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Success in Corporate Life May Not Transfer

“It’s time for me to leave, I can’t take one more HR seminar, help me find a business to buy.”  So started my relationship with Andy (not his real name), a senior-level executive at a publicly traded healthcare company in Nashville.  “I like my corporate job OK, but it’s corporate life I’m not happy with,” he told me over lunch. “I’m ready for a change, I want to be an entrepreneur,” Andy said even before the waiter brought us water.

I didn’t say it to Andy, but I figured this nice lunch would be nothing more than a time for him to vent about his job. I am a lawyer with an MBA, so I don’t have much training in psychology. But working over two decades with entrepreneurs has taught me something about the mentality of the corporate guy/gal who says they want to leave corporate life and become an entrepreneur …. although they say they want to buy a business, they seldom do.

Here’s how I see it, the corporate-type does not understand how fundamentally different corporate life is from running your own business.

First, corporate life does not teach you to understand a business model.  Later in our lunch, I told Andy about an opportunity I thought could be right for him. His first question was, “can I see the financial statement?” While that might seem like the logical first question, I will tell you an entrepreneur does not think that way. The entrepreneur’s first question will likely be “how does the company make money?” The notion of how a company makes money is often referred to as the business model. Perhaps I need to do another blog on the differences between a company’s financial statement and a company’s business model. Suffice it to say, if you don’t instinctively know the difference, keep your corporate job.

Second, corporate life does not prepare you to balance personal financial risk and opportunity. Most business shoppers are like fantasy baseball players, they think they know the game, but analyzing stats is very different from playing the game. For example, an entrepreneur-wannabe will decide what valuation metric they think is right (i.e., 4X EBITDA), then everything rests on finding a deal at or below that metric.  Conversely, the entrepreneur will not overly focus on the valuation of a prospective business purchase; sure, nobody wants to overpay for a business, but a smart business buyer knows that a good business buy is way more than just price.  A great opportunity overpriced is better than a so-so opportunity fairly priced.  Said this way, smart buyers buy on opportunity, not on price (caveat: of course, the best deal is the great opportunity that is underpriced, I just don’t see many of those).

My observations come from experience working with many corporate-to-entrepreneur wannabes, and indeed, my own experience. Yes, I have to admit, I was once a corporate guy, and I was clueless as I made the leap to business ownership. I got lucky, made some good hires, and had a few macro-economic trends in my favor, so everything turned out OK for me. But boy howdy, was I ever at risk of tripping over myself in making the transition.

I love helping entrepreneurs make smart decisions about when to buy or sell a business. But it doesn’t take me long to know who can likely handle the transition and who can’t. If I can help you think through your potential transition, give me a call or drop me an email.

 

JIM CUMBEE is President of Tennessee Valley Group, Inc. a retainer-based business brokerage and transition mediation firm in Franklin, TN. Cumbee is an attorney and has an MBA from Harvard Business School. Jim is the author of Home Run, A Pro’s Guide to Selling a Business. https://www.amazon.com/Home-Pros-Guide-Selling-Business/dp/1599329239 .  He has a wide range of corporate and entrepreneurial experiences that make him one of the most sought-after business transition advisors in the state of Tennessee. The principles above are true, but the story, names and fact patterns are changed to preserve the parties’ identities.

 

NOTE: This blog was originally published on April 26, 2016. I decided to republish it today since the lessons are still relevant, and I seem to find myself in conversations just like this one once or twice a month.

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Tennessee Valley Group

Jim Cumbee established Tennessee Valley Group to help business owners fulfill their dreams for life after business ownership. It’s a mission that his 30+ year career history had prepared him well for—in addition to being an attorney, transition mediator and business broker, Jim has been a buyer, seller, and entrepreneur. His broad range of experience gives him unique insight into how business buyers and sellers can achieve their goals.

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