Business Advice

An interview with Krista Morgan, CEO of Online Lending Platform P2Bi

P2Bi: An online lending platform for growing companies

Recently, I learned about an interesting new resource for pet companies who need access to growth capital. It’s called P2Binvestor (P2Bi), and it provides online access to lines of credit through a hybrid technology and marketplace model. Given my work with rapidly growing pet companies, I am always on the lookout for non-traditional methods of raising capital. I was fascinated by what I learned about P2Bi, so I asked to interview their founder/CEO, Krista Morgan.

1. Where did the idea for P2Bi originate?
I spent six years living in London— one of the first places financial technology and crowdfunding really began—and was exposed to the online lending industry very early on. At the time, my dad was working for a factoring company in Denver, and it occurred to us that factoring was one of the areas where financial technology could make a huge impact and disrupt what was a very old industry running on antiquated, cumbersome technology. After the market crash in 2008, banks had significantly decreased their loans to businesses and there was—and still is—a lack of capital available to entrepreneurs. So in 2012 we took the idea of factoring and created a hybrid ABL/factoring product funded by a crowd of investors. It provides customers a simple to understand, scalable line of credit and our crowd the still has the legal protection of factoring.

2. How is P2Bi different from a traditional lending institution? From an online lending platform like Lending Club?
The unique thing about P2Bi is really our technology and the way we have structured our access to capital. Because we have this crowd of investors, we’re able to deploy a lot of capital very quickly—much faster and in much larger sums than other online lenders in the space. At the same time, a lot of the companies we serve are growing rapidly and that volatility is too difficult to manage for a lot of traditional lending institutions. Banks simply don’t have the technology needed to serve these high-growth businesses. We are also the only online platform that provides multi-million dollar lines of credit in a very automated way.

3. Who is your “sweet spot” in terms of client companies?
The customers who we see benefit the most from our line of credit are high-growth product companies like consumer packaged good businesses in the natural foods or consumer electronics space with $1-10M in revenue. We also work with many B2B service companies in consulting, professional services, and logistics.

4. Do you have a success story to share about a P2Bi customer?
We have seen a lot of success stories in the past year. Two of our clients were included on Inc 5000s list of fastest-growing companies. One of our favorite success stories to share is an ice cream company out of Brooklyn called Phin & Phebes. They make delicious ice cream and have created a really fun, unique brand. Using our line of credit, they were able to move their production to a centrally located copacker and expand distribution. You can now find them in major retailers across the U.S.—a long way away from the farmer’s markets in NYC where they originally began selling their product.

5. Has P2Bi worked with any pet companies?
We have a company in our portfolio called Pipeline Pet Products that makes a few different USDA certified organic, natural pet snacks such as Green Bark Gummies. They’re actually about to launch a brand-new product called Terra Ultra that is a Free-Range Chicken pet snack that contains no corn, no soy, and no wheat.

6. What can an investor expect from a relationship with P2Bi?
Our investors enjoy a fast and easy investing experience using our proprietary technology as well as very competitive rates, diversification opportunities in a variety of industries, and an average of 30-90-day liquidity. We also have strict underwriting criteria and default rates that are lower than the factoring industry standard. Our investors are extremely active on the platform, and there is never a lack of capital in our crowd to fund our clients.

7. In your opinion, can you identify 3 or 4 qualities that make a small business successful?
I think success is measured for everyone differently, but at the end of the day if you’ve built the company you set out to and had some fun along the way, I’d call that a success. Entrepreneurship is a tough road, and while large exits are definitely a big plus—and probably why a lot of us launch these crazy companies—success really comes during the challenges and breakthrough moments you experience along the way. I’d say if you’ve built a team that you’re proud of, got your hands dirty in something that interests you or a problem you really wanted to solve, and got through all of it with only a minor tequila problem—that is success.

8. How does a pet company go about applying for a P2Bi loan?
Our typical loan size is between $200,00 up to $5 million. Our loans are backed by the applicant’s A/R and Inventory.  Go to and fill out the application and then someone with P2Bi will follow up within a few hours.

9. Anything else you would like to share with our readers?
I highly value diversity and have built a company that is 50% women on our wider team, on our leadership team and in our board room. I believe we make better decisions as a company because we assume less and listen more and value differing opinions and ideas.

