May 7th, 2012 → 3:13 pm @ Norman // No Comments
The entrepreneur brought me his plan a few months ago. I agreed it looked achievable, and was ready to go… a nice web-based business. I suggested that he generate some sales before the investors committed their money.
Six weeks later he was back to report the first $30,000 or so in sales…. A good start!
The entrepreneur signed our papers, committing him to the deal. Before the investors would sign, I analysed the actual costs against budget. The costs were much higher. The entrepreneur explained that the model he had originally proposed wouldn’t work, and he had modified it. The modified model had a gross margin of 22%… not enough to build a profitable business.
The investors had a hurried meeting. I was delegated to search for a viable business model. A few days later I had a model which would give the margins and profits we had expected, but it would take us three years to get there.
The entrepreneur remained bullish throughout the discussions. He seemed unconcerned about the failure of his business model, and I became suspicious at his lack of engagement. I asked him some probing questions. Eventually he conceded that he was expecting to exit the business within a year. He pointed out that it was a simple business, and we could get a General Manager to run it… or I could do it!
So now I was being offered a business which would take three years to get ready to exit, and wouldn’t break-even until the end of the first year… okay so far… but one without a committed entrepreneur to run it.
Although the business is straight-forward and still appealing, it isn’t going to deliver eight digit returns. I have plenty of such opportunities. What I’m short of is motivated entrepreneurs to run them. I’m focusing most of my entrepreneurial time on a business with, potentially, 9-10 digit returns. So, unless I find a young entrepreneur with the drive to take on the smaller one, I guess it’ll become just another good idea that didn’t happen… all because the entrepreneur hasn’t the patience to finish what he started.
Tags: behavior, entrepreneurship, investor, start-up, Startup company
