Special episode - Corporate finance

Welcome to our special episode of Business Noodles, focusing on corporate finance. 

We revisit a number of our previous episodes, pulling together the advice provided by our guests on topics ranging from early and late stage fundraising, using equity, through to buying and selling businesses. 

Guests featured include: Myles Hopper from Mindful Chef, Robin Hutson from the Pig Group and Hotel du Vin, Abby Allen from Pipers Farm and Will Ashworth from the Watergate Bay Hotel - plus a few more! 

Transcript

Myles Hopper:

So then we looked at crowdfunding and it was overwhelmingly successful actually for a number of reasons. Not only were we able to overfund in both rounds incredibly quickly, but the most important piece is it actually allowed us to bring on an army of ambassadors.

Mark Roberts:

So in 2018, we brought on some professional investors in the form of the Business Growth Fund, or BGF as they're known, who are great, nothing but positive things to say about them, really, really good out. But also investing alongside them was Martin McCourt, who was the CEO at Dyson, working directly with James Dyson.

Myles Hopper:

And really, we were looking for a partner who would leave us alone when we needed to crack on with work and running the business, but equally offer help and advice when we really needed it. And Piper, with their focus on brand and wider community, et cetera, and getting that right, that was really what we needed at that time and life stage of Mindful Chef, and Piper were fantastic.

Robin Hutson:

I think first of all, no deal is done until it's done. So I think it was very important that we remembered that. We weren't desperate to sell so if it collapsed at some point, it wasn't the end of the world.

Matt O'Donovan:

From what I've heard from friends and colleagues who have also sold their businesses, earn-outs are a bad thing and are to be avoided because you are probably going to get stitched up. It's not always the case.

Mark Greaves:

Welcome to our special Business Noodles podcast on corporate finance. In this episode, we've gathered together the advice provided by our guests on topics ranging from early and late stage fundraising, using equity, through to buying and selling businesses. We hope you enjoy this summary, and you can find all the episodes upon which this podcast draws on the Business Noodles page of PKF Francis Clark. I'm Mark Greaves and I will be your host.

We start with funding the early stages of a business's growth, which can be especially difficult, as there is no track record for traditional lenders to rely on and the funds needed might not be large enough to attract institutional interest. However, many of our guests have proved resourceful in raising funds from less mainstream sources. For instance, Myles Hopper, from healthy meal box supplier Mindful Chef, used crowdfunding for their early expansions, and his comments emphasize the other benefits of this funding route.

Myles Hopper:

So then we looked at crowdfunding and it was overwhelmingly successful actually for a number of reasons. Not only were we able to overfund in both rounds incredibly quickly, but the most important piece was that actually allowed us to bring on an army of ambassadors who are customers in our community, who you can't articulate exactly the value in having those people personally invested in your company. And the responsibility as well taking their money in the first place, that does help you work harder sometimes when you know it's your customers', your family, your friends' money that have invested in your company, but really allows that word of mouth referral community piece. And we are very proud as well of the community we've created at Mindful Chef, not just internally with the team, but also externally with our customers, ambassadors and influencers wider afield. The work involved is actually is just as hard as going out to trawl the streets for institutional money. There's still a lot of work behind the scenes, talking to potential angel investors, talking to your community, telling them all about it.

Mark Greaves:

Taking a slightly different approach, Matt O'Donovan, from IT business WiFi SPARK, raised money from individuals, but in his case from his existing customers, something that many early businesses can be very reticent in accessing. Obviously this does require the right business, customer and timing, but can work really well, as in Matt's case.

Matt O'Donovan:

First of all, they were what I would call silent partners, so they didn't have much interaction with the business, but they had a lot of faith in it. So Malcolm was actually our first customer, and I don't know if you remember the Blackadder episode where Blackadder was looking for a best man, and Lord Percy wanted to be best man, and Blackadder said, "Percy, I don't suppose you know of anyone who could be my best man." And it was almost like that with Malcolm because I was talking to Malcolm about I wanted to grow the business and I would be considering investment, and Malcolm was hopping up and down and waiting for me to ask him, and I didn't, I didn't even consider him, and he had to point out the bleeding obvious to me to say, "Well actually Matt, I might be interested."