Carol Frank of Boulder, CO, is the founder of four companies in the pet industry and a Managing Director with MHT Partners, a national middle-market investment bank, where she specializes in pet sector mergers and acquisitions. She is also a principal at BirdsEye Consulting, the pet industry’s premier consulting group. BirdsEye advises in the areas of M&A, strategy, and licensing. She can be reached at

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Interested in Acquiring a Pet Company? The Top Five Things You Need to Know

Growing through acquisitions is becoming increasingly popular as business owners see the value in increasing revenue without having to significantly increase overhead. In investment bank speak, this is known as creating “synergies.” In other words, if you buy a pet company whose products would sell into your existing customers and sales channels, you are effectively buying their gross margin and maybe a small amount of overhead. But costs such as rent, accounting or other professional fees, administrative staff, and even sales expenses would be all but eliminated as you fold the business into your infrastructure. If this sounds appealing, then perhaps you are interested in becoming a “strategic buyer.”

What does a strategic buyer need to know before pulling the trigger and pursuing an acquisition? Here are a few key lessons that I’ve learned over years of helping pet companies grow through acquisitions:

Similar products will result in the greatest cost savings. If you manufacture dog treats and you acquire a toy company, not only will the manufacturing processes be completely different, but likely the category buyers you call on will be different as well. This is why a durables company (toys, collars, leashes, beds, etc) usually looks to acquire another durables company and that a consumable company (treats/food/supplements) realizes the great synergies when acquiring a fellow consumable company. Think Petmate’s acquisition of Precision Pet Products and Nestle Purina’s acquisitions of Zukes and Merrick.

Find out EARLY ON about the Target’s valuation expectations. Several years ago, I consulted with a well-known pet company to help them grow through acquisitions. We identified a list of over 100 companies (aka Targets) that met their criteria. One of the most eye-opening aspects of this project was the importance of fleshing out the Target’s valuation expectations early in the process because 75+% of the time, my client’s valuation expectation did not align with the Target’s valuation expectation. My client was more than willing to pay fair market value for the business, but unless the Target company’s owner was ready and eager to sell, they often will expect a price above (and in some cases WAY above!) market value. Ferreting out the Target’s price expectation early in the conversation will prevent a great deal of wasted time and resources.

Ensure the Target is truly interested in an exit. I’ve heard countless stories of buyers working on a deal for months and months, only to have the seller change their mind at the last minute. While there is no way to guarantee this won’t happen, having probing and meaningful conversations at the beginning of the process will mitigate the risk of the Target changing their mind at the 11th hour. Once you’ve identified a willing Target, learn as much as you can about their valuation expectations, their reason for wanting to sell, and what they plan to do post-sale.

Sloppy accounting records will result in major difficulties for the buyer.  It never ceases to amaze me the number of multi-million-dollar pet companies who do not have professional accounting records. I’ve experienced deals that fell apart because the seller was not able to produce accurate books that the buyer could use to evaluate the business. Questions to ask at the onset: What system is used to keep their accounting records? Do they have a professional accountant prepare monthly or quarterly financial statements? How far back do they go? If they don’t have at least three years of professionally prepared financial statements, sales, inventory, A/R, and A/P data, you may never be able to determine the true value of the business.

Spend more time than you initially think necessary evaluating the Target’s customer relationships. In many cases, the most appealing aspect of a potential acquisition is the key customer relationships. Have you been trying to get into Petco or Petsmart but have been unsuccessful? Perhaps you are strong in pet specialty and have a plan to expand into the FDM (food/drug/mass) channel but don’t have experience in entering that market. Acquiring an existing business that is strong in the channels you are not could result in the placement of your current products into the new sales channel. But before paying a strong market multiple for this company, make sure that the relationship they have with the coveted customer(s) is solid and stable. I’ve seen deals fall apart at the last minute because a large customer dropped the Target’s product line before the deal closed. How do you diligence a customer relationship? The ideal situation is to speak to the category buyer(s) at the retailer(s) in question. Many acquirers will put this requirement into the Letter of Intent (LOI) as one of the last steps in the due diligence process before closing. If the Target will not allow this, look at the month-by-month sales to the customer for the last 12-24 months and look for any patterns of decline. Go into the retailer in question and talk to the sales people about the product line. Carefully review any existing contracts.

It probably won’t surprise you that I strongly recommend you hire an experienced team of M&A advisors to help you through the acquisition process. Your team should include an investment banker, an M&A attorney, and an accountant. The right team will more than pay for themselves by preventing you from paying too much for the Target, from putting yourself at legal and financial risk, and by ensuring that the books/records of the Target are accurate.

Carol Frank of Boulder, CO, is the founder of four companies in the pet industry and a Managing Director – Business Development with MHT Partners, a national middle-market investment bank, where she specializes in pet sector mergers and acquisitions. She is also a principal at BirdsEye Consulting, the pet industry’s premier consulting group. BirdsEye advises in the areas of M&A, strategy, and licensing. She can be reached at

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Do you want to find ways to ensure your pet company is more valuable 12, 24, or 36 months from now then it is today? This is done through “Value Drivers” that increase the transferable value a buyer will eventually pay for your company. Generally, these value drivers increase cash flow both during and after the original owner’s tenure.

