Inc Query

The challenge of working for someone else, and other curious quandaries

We have a lot of great queries this month, including questions about becoming an employee, discontinuing a product, finding valuation formulas, deciding when to sell the company, and competing with a former employer who wants to put you out of business.

The Entrepreneur Trap
I'm a 49-year-old career changer. I started my company, a trucking business, in 1975. By the mid 1990s we'd grown to 28 employees and branched out into warehousing. Around that time I had one of those midlife "Is that all there is?" crises and decided to sell, getting an all-cash buyout in 1997. (To my surprise, the company is still in business. Maybe I wasn't God's gift to trucking after all, as I once thought.)

After the sale I took nine months off, built a house, and began looking for a new career. Eventually, I landed a sales job in a computer business, where I had struggles with the owner. The company was good in technical skills but abysmal in administration and employee motivation, and I couldn't help pointing that out. Having never been an employee before, I didn't grasp the depth of the emperor's-new-clothes mentality.

I also lacked experience in internal politics. I was constantly catching flak for suggesting how other departments might improve. That didn't make sense to me. In my company, if something was broke, I cared only about getting it fixed. Anyway, I was fired after two years for failing to toe the line, which was a blow to my ego because I'd really been trying to make it work.

Now I'm halfway through a computer-engineering course, and I'm planning to start looking for another job. I just wonder if I'm too headstrong to work for other people. I don't want to go back to the entrepreneurial life. I don't like constantly having to gamble everything I've worked so hard to earn. But is there an alternative? Do I have to start another company because I'll never find happiness as an employee? Is there hope, or do they shoot old horses? --Bruce

We don't hear from many people like you, Bruce. Sometimes entrepreneurs will become employees because of management contracts they've signed in connection with the sale of a business, but we know of only a handful who have a real desire to make the switch from entrepreneur to employee.

Do I have to start another company because I'll never find happiness as an employee? Is there hope, or do they shoot old horses?

But there is hope for you. "A lot of us are too headstrong to be long-term employees," says veteran entrepreneur and Inc columnist Norm Brodsky, who once, in the distant past, was an employee himself. "I know I couldn't work for someone else anymore, but that doesn't mean I couldn't work with someone else. I'd advise Bruce to think about becoming an independent contractor -- doing outside sales, for example.

"Of course, it may be that what he really wants is to get involved in the management of a business. In that case, I'd suggest he find a small company that wants and needs the help of an experienced entrepreneur and do an unconventional deal of the kind I've written about in the past. (See ' Hiring the Best,' February 1999.) If that doesn't work, start a business."

Saying You're Sorry
I'm hoping you have some (brilliant) suggestions for notifying customers that a product has been discontinued. I've read all sorts of advice about introducing new products but can't find anything about gracefully withdrawing old ones. Does anybody have a method that doesn't alienate the customer and cost you sales? --Lori

Yes, Lori, Chuck Sussman does. In the course of building Pretty Neat Industries, a maker of cosmetics organizers, into a $12-million Inc 500 company, Chuck and his wife, Greta, had to discontinue quite a few products. "It's real simple," Chuck says. "When you get an order for the item, you send back a little note, saying, 'Boy, are we alone! I loved that item, and I can see you did, too, but not enough people went for it, so we've had to drop it from the line. Instead I'm sending you a copy of our latest catalog. If you'll include this note with your order, you can get a 10% discount on anything else you order from us. That's my way of saying, We're really sorry."

What It's Worth
In "Business for Sale," you often refer to formulas used to figure out what companies in various industries should sell for. It may be a multiple of earnings or a percentage of sales or whatever. Where can I find a comprehensive list of those rules of thumb? --Ozzie

We know of no such list, Ozzie, but there is an alternative. "First you need to understand that all those rules of thumb boil down to the same thing -- namely, the present value of future cash flows," says Sam Kaplan, president of Central Chase Associates LLC, in New York City, who buys and sells companies on his own and with partners. "That said, I still want to know the rule of thumb for any industry in which I'm thinking about buying a company. Why? Because it's important to know the terms that people are thinking in and the language that they use.

"So I go to a directory of industry associations. The American Society of Association Executives has one at I get the association's phone number and call up the executive director. Executive directors love to talk. I explain what I'm looking for and ask for help. Has the industry newsletter run any articles about valuing a business? Does one of the association's board members know about valuations? Is there a banker or investment banker who's familiar with valuation practices in the industry? You can usually get what you need without too much difficulty."

Two and a half years ago my friend and I left the company where we worked and started our own business. I'd been in our former employer's customer-service department, and I'd heard constant complaints about the company's poor service and failure to support its customers. My friend and I were determined to do better. As soon as we sent out our marketing material, the business took off. Our sales doubled from year one to year two. But recently our growth has slowed, partly because of the economy but also because our former employer has stepped up its marketing and undercut our prices. How should we respond? --Christopher

We turn again to our marketing maven, Inc 500 CEO Max Carey of Atlanta-based Corporate Resource Development Inc. "Christopher and his friend should respond by doing now what they should have done two and a half years ago," he says. "They should have anticipated that their former employer would come at them with a vengeance, and they should have developed a plan based on that likelihood.

"Frankly, it's quite possible that the old company's salespeople have been told to do whatever is necessary to take business away from Christopher's company. There's only one way to fight back in that situation. You need to have a value proposition that appeals to the decision makers at different levels of the customer's organization.

"When you start a business, you're typically dealing with the buyers, who focus on price. Someone like Christopher, who doesn't have the overhead of his former employer, can come in and offer better service at a lower price, and it works until the big company decides to take him out. To survive, you have to offer something that appeals both to the buyers, who will insist that your prices be competitive (although not necessarily the lowest), and to the senior managers, who are looking for tools to help them grow and improve the company. Figuring out what all those people want requires research, but Christopher and his friend have to do it, or they'll be sitting ducks for their former employer."

Should I Stay or Should I Go?
I have a business that I purchased from my dad when he retired, in 1985. My goal has been to run a $10-million company, and we are two-thirds of the way there. Lately, we've been approached by companies wanting to buy us. The business is doing great, and overall I still enjoy running my own company. On the other hand, who knows what lies down the road? I am 50 years old. Should I be giving serious consideration to selling? --Peter

You should definitely give it serious consideration, Peter, but that doesn't mean you should accept one of the offers you've received. "I don't think Peter is ready to sell," says Bill Samuels Jr., president of Maker's Mark, the legendary bourbon distiller. "It sounds as though he'd really enjoy the satisfaction of reaching his goal.

"That said, he should absolutely be preparing for an eventual sale. Right now Peter still has a lot of options open to him, and he has time to create new ones. If he waits too long, his options will narrow. When he goes to sell the company, the buyer will control the agenda.

"In particular, Peter should think about bringing in a couple of strong young managers to help him reach his goal more quickly. He could have an understanding with them that if certain conditions are met, he'll sell them the company. In the worst case, he winds up with a stronger business, and the managers have shared the burden. They'll also give him a sounding board, which is even more important in a small company. I know I became a much better manager when we started hiring smarter people -- because I had someone to talk to."


Could you use some advice from an experienced entrepreneur who has been where you are and figured out what works and what doesn't? Send your questions to Editor-at-large Bo Burlingham, aided and abetted by Street Smarts columnist Norm Brodsky, will find the best people around to answer them. If you don't like their answers -- well, you can tell us that, too.

The Whole New Business Catalog

Please e-mail your comments to