So Malcolm bought 15% of the business in the very early days, a really shrewd move for Malcolm. I can't disclose how much he paid, but let's just say it contributed greatly at the time to the business and allowed me to spend some money in areas for recruitment and development, which is really good. And a couple of years later, another customer, a gentleman called Tim came along, we were having dinner one evening and he asked me that classic question, if you had lots of cash, what would you do with it in this business? So I just rackled off a whole load of, oh, I'd get this, I'd do this and develop one of these and get sales and maybe do this thing called marketing, which apparently is very good. And he said, "Okay, how about this much?" And it was one of those, oh okay, moments.

Mark Greaves:

Robin Hutson, who founded hotel groups Hotel du Vin and The Pig group, talked to us about how he funded his first venture. Obviously funding a hotel meant he could access debt funding, but he still had to supplement this with other investors and provide personal guarantees. Even though we're going back to the 1990s here, the subject of putting the home up for security remains as contentious as ever. However, it was a very different time for interest rates, as Robin explains.

Robin Hutson:

We raised the money, we didn't have money, we put together a raft of shareholders, borrowed a lot of money from the bank, and if anyone that remembers back to '94, interest rates were very high so our first loan of three quarters of a million was at 12.5% I recall. So my wife, God bless her, she was the brave one really because she allowed me to put the house up as a guarantee for the business, or at least a charge against the house, and we got going. And it took off very, very quickly, and thankfully, and yeah, that was the first Hotel du Vin.

Mark Greaves:

Robin also explains about how the Hotel du Vin nearly ended up with not enough vin.

Robin Hutson:

Well, it wasn't so much as missed the funding for the wine, we really ran out of cash. And so we were called Hotel du Vin and Gerard, my partner, was the top sommelier in the country at that stage. So we really had to have put together a decent list. So we blagged a lot of wine from various wine merchants in the guise of sponsorship. That was the first thing we did. We were a week or two out from opening and the list looked really rather thin, given that the name of Hotel du Vin was across the door. So we decided that we would add a few bottles each from our own rather meager collections from cupboards under our stairs. So anyway, I recall to this day it's etched on my brain, but I put in three bottles of 1982 Château Pichon Lalande, which is fantastic wine, and it was rated as 99 out of a hundred, which doesn't happen very often.

Anyway, we were so naive and so stupid that we priced up the wines and put them on the list, and of course, we got all the prices wrong. And so we put them on far too cheap and I remember this particular wine, it was on our list for then £60 a bottle or something like that, which at the end of the first week, all of these random wines that we put on the list had all disappeared, they'd all been sold, and it was because we were selling them for less than you could buy them in the shops, basically. So once we sold Hotel du Vin in 10 years later, the first thing I did was I went out and bought myself a case of Château Pichon Lalande 1982.

Mark Greaves:

We also talked to Abby Allen from Pipers Farm, which describes itself as a destination for meat that is produced sustainably and in harmony with nature. They also raised funds from customers, but this time for the expansion of a mature business, and she emphasized the need for a clear vision.

Abby Allen:

So we have been growing the business quite steadily. We've always been much more about quality over quantity, and I think the business had just been naturally finding its feet. I think we were very lucky with the vision that Peter and Henry had 30 years ago, a lot of the mission statements behind the business, so things about permanent pasture and the importance of eating grass-fed meat, antibiotic resistance, supporting small-scale family farms, the climate impacts of the food that we're producing. So many of those questions they had really answered 30 years ago and really, really championed. And so with that, we had this very strong foundation and we'd really found this group of customers that was just going, "This answers so many of my problems," whether it's a health problem or a diet problem or they're passionate about animal welfare or traceability.