Determining how to increase transferable value is the owner’s job. But once owners and their advisors determine which of the value drivers (listed below) must be strengthened, everyone in the company should be involved. Owners cannot do it alone. If they could, by definition they wouldn’t be creating transferable value because once they departed, the value drivers would disappear. Based on my years of experience as a pet company M&A advisor, these top five drivers will give you the most bang for your buck with respect to increasing the value of your company:

  1. Stable, motivated, strong management team who is willing to stay on after an acquisition
  2. Sustainable revenue, resistant to “commoditization” through unique products or IP.
  3. A competitive advantage.
  4. A documented and proven growth strategy.
  5. A solid, diversified customer base.

A brief word about each:

  1. A stable, motivated management team that stays after owner leaves. If you plan to take any exit path other than liquidation, capable management is indispensable. Having the “best in class” management is the surest way to become a “best in class” company.
  2. A solid, diversified customer base. Buyers typically look for a customer base in which no single client accounts for more than 10-15 percent of total sales. A diversified customer base helps insulate a company from the loss of any single customer.
  3. Sustainable revenue. Buyers look for revenue streams that continue despite fluctuations in the economy. They also prefer those that are resistant to “commoditization”, which can be avoided if your company has strong patents or other forms of IP.
  4. A Competitive Advantage. To paraphrase Michael Porter of Harvard University’s Business School, competitive advantage is the product or service that a company offers–either better or more cheaply–over time than does its competitors. Your company’s competitive advantage is the reason your customers buy from you instead of from your competitors.
  5. A documented and proven growth strategy. In my experience as an investment banker, the first thing buyers want to know about a potential acquisition are the specific ideas/plans the company has on how to significantly grow the business over the coming years. Valuation multiples in the pet industry are still quite high, but those multiples cannot be achieved if the seller does not have a solid, defendable growth strategy that includes innovative, unique products or services in the pipeline. Even if you expect to retire tomorrow, it makes sense to have a written plan describing future growth and how that growth will be achieved based on industry dynamics, increased demand for the company’s products, new product lines, market plans, growth through acquisition, and expansion through augmenting territory, product lines, manufacturing capacity, etc. It is this detailed growth plan, properly communicated, that helps to attract buyers. Buyers will give credence to your current growth plan if previous plans have attained their goals.

Creating the plan to increase transferable value in your company is your job. No one else cares nearly as much and no one else will reap as great a reward. Executing the strategy to increase value, however, is everyone’s job. If you don’t already have top managers and skilled advisors ready and willing to provide ideas and implement value drivers, I suggest that you recruit them immediately.

Remember that this list contains only the top “generic” value drivers. There are many others that carry a great deal of weight, depending on what your company does. Your best course of action is to hire a professional advisor or CFO that can help you execute a plan to attain your maximum valuation.

Carol Frank of Boulder, CO, is the founder of four companies in the pet industry and a Managing Director with MHT Midspan, a premier middle-market investment bank, where she specializes in M&A in the pet sector. She is also a principal at BirdsEye Consulting, the pet industry’s premier consulting group. BirdsEye advises in the areas of M&A, strategy, and licensing. She can be reached at

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Looking to Raise Growth Capital?

Top 10 Questions Asked by Investors

Growing your pet products business takes money, and unless you have a rich uncle, significant cash flow, or a very progressive bank, chances are you may need to raise capital of some form or fashion over the life of your business.  As an investment banker, I’ve heard potential investors ask just about every kind of question imaginable to entrepreneurs in order to gauge whether the opportunity is an appealing investment. If you have a unique, differentiated product with a solid growth plan in place, you will likely find interest from investors looking to put their money into the white-hot pet market.  Before going out to pitch your business to these potential investors, I thought it would be helpful for you to know the key questions you MUST have answers to before you make that first call or send that first email.

