and how will you spend the money? The purpose of going public is to raise money to do something, such as fund acquisitions, not just for the sake of raising money.
-- Can you get the money from conventional financing? "What people forget is that they're giving away pieces of their business for the money," Bartley says. If you're going to sell part of your company to raise money, make sure you will grow at a rate that makes the IPO worthwhile.
-- Do you want the pressure of dealing with stockholders, market analysts and the SEC? There is tremendous pressure to meet earnings projections, and it's time-consuming to answer to all of the people who hold a stake in a public company. "In some instances, it's almost put people out of business because you can't focus on your core business," says David Klein, a Boca Raton business consultant. "You're too worried about the outside world."
Alternative Sources: Don't Overlook Private Placements
By Robyn A. Friedman
Companies not ready for an initial public offering -- either because they're too young or don't have sufficient revenues -- can still raise money through private placements. Ordinarily, securities have to be registered with the Securities and Exchange Commission before they can be offered to the public. But the securities laws contain exemptions for certain classes of transactions -- called private placements -- in which no public offering is deemed to have taken place. To qualify as a private placement, companies must place strict limits on the number and type of investors, refrain from advertising and comply with a host of strict rules promulgated by the SEC.
(Note: Even if a securities transaction qualifies for an exemption from registration under the federal securities laws, it is still subject to the anti-fraud provisions of those laws. State securities laws, meanwhile, may apply as well.)
Fred Barstein established his company, Lake Worth-based 401(k)exchange.com, just over a year ago, but he's already been through two rounds of private placements, raising almost $4 million.
Barstein never considered doing an IPO to raise funds. "We're not ready," he says. "We're too early-stage. It would be very premature."
"Very few companies are real IPO candidates," says Richard M. Leisner, an attorney with Trenam Kemker in Tampa. "A private offering is less costly and less time-consuming."
To make a private placement, a company's attorneys will typically prepare a disclosure document called a private placement memorandum, similar to the prospectus used for public offerings. That document will be presented to venture capitalists, angel investors or anyone else interested in investing.
Last year, venture capital investments reached a record $48.3 billion, an increase of 151.6% over 1998, according to the National Venture Capital Association, with 3,649 companies receiving financing. There are plenty of opportunities for young companies to receive investment financing through private placements, although the market is highly competitive.
But experts caution entrepreneurs to consider other sources of financing before they proceed with a private placement and give up a piece of their company to an outsider. Leisner urges business owners to consider all potential sources of financing. He says, "I'd rather borrow the money from a bank and not have to worry about whether somebody thinks I'm being paid too much."
Online Help and Resources (for IPOs)
IPO Central
(www.ipocentral.com)
Operated by Hoover's Online, this site contains everything from a beginners guide to IPOs to statistics on companies that went public to the latest filings. It offers a directory that's searchable by name, industry or underwriter of all companies that have gone public since 1996.
IPO.com
(www.ipo.com)
This site is a leading provider of content and services to investors interested in initial public offerings, private placements and emerging growth companies. It offers up-to-date pricing and filing information, a link to the SEC's EDGAR database, daily columns and free weekly e-mail newsletters.
IPO Timetable
(www.us.deloitte.com/growth/ipotools/ipotools.htm)
IPO Timetable is free downloadable software offered by consulting firm Deloitte & Touche to help companies that have decided to go public wade through the SEC registration process.
The National Venture CapitalAssociation
(nvca.org)
This official site of the Arlington, Va.-based National Venture Capital Association offers industry statistics, venture capital news and a list of venture capital firms.
Securities and Exchange Commission
(www.sec.gov)
The SEC is perhaps the best place to get information on IPOs and private offerings. It offers small-business information and an excellent primer on the securities laws and how to raise capital (written in plain language), which can be found at www.sec.gov/smbus/qasbsec.htm. The SEC also operates the EDGAR database, a free searchable database of company filings.
Yahoo IPO
(http://biz.yahoo.com/ipo)
This comprehensive site lists the latest IPOs, statistics on post-IPO performance and lists of IPOs, sorted by company, industry and underwriter. It also includes IPO news, message boards and a financial glossary.
Pitching a Website
An Orlando-based startup allows amateur athletes to compete against each other online.
By Amy Welch
Four years ago, standing on a Little League baseball field, John Bonaccorso thought about how the Internet could make amateur athletes stars. The idea: Set up a website for recreational athletes to post their stats.
But the Internet was in its infancy and Bonaccorso, working in marketing for a technology company, couldn't generate interest. He held his dream in the back of his mind until a year ago, when he met Karl Seiler at an Orlando entrepreneurial conference. Seiler, who has managed many Internet startups, was pitching a new technology that produces statistical calculations. The two teamed up.
They created ScoreCardUSA, which this month is scheduled to launch its website. In a risky move so close to the launch date, the company changed the name of the site from ScoreCardUSA.com to GoBigMo.com. The way the site works is that each member athlete and team has a "personal scorecard" to record athletic progress. The website can rate, rank, score and compare players and teams in more than 120 sports. For example, an amateur baseball player in Florida can compare stats with a player in Maine; teams can measure their progress against hundreds of other teams.