So we got to a point where almost we had more customers than we could really reach. We were quite tied to our facilities at the farm. Everything started out on the family farm, which is based just outside of Exeter. And we just found, we put up, we had tarps and we had different mobile buildings that we'd put up, old lorry bodies which we converted into freezers. Any kind of flat space, which we're on a hill, so there wasn't a lot of it, we had put a building on to try and cope with the demand that we were seeing. And so it felt the right time to say, hang on a second, we really feel like this business has got legs. There are so many people, they want to support the mission that we really believe in, and so up until that point we'd used a lot of family money to fund the business, and it was at the point of saying, actually, should we reach out to a wider network of people? And so we looked at bringing in external shareholders.

Mark Greaves:

And Abby has some clear advice for others looking at this route.

Abby Allen:

I think probably number one is to start small and start with people that you really trust and you really know that they believe passionately in what you believe. I think that's really important, so you set clear expectations and boundaries and goals right at the outset, and you are happy with the pace in which you want to grow the business. And that is very much what we did. We started with one person, he came on board, he was looking to invest in a food business at the time, and he was very, very passionate about farming, about basically the mission that we'd founded Pipers farm on.

And so it just felt like a great partnership, again, with... I'm sure I'll repeat that word a lot. But in a lot of the things we do, relationships are so important, and especially long-term relationships. With anything working with nature, you can never have a short-term view. So again, finding the right shareholders, I guess we really thought about that and thought, will they be here for the next 5, 10, 15, 20, 25 years? And so that's probably my best piece of advice is start small and find someone that really believes in your product.

Mark Greaves:

Looking at more formal deals, with a family office, without a direct link to the business, we turn to Will Ashworth from the Watergate Hotel. Will bought in an external investor to help his third generation family business expand by acquiring new hotels.

Will Ashworth:

It felt like an enormous step. We obviously had been operating as a family business with family shareholders and to some extent that's very cozy and easy and straightforward. But we also knew that we wanted to ensure that the multi-generational family business that's Watergate Bay was ring-fenced away from a faster growth business that we were developing with another place. And so we knew that we wanted to work with investors to fund another place development, leaving Watergate to continue its own development strategy using its own funds.

And so although Watergate pump primed another place and bought the first hotel and got that going, the development of the first hotel and the rollout to the second and third was going to come about through partnering with an investor. And we were extremely lucky to be introduced to a family office, to a couple, a husband and wife team who have invested with us, and they have been extraordinarily supportive and supported us with the funding to deliver our first two hotels. We feel actually really blessed to have them on board and they were actually the only people that we met, they were introduced to us, we liked them instantly and I think the feeling was mutual. And within a matter of a few months, actually with your support, Mark, we got the deal across the line and started building the lake the following day. So it was meant to be, really. But having not had much experience of other investors, our funding has almost always come from retained profit and HSBC. We have really landed on our feet and we're delighted to be working with them and it's a very comfortable relationship.

Mark Greaves:

Will was also very open about the transition from being the ultimate boss of his family business to working with another equal party.

Will Ashworth:

Running in and around the family as a family business is relatively comfortable. I think I did try to change the way that I operated when they came on board in another place and I probably oversupplied information at board meetings, too much to read, et cetera, and it's taken a few years for us to, I suppose, relax into a style that actually now feels very similar to Watergate in terms of the conveying of information and the board meeting style and the level of information required. And they are very supportive, very trusting, it couldn't be a more comfortable relationship. But yes, it was a slightly odd situation initially when you haven't been in and working with investors before to understand how you should convey information and approach it. But actually, they've been so supportive that it felt very natural.

Mark Greaves:

Finally, Will also contrasted the approach between an equity house and a family office, represented for him by Baroness Sue Nye, in terms of process and working relationships.