  1. How much of your own money have you invested? Early on in my consulting career I worked on a project where the founder of the company, who is a well-known celebrity, was trying to raise millions of dollars for her pet product company but refused to put any of her own money in. Guess what?  We didn’t raise a dollar.  Investors will need to know that you have significant skin in the game before they are comfortable giving you their money.
  2. What is your growth strategy to double or triple your sales in the next five years? For investors, it’s all about growth and how they are going to make a return on their capital that matches the level of risk they are taking on by investing money into your pet company.
  3. If you were an investor considering an investment in your company, what is the biggest hesitation you would need to overcome? Be honest here.  It’s not going to be all flowers and rainbows and there will be hurdles to overcome.  An investor will have more confidence in you when you give them a thoughtful, honest, and authentic answer to this question.
  4. Do you have a competitive analysis finished for me to review? This is the first page I go to when looking at a potential investment opportunity.  Who is your competition?  What are the barriers to entry in your category?  What makes you unique and special?  One of my favorite messages to entrepreneurs is “If you can’t do it better or differently than your competitors, then you are wasting your time and resources.”
  5. Why did you start this company? “To make money” isn’t an answer we often hear in the pet industry, since fortunately our industry is full of passionate people who love animals.  While making money IS an honorable goal, also be sure to be clear and concise about your intention, passion and convictions around your dream for your business.  Remember that passion and persistence go hand in hand. When you are passionate about what you do, you will be able to overcome obstacles you never dreamed possible, and investors like to know that you will do “whatever it takes” to make your business a success.
  6. What is your exit strategy? When would you like to exit? Who are likely acquirers? Remember that investors need to eventually get their money back out of your company and you must have a plan to make that happen.  A well thought out answer to this question is critical as it reveals a great deal about how much you know about industry players, valuations, and your long-term strategies.
  7. How will the capital you raise be used? Here’s what investors DON’T want to hear: to pay off debts or to pay the owners a salary.  What they do want to see is a specific list of expenditures designed to increase revenue and profitability.  Remember that you are raising GROWTH capital.
  8. Can I see a list of your Intellectual Property? Having patents, trademarks, and copyrights will greatly enhance the value of your business and protect your business from being overtaken by a competitor.
  9. What affects your gross margins and how do you expect this to change over time? If you have followed my articles over the years, you will know that I generally recommend striving for gross margins for a pet products company of at least 40%. A gross margin at that level not only lead to greater profitability, but will significantly increase the value of your business when you go to sell it.
  10. If money and resources were not barriers, what are three improvements you would make to your business? A thoughtful answer to this question not only helps an investor decide whether your business is worthy of his or her money, but also helps you dream big, prioritize how you will spend your growth capital and invest future profits.

Carol Frank of Boulder, CO, is the founder of four companies in the pet industry and a Managing Director with MHT Midspan, a premier middle-market investment bank, where she specializes in M&A in the pet sector.  She is also a principal at BirdsEye Consulting, the pet industry’s premier consulting group.  BirdsEye advises in the areas of M&A, strategy, and licensing.    She can be reached at

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Exit Strategies for Baby Boomer’ Owned Business – Part II

An Interview with Dr. Pamela Dennis, author of “Exit Signs”

I ended my last column with these three burning questions: If you are a Boomer who owns a pet company, what can you do to increase your chance of selling your business for optimum value? Should you get a jump on the plethora of Boomer businesses that are likely to hit the market in the next 10 years? And where would you even begin to start the process? To answer these important questions and more, I connected with Dr. Pamela Dennis, the author of the new book Exit Signs: The Expressway to Selling Your Business with Pride and Profit.

This topic is timely and important as a significant number of pet company owners are approaching retirement age. As Dr. Dennis ( writes in her book, many of them do not have a clear exit strategy, yet an entrepreneur’s business is likely their most valuable asset.

Carol: Why did you write this book?

Dr. Dennis: I spent the majority of my career building, growing and running a professional services firm. I loved it! Then I left it. I sold it after almost 20 years, with a great deal of pride that it had surpassed our wildest dreams for growth and working with the best companies in the US and globally. And it was going to go on without me, a big goal when I started the firm. The sale ensured my retirement was going to be well funded too. We followed an exit plan.

I kept hearing painful stories about people (some were my friends) struggling with how to prepare themselves and their business to be sold. AND to do it in a way that met their personal goals but also left their business in good hands. One owner close to tears said, “I was very successful selling my business – just to the wrong buyer.” Then I learned the dismal statistics about ownership transfers and the lack of planning.

I wanted to write a book for owners who had invested much of their lives in building their businesses and had three goals: a profitable sale that would assure their retirement life style; pride in leaving a strong business for their people and customers; and a path forward. I wrote the book in 3 sections to do this: 1) build a strategy, 2) assure sustainability and 3) achieve serenity.

Carol: Why is the topic of exit strategy so important?

Dr. Dennis: Owners of small and mid-size privately held businesses are in the race of their lives. They just don’t admit it. The consequences of this denial are a disaster in the making for owners and for the local economies where they reside. The asset value of small to medium sized businesses today is estimated at over $10 trillion. Among that group of asset owners are 12 million Boomer business owners who are hoping to transfer ownership in the next five to ten years at a rate 9 times over previous levels. The negative impact on the market value of companies will be devastating.

