Think Twice Before Starting That New Division
September 7, 2016 |
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Jim Beach sold American Computer Experience for $200 million, which sounds like a fantastic exit, but when I asked Beach if he had any regrets I was surprised by how long a list of lessons he had to share.
Jim Beach’s lessons to share:
- How creating new divisions can help grow revenue but reduce the overall value of your company.
- The dangers of raising venture capital.
- Why growing faster than your cash flow may end up costing you more equity in your business than you want to give up.
- The perils of partnering with a celebrity entrepreneur.
- Why you should never take an angel investment from a friend or family member.
- How to avoid a $250,000 legal bill when selling your company.
Think Twice Before Starting That New Division
Growing revenue by starting new divisions can feel like you’re making progress, but, in many cases the growth can come at the expense of your company’s value. At The Value Builder System™ we help entrepreneurs improve their company’s value. We start by scoring your businesses on eight factors that are statistically linked to the value of your company.
One of the eight attributes is called The Monopoly Control, which quantifies how well differentiated your business is from its competitors. Starting new divisions often reduces your performance on The Monopoly Control because each new offering is almost always less differentiated in the market than the original.
In Beach’s cases, while the computer camp division was well differentiated, the contract event management services he offered the Boys and Girls Club was less unique, as there are many companies that offer generic event management services. See how you perform on the Monopoly Control by getting your Value Builder Score here.
Our guest
Jim Beach’s first book, School for Startups, was published by McGraw-Hill in June 2011 and reached as high as number nine in Amazon’s business best-seller list. Beach has started businesses and taught entrepreneurship around the world and he recently won the Small Business Administration Media Advocate Award for his terrestrial radio show. At the age of 25, Beach founded American Computer Experience. From 1993 to 2000, Beach grew the company with no capital infusion to $35 million in annual revenue and to over 60 permanent and 700 temporary employees, operating in 39 states and in three countries.
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