Will Ashworth:

Sue sits on our board and she represents them and that sense of the family office, having a very similar attitude and mindset to what I was used to in the family business, I suppose is the reason it was comfortable. And if it had been an equity house or some other potentially more aggressive institution, I think I would've found that much more challenging to adapt. I often reflect on the way that they support our decision making, the buying of our hotel, or the hotel site in Amport in Hampshire, back in March 2020. They've seen a lot of businesses, they understand how these decisions are taken and made, and yet they did it in such a respectful way that we were able to come to the conclusion, if you like, together, in a very joined up way. And I think it may have been somewhat different if we had been with a non-family office type investor, but they are very, very good at supporting the decision making process without jumping in with two feet.

Mark Greaves:

Turning to the more formal equity options, Mark Roberts, from Fitbit for cars producer Lightfoot, highlights the advantages of the equity house's Black Book, where they can introduce other investors and management resource to the company.

Mark Roberts:

So in 2018, we brought on some professional investors in the form of the Business Growth Fund, or BGF as they're known, who are great, nothing but positive things to say about them, really, really good out. But also investing alongside them was Martin McCourt, who was the CEO at Dyson, working directly with James Dyson for, I think he was there for 15 years, but CEO for 11 years. He became CEO when they had one product and was selling just to the UK and he then left, having turned it into a global megastar that it is today. He has grown a proud British engineering business from zero to hero. He's fallen in the potholes and climbed out of them and now he's helping us try to avoid them as much as possible. So he's been instrumental to our growth over recent years, really, really great guy, but also really knows his stuff. Really, really, really lucky to have him on board.

Mark Greaves:

Matt O'Donovan also looked at the equity route but formed a different conclusion, eventually deciding on a sale to a trade buyer.

Matt O'Donovan:

This was at an interesting time for the business because we were doing okay, but I'd reached the point where the business had hit a bit of an EBITDA ceiling and I knew it could do much more, but I wasn't really able to take it to its next level. So I realized, this is the time to get somebody else in. And I looked favorably at PE as we had three companies who ultimately put an offer in with us. Going down the PE route was quite interesting. And I think you know what happens with PE, they put people in, you get a couple of people on the board, you might get a chairman along, they're usually very aggressive, they want three times after a few years and then they'll flip you and move you on to a bigger PE house hopefully. And I didn't really want to get bounced around like that and have somebody come in and change everything.

Mark Greaves:

We do hear a lot of these negative comments about the equity industry, but Myles Hopper gives a different view of his experience of dealing with Piper, who are a specialist equity house that focuses on fast-growing brand businesses. I especially like Piper's operating model and their experience of growing a brand business, the need for management, structures, reporting, et cetera, as well as being able to connect into their network, as Myles explains.

Myles Hopper:

We'd actually spoken to Piper, so the individuals involved, personally, for a number of years actually, and it's the way they work is you get to know entrepreneurs over a couple of years and see how the business is running and then when it hits probably certain numbers that you have to hit, then you go and speak in a bit more in-depth conversations. And really, we were looking for a partner who would leave us alone when we needed to crack on with work and running the business, but equally offer help and advice when we really needed it. And Piper, with their focus on brand and wider community, et cetera, and getting that right, that was really what we needed at that time and life stage of Mindful Chef, and Piper were fantastic. We can only say positive things of our time with them actually and how they helped Mindful Chef position themselves moving ahead into the future.

Mark Greaves:

Chris Ormrod, from artisan handmade cakes business Cakesmiths, also reports positivity.

Chris Ormrod:

Yeah, I'm now backed by private equity, and some of your listeners will be familiar with that and others won't. I've had a great time with private equity and I think if you get it right and it works, there's no better experience.

Mark Greaves:

Mark Roberts has some useful views here on the need for an entrepreneur to give up control if they involve equity.