But it's one thing to create an idea, another to find money to make it work. In the past year, there have been many dark days, Bonaccorso says -- especially the rejection from venture capitalists.
"We made excuses," says Bonaccorso. At one time they blamed Florida, quit their jobs and flew to California where they thought they might have more luck.
But they returned to Florida, and, with the help of Orlando's Central Florida Innovation Corp., found angel investors who gave them $350,000. The influx of angel capital provided the boost they needed to recruit other investors. Bonaccorso, 37, and Seiler, 45, recently won $1.6 million from Crossbow Ventures, a venture firm in West Palm Beach, not Silicon Valley.
Bonaccorso says he expects ScoreCardUSA, which now has 16 employees, to generate half of its revenue by providing its points-tracking technology to established sports websites. In return, ScoreCardUSA would be paid each time it gets a new member from those sites. The company also will sell advertising on its GoBigMo.com site. And through an e-mail program, it will offer members deals on products from sporting goods manufacturers and retailers. Based on athletes' scorecards, GoBigMo.com will alert users when they need sports gear, which they could then order from the site.
In three years, the company projects revenues to hit $55 million. That's a long way from a Little League baseball mound in Orlando.
Taking the Bite Out of Taxes
Start now to get a jump on the 2001 tax season.
By Jeffery D. Zbar
It was the early 1970s, and Becky Nickols and her husband were running a bustling restaurant from the back of a converted mail truck along Honolulu's Waikiki.
Business was good -- better than expected, recalls Nickols, who now lives in Orlando. That is, until she tossed a shoe box full of business receipts into the garbage. Without those receipts, the business had no deductions against its revenues.
"We entered into the tax season with no receipts," recalls Nickols, whose now-ex-husband dragged her down to the accountant's office for a lecture on the importance of small-business taxes and record-keeping. "It was so humiliating."
Each year, tax time is a taxing exercise for Americans. Those who run home businesses have it doubly so. While they're preparing the personal Form 1040, they're also adding up income and expenses for the business.
In fact, many add heat to the fire by waiting until December to begin collecting receipts, re-creating mileage logs and snooping out expenses to offset business income.
"December and April are no times to start your tax planning, unless it's for the next year," says Jeffrey A. Schneider, president of FL Tax Man, a Lauderhill-based accountant and tax adviser.
Summer is a good time to start getting the books in order, Schneider says. Think about what new equipment or other big-ticket purchases the business could make to increase expenses and lower the tax hit.
Hire minor children to work in the business cleaning, filing or running errands, and put them on the payroll; they're not subject to FICA and Medicare withholding taxes because they're in a family business. And you'll be able to write off their wages. But this is only for unincorporated businesses.
Then, get out of paper-ledger-based record keeping and hit the software. In fact, shoeboxes no longer play any role at TeamTech, Nickols' Orlando-based team-building workshop consultancy. Her books -- from expenses to income -- are kept on QuickBooks Pro 2000. And instead of waiting until December to enter expenses or tally miles, she does it weekly, Nickols says. When she's ready to meet with her accountant or send him a record of her business's year-end performance, it's as simple as printing a document. "At the end of the year, all I need to do is push a couple of buttons," she boasts. "It's quite an easy process."
As needed, Nickols chats with her accountant -- an adviser she chose based on their shared views about home-business tax issues. And when a client check comes in, Nickols deducts roughly 30% and deposits the money into her "tax account." "It's so easy to get a check and come tax time, not have those funds laid aside," she admits. "We have to play these little tricks with ourselves when we're home-based."
Better Tax Planning
Want to get your home business's taxes under control -- before it's time to file your return or too late to make any tax-saving purchases? Follow this timeline.
SUMMER
- Look at what you've paid so far this year in estimated taxes, and what your working spouse has paid in withholding taxes at his or her job. Generally, you have to pay in 100% of the prior year's tax liability, or 90% of your current year (at time of filing) to avoid the under-estimation penalty.
- If you're not already, start using a financial or accounting software program from Peachtree, Intuit or another vendor.
SEPTEMBER
- Non-incorporated self-employed workers must make an estimated tax payment via form 1040-ES on the 15th, as well as on the 15th of January, April and June.
DECEMBER
- Need to cut your taxes -- and buy some equipment? This is the time to do it. Computer upgrades, new software or a bigger desk should be purchased before year-end to take advantage of deductibility.
- Make year-end purchases on credit cards. Deductions can be taken at the time the credit card is charged, not when the bill is paid.
- Remember your bona-fide business expenses: online service, dedicated phone or fax lines (or the long-distance business toll calls on a personal line), postage, mileage and other expenses.
- Consult with your tax adviser on taking the home office deduction, and see IRS Publication 8829 "Business Use of Your Home."
Source: Jeffrey A. Schneider, FL Tax Man.