About half of the U.S. job base in these companies will face a transition. According to PWc in 2010, 66% of small business owners are counting on the sale of their business to fund retirement or encore careers, but we know that only 25-30% of owners are successful in selling and almost 20 percent simply close their doors. This not only impacts individuals but communities and the national economy. Individual retirements, millions of jobs, and the viability of main street businesses will be significantly impacted. A NYT article quoting a study by a former FED member estimated the US could see a loss in asset values of $4.8 trillion dollars in the next decade. Research says lack of planning is the major reason for the dismal transfer outcomes. While 96 percent of these business owners know the importance of having an exit plan, fewer than 15 percent have one.

Carol: Why don’t owners have exit plans? What can owners do if they don’t have one?

Dr. Dennis: The three main reason business owners give for not engaging in exit planning is, “I’m too busy,” “It’s too early,” and “I don’t want to think about it.”

Exit Signs uses the metaphor of being in your car on an important journey. The reality today is it’s not just a journey, it’s a race. A famous race quote is, “You gotta work on the nut behind the wheel before you starting fixing bolts in the car.” Owners have first to face reality: this is the race of your life. It will take preparation and planning. The preparation begins with the owner — defining goals, overcoming resistance or fear, pulling together the expert advisors to be their pit crew.

I advocate 3 important actions.
1. Be Honest with yourself: “Are you, personally, committed to selling?” If not, don’t deceive yourself and waste valuable resources. Letting go is a process that starts now.
2. Face Reality — Check out your “vehicle” or business for its salability and areas for improving it. With so many companies coming on the market in the next 10 years, you must be in the top 10% of your industry.
3. Start drafting that new name badge. Too many owners don’t know how to answer the question, “Who am I if not my company?” They know too well what they are leaving behind, but not what to look forward to. Enzo Ferrari said, “What’s behind you doesn’t matter.” You don’t win the race looking in the rear view mirror. However, the past does provide important lessons for what will be gratifying in the next phase of your life.

Carol: What are some of the traps owners fall into when selling their businesses?

Dr. Dennis: I call them road hazards and potholes in the book. Some of them are what’s in our heads, others are what’s in our business operations.

One road hazard I call “Too Busy to Leave, Too Tired to Stay.” It’s being so busy running your business you don’t have the time to think about how to leave it. These owners are so busy performing all those functions, some of which they may even detest, that it’s an effort just moving down the road directly in front of you.

One alternate route is to think of wearing bifocals as you build your yearly plans or prepare your growth strategy. What do you need to do today AND how does the long range exit plan impact what you focus on up-close? When you invest, for example, in customer acquisition or process improvements, how will they build the value of your business in the eyes of a buyer? When you strip the profits out of the tax return today, how will it impact the salability and value of the business in three years?

Another example of a pothole is what the Nat’l Fed of Independent Businesses (NFIB) has called one of the top 3 problems small businesses face in selling their business: lack of complete and credible performance data — financial, legal, customer and operations. Exit Signs provides planning worksheets that build a strategy to avoid the pothole or overcome it.

Carol: Does your advice benefit entrepreneurs early in their businesses as well as for those “Late Stage business owners”?

Dr. Dennis: Yes. For the entrepreneur starting a business the critical question is “why are you in business, for what end game?” Is this a lucrative career move to generate revenue and invest your profits elsewhere? At some point you liquidate? Or, is this an entity to build equity and eventually realize a return on your investment? Two great strategies, but you need to be clear up front. It will impact everything from investment and budget strategies to key talent you employ.

AND, the book addresses many of the tasks and issues “mature business owners” face — who founded and worked tirelessly to build an enduring entity. The 22.7 million small to medium-sized enterprise owners who will eventually step away from their businesses need a roadmap that recognizes their long history of vision, passion, and dedication to making their business successful, and the natural exhaustion that accompanies years of growing and running a business. They want to see their brainchild (“my baby”), often their life’s work, sustained when their tenure at the helm is over. It is for these business owners that this book is written. Of course they want to exit profitably too. They want a new kind of roadmap for their exit journey that recognizes their aspirations and values of built to last versus built to flip.

Carol: Thank you so much for sharing your wisdom and experience with APPA’s members and best of luck with your new book.

Carol Frank of Boulder, CO, is the founder of four companies in the pet industry and a Managing Director with MHT Midspan, one of the nation’s premier middle-market investment banks, where she specializes in Mergers and Acquisitions in the pet sector. She is also a principal at BirdsEye Consulting, the pet industry’s premier consulting group. BirdsEye advises in the areas of M&A, strategy, and licensing. She can be reached at

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