Mark Roberts:

So in answer to your question, rather than dodging it, just pick the right investor. And it is true that some private equity investors, they've got a three-year fund cycle, they want to be in, they want to be out, they want to call the shots, they want to hold your feet to the fire. But then other investors like BGF who are long-term, they don't have a fund cycle, they will invest in businesses that have no intention of ever selling, family businesses, and their investment will then be based on the returns they get from loan notes or dividends or whatever it is. Or they'll invest in high-growth businesses that might be sold within a couple of years. They don't mind.

What they want is they want businesses they believe in where they buy into the management team, believe the management team. Because they're a high volume investor, as in they do hundreds and hundreds of investments, they don't want to be too hands-on, which is why they do so much due diligence, make sure they're really comfortable with the team and the business, so the probability of them having to intervene is much lower than it might be in a private equity recovery turnaround strategy, private equity. So it's horses for courses, so pick your investor. If you've got a good growing business, good management team, then look for a private equity investor who is looking for that kind of setup, and they're not all looking for that at all.

Mark Greaves:

We now turn to a potential and ultimate end result from the fundraising, a successful exit from the business. We start with Robin Hutson again, who recently sold The Pig group to an American equity house, many of whom of a certain hard-nosed reputation in the global industry. He recommends a real focus on maintaining a, if it happens it's good, if it doesn't happen I'm still okay attitude.

Robin Hutson:

I think first of all, no deal is done until it's done. So I think it was very important that we remembered that. We weren't desperate to sell, so if it collapsed at some point, it wasn't the end of the world. We didn't have our backs against the wall or anything like that. We were very comfortable. Of course, that puts you in a very strong negotiating position. It was a rigorous sale process, but there weren't any funny tricks from either side in that, so it was fairly straightforward. And as we got towards the end of the process, I thought, well actually, I think this is really going to happen, which in business there's always people that flirt with you and so on. So you never really know whether it's how serious an offer is or an interest. But yeah, it went through and KSL had proved themselves to be a very good outfit.

At any moment, of course, these things can collapse and you have to try and keep your cool, and there's an awful lot of moving parts in a sale process like that. Confidentiality was a big factor, and then when we actually did announce to the team in the right sequence, all of that and the press and everything else that goes with it, it's complex. And trying to get that right whilst not really... Or planning for that when you don't really know that it's actually going to happen is tricky. But part of our business life, I guess.

Mark Greaves:

Obviously most exits do not feature an equity house, with most being picked up by other larger trading businesses. They can also not be the most obvious candidates. Mindful Chef's focus on healthy eating, sustainability, et cetera, may not seem to be the ideal fit for Nestle, with their wider brand reputation. However, Myles Hopper saw this as more of a challenge than an issue.

Myles Hopper:

I think, again, it comes back to that personal mission for me, and I know the others also feel this way, but very much, as I said earlier, being able to get my messaging around healthy eating to more and more people and getting them to have that personal positive impact. Who better to partner with than one of the world's biggest food and drinks companies to actually get that message to even more people? So that was a big positive benefit of it from our side.

And then probably more to your question, I think, is what impact can Mindful Chef have on a company like Nestle? I think we are thought of that new era of businesses who are acting as a force for good, not only focused on profit, but also focused on people, their people, the wider community, focused on their environmental impact, all of those sorts of things.

And actually saying, "Oh, okay, these businesses can be really successful." And this is what consumers want, they want their money not only to get into the product, but also to feel a part of something bigger than just that experience. And really what we hope is we're not people who shout at others and throw stones, actually what we try and do, as I said, is lead by example. And we'll obviously get things wrong from time to time, but just hold our hands up. But really, if we can use Mindful Chef as a good example of a business that is a B Corp that puts its money into wider societal environmental activities as well as the community projects we run each year.

And if we can have some influence within the Nestle portfolio for them to go, "Do you know what? We should actually encourage more of our companies to start doing this." And you see it, we have lots of different companies that there go, "Can we talk more about B Corp? What does it mean? How's it involved? What do you do?" Et cetera, et cetera. So it's a big ask, it's a big goal. We'll see how we get on. We said judge us by that in a couple of years time, we'll see what sort of impact Mindful Chef can have.

