Selling your Business

I guess all entrepreneurs have an emotional attachment to their business which prevents them from even contemplating selling the same until circumstances force them to. This is typically true of Indian Entrepreneurs.

Just yesterday I was in meeting where it was established that even though one of the business units of the family was making continuous losses, and there seems to be no way out, still the promoter who had started the same and nurtured it over the years was continuing to cross subsidise the same instead of looking to exit. There are many such similar situations where the promoter’s emotions have prevented the right solution being adopted.

This led me to try and pen down what are the top 5 errors that most entrepreneurs make while trying to divest their existing business.

1. In todays world the only thing constant is change. As such it is most important to decide right at the beginning of a venture as to when you would like to make an exit. It is like the stock market, you invest in a share with a certain return in mind and then stick to the plan or you might end up loosing your shirt. In any case, even in case one has not decided this in advance, one should try and give it enough lead time or else one will not do justice to the exit strategy and end up loosing in the final deal. Further, in most cases the Buyer would want the existing management to continue for a specified period so as to achieve a smooth transition and that time should be also be factored in by the Seller.

2. Selling a business is not like selling Real Estate, although, today, even selling real estate has become complex. Businesses are of various types and shapes and consist of elements which can have a different meaning for different people. As such it is advisable to take the assistance of someone who has handled such transactions and not try to do it yourself. In most cases you will come out ahead by getting a better price. I remember in one of the transactions that I was involved in from the buyers side, one was able to bring down the valuation by more than 50%. The impact ran into millions of dollars.

3. Competition drives up the price. As such it is of utmost importance to try and have more than one buyer or else you end up loosing by not getting the right price. This is true of every transaction in any sphere of life. This too can be achieved by taking the assistance of Investment Bankers/ Management Consultants who specialise in such deal making. It will be well worth the effort.

4. Identifying the right buyer is another important aspect which needs considerable attention. Typically a Strategic Buyer would see a strategic fit with their current line of business and be agreeable to pay a greater price as compared to a Financial Buyer who is primarily looking at it as a specific period investment and would like to see returns by way of Dividends and Appreciation in value over a defined period before exiting. they would not normally interfere with the management of the company except to ensure proper financial discipline and control. A Strategic Buyer would see longterm value as the acquisition would strengthen and add synergies to its main business.

5. Although I have touched upon this in an earlier point, however, I have found that most SME sector entrepreneurs do not know how to project their key strengths / assets that could influence value substantially. You need to identify all your value drivers, both tangible and intangible, more so in case you are in the Services Industry. These could be the credentials of the management, the brand recognition, unique process or process maturity, intellectual property etc.


In the end it is best to remember the Biblical saying “Where there is no vision, the people perish”

Blog Search Gets Easier and Better– with Google

The big daddy of search has recently launched its blog search and it works great ! I definitely like the clean interface and the way the results are shown.

Joel Cheeseman has an interesting take on the effect this could have on the online recruitment marketplace. We in the recruitment industry definitely need to give it a serious thought and, maybe, come up with ideas on how to leverage it.

What I will comment on is the crystal ball this offering seems to be for providing vertical search for other content. Say, oh, jobs for example.

Do a search and you'll see how the results are served. You'll notice results take you to actual blog entries and not homepages of blogs - just like they might take you directly to job listings. You'll notice results are incredibly timely.

You'll notice that results are ranked by relevancy. This is a big difference from most of the other blog search engines like Technorati, which default to a date-based sort.

This kind of ranking should be the secret weapon to Google’s blog search success. From limited testing, it appears to be a combination of timing, links, and keyword frequency.

And if you think of this in terms of job postings, the relevancy issue becomes very important. Here's an example: Do a search for online recruiting.

You'll notice that this very blog (Joel Cheesemans) owns a lot of real estate on page one. Am I the only one blogging about online recruitment? Of course not. But you may not know that looking at the results.

Could an employer leverage the same optimization tactics in a vertical search for jobs and push their competition down the ladder of results? You bet they can. And I think savvy employers will do just that.

You'll also notice the ability to get results via your favorite RSS feeder. Say goodbye to e-mail alerts.

For Monster, CareerBuilder, SimplyHired, Indeed, your local newspaper, etc., Google's move shouldn't be a surprise, but it should certainly be a wake-up call to what their futures may hold. In India Naukri, Timesjobs, Jobsahead, Newspapers would be equally affected as broadband becomes cheaper and easily available at low cost across the country. The 800-pound gorilla may soon be coming to their neighborhood too.