60-Second Business Plan
THE PITCH: U.S. workers often don't stay put for very long. In the service sector alone, almost 25% of employees exit their jobs every year. And given the steep costs of hiring and job training, replacing those workers isn't cheap. But Cem Sertoglu thinks that he's got a way to fight the high price of turnover: when an employee leaves, say au revoir, not good-bye.
Sertoglu's two-year-old company, SelectMinds, based in New York City, provides software and consulting services that help businesses develop and maintain "alumni" networks of ex-employees. Keeping track of former workers is smart business, says CEO Sertoglu. Not only are alums a bargain labor pool, but rehiring a former employee typically costs only about half as much as bringing in a brand-new hire, according to the Society for Human Resource Management. In addition, ex-workers can supply top-quality job-candidate referrals because they know their former employer's culture and requirements. Plus, alums who've joined potential customers can be a lucrative source of new business, especially in the professional-services industry.
How does it work? Once a company signs up, SelectMinds sets up and maintains a customized portal linked to the business's own Web site, through which former employees can access an alumni directory, get company news, scan job postings from the ex-employer and other alums, and network on alumni discussion boards. For employers, the system offers a means to register and track its departed workers, making it easier to identify potential rehires and send out targeted E-mail messages about relevant job openings.
"Usually, the larger the company, the more challenging it is to maintain alumni information," says Sertoglu. His target market: high-tech and professional-services businesses. Since November 1999 the 18-employee SelectMinds has signed up more than a dozen customers, including Agilent Technologies, financial services consultant Oliver, Wyman & Co., and law firm Cadwalader, Wickersham & Taft. Customers pay SelectMinds an up-front fee (starting at $75,000) to set up the alumni Web link, with additional licensing and service fees based on the number of users.
Sertoglu, a former management consultant, came up with the idea for the business three years ago while he was advising a large advertising agency on improving recruitment and retention. At the time, with the economy booming, Sertoglu envisioned SelectMinds as a way to help companies fight and win the talent wars. He pegged his pitch to the long-term-worker shortage that was predicted to develop during the next decade as baby boomers started to retire.
Now, as the economy slows, Sertoglu is playing up the potential business that a company can reap from alumni contacts. But he says that the rise in corporate layoffs has actually been good for SelectMinds, which has recently been tapped to help several customers set up systems for tracking their newly downsized employees. To many companies, the recruiting problems of the 1990s are still fresh, says Sertoglu. "They're very aware that down the line, as business picks up, they will be faced with a similar talent shortage," he says.
The Quick Once-Over
Formal Projections*: $2.1 million in revenues, $450,000 net loss in 2001; $6.8 million in revenues, $350,000 net profit in 2002; $18 million in revenues, $3.9 million net profit in 2003
Total Capital Raised: $500,000 from angel investors
Biggest First-Year Expense: Employee salaries and benefits totaling $1.9 million
First-Year Total Expenses: $2.4 million
*Based on numbers provided in the business plan. According to Sertoglu, SelectMinds broke even in 2001, ahead of projections.
The Weigh-in: Our Panel Rates the Plan
Cum Laude or Calamity?
WHO: John P. Raeder Jr., president and CEO of IQNavigator, a Denver company that makes software for recruiting and managing contract employees
RATING: 8 (based on a scale of 1 to 10, with 10 being the highest)
"Their blue-chip-customer basis is very strong, and they have a very strong management team and advisory board with a great deal of subject expertise. They also offer a very solid value proposition. I'm an Oracle alum, and I know I've made some really strong contacts and found good job candidates because of my Oracle experience. At the same time I would love to have a database that I could access much more aggressively.
"From a negative perspective, this looks a lot more like a services company than a software company. As such, I don't see margins or revenues scaling up over time. I would really have them pause and think about what they want to do with this company. Do they want to build a high-touch consultancy with a little bit of technology and basically go at it as a services-based company? Or are they really looking to gain huge acceptance as a de facto software application and create significantly more upside for themselves and their investors?"
WHO: David Russo, CEO of Empliant Inc., an HR-software company in Raleigh, N.C.
"I think they've got a solid concept. I bet they have a great product. And it looks like they have some traction with some meaningful companies. I think they have a chance to be really successful. However, if you look at their management team, at their top executives, you don't see a lot of HR types. These days everybody has technology, but you have to have somebody who really understands what's going on.
"Their broad-based opportunity for success is based on finding companies that are what we call employers of choice. If you're a lousy employer, I don't care how much you implement this system, your employees aren't coming back. There's a very green pasture out there to be farmed, but SelectMinds has to be really selective about its client base."
WHO: Steven C. Currall, associate professor of management at Rice University and founding director of the Rice Alliance for Technology and Entrepreneurship
"The basic concept here is innovative, and it provides a vehicle for greater connectedness. Given the fact that we're so geographically mobile now and turnover is fairly frequent in consulting firms as well as large corporations, a product that creates such connectedness resonates with me. It's a creative way of expanding a pool of talent. One concern I have is this: What will prevent a large executive-search firm from getting into the business and eliminating SelectMinds? Also, how will the concept operate at most companies? I think the strength of the loyalty in your garden-variety corporation is not as strong as it is at a place like McKinsey & Co. or other highly selective firms. Without that, I question how much loyalty you can actually bank on to get former employees to use this network."
WHO: Steve Ciesinski, a partner in the Palo Alto office of Earlybird, an early-stage venture-capital firm
"In general, I liked the concept. It's a focused market. They have a good message: recruiting, business-lead generation, and enterprise knowledge management. One question is, Who are they really selling to? I'm not sure that the HR organization is really necessarily the beneficiary of what they're trying to accomplish, and these days HR budgets are being slashed. I think they need to figure out who in the organization is their target customer. Is it the chief financial officer? The vice-president of marketing? The VP of HR? Who is the ultimate customer and champion going to be who says, 'Yeah, this is the greatest thing since sliced bread, and I'm going to get it into my organization'?"
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