Mark Greaves:

Obviously you cannot fault Myles for his ambition here. Joanna Allen from Graze talked about a very similar experience when Graze, the healthy snacks business, was sold to Unilever. Again, not a traditional brand in this healthy eating arena.

Joanna Allen:

So Unilever saw within the Graze business two critical things that it chose to acquire us on the basis of. One was that we were operating and continue to operate in a higher growth segment, and sometimes their core business does, and often they'll look at acquisitions on the basis of revenue growth accelerators to their core business, which tends to be much more mature. And healthy snacking is growing faster than the total snacking market and continues to be an accelerant for the food industry as a whole, and is still relatively small when you look at the size of the total snacking industry. And Unilever definitely recognized our competency around data and wanted, through the acquisition, to make sure that they were upskilling both on that direct consumer capability, but also in terms of how we utilize data to drive either efficiency in our market, to drive a competitive advantage of how we work with our customers, that was an asset that Unilever saw as something that they wanted to acquire Graze for.

Mark Greaves:

In terms of selling the business you have grown over many years, it can always be a real struggle to extract yourself, and there is always the concern for the business's employees and customers. Matt O'Donovan again.

Matt O'Donovan:

I've grown this business over nearly two decades. I've seen people join the company, I've seen them get married, have kids, have divorces, have deaths in the family. I've supported them, they've become my friends. My customers have become friends as well. Goodness, Malcolm became an investor and he was a customer. You build up a real nucleus of people and it becomes all encompassing, it becomes your life. So when it came to trade sale, I had a rather aggressive offer, which I thought, well, if I do that, they're just going to strip this business down. It would've gone to a competitor actually in the States. They would've just taken the software and probably dismembered the rest of the company and I'd have been gone. It was, "There's your money, Matt, off you go." And I didn't really like the idea of walking down the high street, bumping into employees saying, "Hi, how are you doing?" And they're saying, "Oh, I'm still looking for a job." And me saying, "Well, I'm all right. I've got millions. It's great." So that's not me, and I wanted to keep everything intact.

So Volaris came along and said, "Well, we like what you're doing. We'd like you to keep doing what you're doing, and we're going to give you a bit of help. But we're not going to put anybody on your board. We're not going to replace you. We're going to give you a realistic earn-out, and you're going to have to work hard, but we're going to help you every step of the way." The difference with Volaris is they've never sold a company, and whilst their initial offer may not have been as great as a trade sale, the long-term prospects looked a lot brighter as compared to the others.

There's no nonsense about being flipped in three years. Their business model demonstrates progressive, good, organic growth, and they're also somewhat formidably large in terms of cash. But what was really weird about the transaction for me is that on the day, I had to make an announcement to the whole company, which had to do on Teams because of being in the middle of lockdown, and I was sat in my chair at home, and at 9:00 in the morning I was the owner and CEO of WiFi SPARK. At about five past nine in the morning, I was the founder and CEO of WiFi SPARK, and nothing had changed apart from my bank balance, and that is a really strange feeling.

Mark Greaves:

Cakesmith's Chris Ormrod explained his slightly unusual experience with selling, or not, his business.

Chris Ormrod:

We'd only owned it for just under two years when the phone went one day, and effectively, it was a potential business looking to buy us. So we thought, well, if they're interested, then others might be, so we discreetly put the business on the market. And at that point, Greencore, the big Irish food conglomerate, were looking to expand away from retail and do something in the world of food service. And they saw us as a strategic land grab for them, so they bought us. And I agreed to stay with them for a two-year period, the idea was I'd sell it to them, work there for two years, and then I'd go and do something else, and same again.

