Intentional Growth

#330: How to Achieve a Breakout Valuation with Patrick Donohue

Dec 8, 2022

01:05:19

Ep.#2 [THEME SIX]

Today we are launching episode two in our mini-series “How to Grow The Equity Value of Your Company.” Patrick Donohue from Hill Capital joins us to talk about his newly released book, Breakout Valuation: How To Finance Your Future Today.

During the interview, Patrick shares the nine components of a breakout valuation and how to use the financials as a road map to get you where you want to go. Patrick and Ryan discuss what it means to view and run a company like a financial asset and why there is a ‘capital gap’ in the middle market. Patrick then explains the different sources of capital, why they are different, and how to match the right type of capital with the long-term equity valuation goal of the owner.

Even if finance isn’t your thing, this episode is for you. Patrick does a great job of explaining why it’s worth understanding the financials and how they give the necessary clarity on how to create a valuable asset.

// WATCH THE INTERVIEW ON YOUTUBE: Intentional Growth™ Podcast

What You Will Learn

What a breakout valuation is and how to achieve one.
Why the financials are the key to achieving a breakout valuation.
What the capital gap is and why it impacts so many privately held businesses.
What capital matching is and why it’s so important to get it right.
The nine components of a breakout valuation.
Why the founder and/or CEO’s magnetic vision is so important.
What trust and emotion have to do with a breakout valuation.
How the foundation of a vision is essential to a breakout valuation.
The trifecta of cash management.
The five big cash traps.
What the ‘capital ecosystem’ is and why it matters.
Why debt over equity can be beneficial for an entrepreneur in the long term.

// USE YOUR FINANCIALS TO CLARIFY A PATH TOWARDS A MORE VALUABLE BUSINESS: Intentional Growth Financial Assessment

Bio:

Patrick Donohue is an Innovator, investor, financial analyst, investment banker, and entrepreneur. He specializes in finance strategy and executing corporate development initiatives for growth companies. He has helped author and execute numerous capital formation plans from start-ups to equity growth capital. His core skill-set is developing market intelligence to advise companies on growth initiatives and equity capital formation.

His experience is in several industries at various points within the corporate life cycle. In particular, He has spent considerable time working on financial technology, medtech, healthtech, healthcare, energy and the metals / mining industries (and of course finance!).

Interview Quotes:

08:44 - “I’ve always found capital transactions extremely interesting: why some companies are able to raise money and some are not.” - Patrick Donohue

12:13 - “They need the money, beyond what they can get from the bank, but their business model (thier economic engine) doesn’t justify or can’t potentially provide the minimum 10x or 100x return that a venture fund needs to buy equity into that business.” - Patrick Donohue

15:39 - “Don’t assume. Don’t let one no stop you. The name of the game in private capital formation is a numbers game. You have to have a lot of conversations. There are investors out there for every businesses, I will argue. But for some businesses, it takes hundreds of conversations.” - Patrick Donohue

17:12 - “So the idea of capital matching is to make sure that the money that comes in the business, any external capital that comes into the business, matches the needs of where the capital is going to be utilized. All capital needs to be paid back at some point in time.” - Patrick Donohue

31:19 - “The business owner really needs to articulate what the business is can do in the future. But not only do that but do that in a way that really attracts other people to the vision, thus magnetic. Attracting people to it.” - Patrick Donohue

41:49 - “At the end of the day, it’s about the people. It’s not going to be quantified in a software algorithm.” - Patrick Donohue

54:29 - “I don’t know if it’s a financial literacy problem. I think if we peel back the onion a little bit–and maybe this is why I started out with things in the book like confidence and curiosity and so forth but–I think a lot of it has to do with mindset.” - Patrick Donohue