But it was about three weeks after I sold it that, some of your older listeners might recognize the phrase 'Northern Rock closed their doors', and the world went to hell and back in a handbasket, and that wasn't the time to be buying a business, I didn't think. So I hunkered down and sadly became a corporate fiend again within... But Greencore, great, great business, and working for Patrick Coveney, who was then the chief exec, was pretty much like running my own business. But I knew relatively quickly on that they, although they bought me to get into food service, they had then also tried to America, and America was starting to take more of their time and effort.

So very kindly Patrick said, "Do you know what? If you want to buy Ministry back, we'll let you have it, but it's going to be a fair evaluation. We're not going to let you have it on the cheap," and I bought it back from them and ran it again. But this time, having learnt the first time round, this time I knew exactly who would be the acquirers when I bought the business. And one tip I'd give people is if you're going to borrow a lot of money to buy a business, you need to have a pretty clear view in mind of what your exit route is going to be, or what your options, your exit options, are. And I knew exactly, as it turned out, the company that I thought would have a major interest were the people that bought us the second time round.

Mark Greaves:

Chris and Matt O'Donovan have referred briefly to earn-outs, where part of a sales consideration is deferred and possibly linked to post-deal measures. These are sometimes rightly unfavored, but can really help a successful deal if they're properly structured. Matt expands on this.

Matt O'Donovan:

From what I've heard from friends and colleagues who have also sold their businesses, earn-outs are a bad thing and are to be avoided because you're probably going to get stitched up. It's not always the case. It depends on who's buying you and what their intentions are. So if you consider if a business is being bought as a trade sale, usually earn-outs are going to be really bad news, because probably you're not going to get the opportunity to run your business the way you want with the support you need to achieve that earn-out. Not always, but certainly sometimes.

If the business is being acquired to grow and realistic growth targets are set on the business, then earn-outs could actually be a good thing. And if you are quite smart as an entrepreneur, you should know what your business prospects are and what its capability is likely to be in the future, and you balance that off against the offer that is made, such that your earn-out is something that you know can achieve. If you know you can achieve it and you've got an organization who wants to buy you and keep you forever, you've got a very good chance of hitting that earn-out.

So I'll be really open with you. I'm not going to share numbers with you, but the earn-out that I was presented with was very reasonable. Year one did great, but in the middle of year one, we went out and acquired another business, which changed the landscape a bit. So given that it changed the landscape, I discussed with our buyer, Volaris, to say, "Look, it's a bit of a different picture now, and this may have an effect on my earn-out. What do you think?" And they said, "No problem. Let's change it, and let's adapt it. We still want you to grow the business, but we're prepared to do this and to do that for you." And I'm honestly blown away by how supportive they have been for me to achieve what I need to or want to from the earn-out.

So having the support from an organization will be there if they are going to succeed if you succeed, if it's a mutual benefit. And for the case of SPARK, if SPARK grows at a certain rate, if our recurring revenue increases at a certain rate, we hit all the IRR targets, it means the business model works, other people above me get their bonuses and their rewards, it all stacks up and it flows into the greater larger entity of Volaris. So I guess what I'm saying is if you're going to have an earn-out, make sure that it's not just you that benefits from it, or the targets of the earn-out, but it's the acquiring organization. So what is the benefit to the acquiring organization if your earn-out says you've got double your EBIT after three years? If that's going to make a massive difference to that IRR, then you know they will do everything they can to support you in getting your earn-out.

Mark Greaves:

So with that final piece of advice, this brings our special episode almost to an end. We hope that our guests views on funding and selling a business can provide some words of wisdom for our listeners. Obviously, if you need more advice in this area, you can call our corporate finance team who has advised many businesses looking at their options. On this note, I want to end with a word from Jaye Cowle, founder of performance marketing agency, Launch, who was glad she listened to advice about diversification.

Jaye Cowle:

We almost bought a cheese shop. That's a story for another day. Luckily, we had a very good accountancy firm who did due diligence and they told us it was not going to necessarily be the best business idea in the world.

Mark Greaves:

Don't forget to follow this podcast to get updates and notifications as to when new episodes are available. Thank you for listening.