my business does not have enough 'gravitas'

[bazaarboy]

Go on Dragons Den.


kd

have definitely considered that - not sure how good I would be explaining what my system does in 5 minutes, my close friends and family are not quite sure what I do exactly lol

 

[SoSolid]

been in business for 6 years, developing specialised intranet web applications
I've developed my product entirely on my own, and there's only me in the company - my current turnover is about 100k
so far my work has been small-fry and I'm happy to admit that

the industry is changing however, and my product has become the focus of a number of (much) larger companies, and I've been made take-over offers - essentially they want my IPR, and at least 2-3 years of my time to lead development to take the product to the next level - my remuneration will be contingent on an earn-out contract

problem is, I'm not ready to sell out. I want continue developing my product, and ideally recruit staff into my company, expand, and keep my IPR
unfortunately, I'm told, my company doesn't have the gravitas to pull something like this off - this may well be correct...

one practical example is the idea of managing corporate risk. if the product fails, eg servers crash, a bug in the system means they make a mistake etc etc and they blame my system, there is the potential for litigation
a small company therefore would seem unable to handle this sort of risk...
having said that, I believe you can get bespoke insurance that underwrites this sort of risk...

so, overclockers - can you give me any suggestions as to how I can increase the 'gravitas' of my company - or do you think selling-out is the better option

PS: i know i've not given you much in the way of detail, so please ask away!

You can get liability insurance.

 

[bazaarboy]

Hang on in there if that's what you want to do. Look to protect your IP at all costs. Indemnity insurance may well cover your corporate risk, but I would spend time in the lab ensuring your product is stable for all eventualities.

Don't forget, smaller software house companies normally rake in the fees based around maintenance / support contracts rather than the licence of the product itself.

The reason you want to hang on and not get drawn in to any "packages" of earn-out contracts is simple. A friend of mine had a bespoke conferencing company. He sold it a few years ago for a couple of million £. He's 50, has 3 kids, and no job. He's pretty much unemployable as all he knows is his own company, which he no long owns. After a house purchase and putting his kids through uni and enjoying life, he now really needs a job.

for me the license has to be main form of income, mainly because the support element is minimal - I designed the system to be self-maintaining as much as possible, and the clients look after it themselves
the other reason is that I'm also working full time (almost) as a doctor so free-time is definitely a premium

 

[sigma]

I would continue to grow the company at a steady rate.

 

[Skidder]

have definitely considered that - not sure how good I would be explaining what my system does in 5 minutes, my close friends and family are not quite sure what I do exactly lol

dragon's den is pulp tv for people with hokey products to play the side show not for people with real services, do not do it! (you will be another sweaty britboy)

 

[Participant]

I would definitely prefer to stay in control, get bigger and become more established
To complicate things even more, the competitor who wants my product is, themselves, getting bought out by an even larger company...
they divulged that their own buy-out arrangement is subject to hitting an 8 figure sales target in 4 years

How about x % royalties every time they sell your product and a minority shareholding retained in your company. Then you can just kick back in the Bahamas and watch the dollars roll in .

 

[bazaarboy]

I would continue to grow the company at a steady rate.

ideally yes, but I've hit a plateau - if I recruit staff then I have to start worrying about making sure PAYE, NI, annual leave etc etc are all done properly, they would never work the sort of hours I put in, which I completely understand...
perhaps using outsourced services, like using temp staff, IT specialists on an hourly basis, outsourced telephony services etc might be the way forward

 

[Participant]

ideally yes, but I've hit a plateau - if I recruit staff then I have to start worrying about making sure PAYE, NI, annual leave etc etc are all done properly, they would never work the sort of hours I put in, which I completely understand...
perhaps using outsourced services, like using temp staff, IT specialists on an hourly basis, outsourced telephony services etc might be the way forward

Contract staff will cost you a lot of money and if gaining familiarity with your product requires specialist long-term knowledge, then holding onto decent people becomes important.

 

[bazaarboy]

How about x % royalties every time they sell your product and a minority shareholding retained in your company. Then you can just kick back in the Bahamas and watch the dollars roll in .

tried that one, they are very resistant in letting me keep the IPR or going into partnership - they want full ownership of the IPR and me to work for x number of years on a salary to further develop the system

 

[King Damager]

tried that one, they are very resistant in letting me keep the IPR or going into partnership - they want full ownership of the IPR and me to work for x number of years on a salary to further develop the system

Just out of interest. If you are a Doctor how would you manage this at the same time? Or would you give up the Doctors job?

kd

 

[bazaarboy]

Contract staff will cost you a lot of money and if gaining familiarity with your product requires specialist long-term knowledge, then holding onto decent people becomes important.

okay, say I put together a team of 10 people - that's as small as possible i believe:
2 programmers, 4 support staff, 4 sales staff and it may take 2 years or more before the company breaks even
how much capital would I need, and where do I get it from??

 

[bazaarboy]

Just out of interest. If you are a Doctor how would you manage this at the same time? Or would you give up the Doctors job?

kd

depends - I'd never give up the day job, but I can do shift work, if I get a team together I may well need to do lots of clinical work to pay for the staff initially!

 

[cm1179]

ideally yes, but I've hit a plateau - if I recruit staff then I have to start worrying about making sure PAYE, NI, annual leave etc etc are all done properly, they would never work the sort of hours I put in, which I completely understand...
perhaps using outsourced services, like using temp staff, IT specialists on an hourly basis, outsourced telephony services etc might be the way forward

this is always the problem for smaller business; expansion. now that i know you are a doctor, i would personally sell (not to the first offer) and make sure you still have the element of control that you want.

 

[platypus]

Who has told you it doesn't have enough gravitas?

 

[bazaarboy]

Who has told you it doesn't have enough gravitas?

erm the guys who want to buy me out, at a low price? lol
I know what you mean though -

they have a point however - as part of the procurement process, the organisations that would use my system would take into account the company size - and this limiting factor is working against me

 

[Participant]

okay, say I put together a team of 10 people - that's as small as possible i believe:
2 programmers, 4 support staff, 4 sales staff and it may take 2 years or more before the company breaks even
how much capital would I need, and where do I get it from??

How come you need to go straight from 1 man to 11? Can't you hire one or two to start with, or is that the minimum you feel you need to fulfill the big contracts?

Even as a doctor I'd hold on, it could be an epic retirement fund in 20 years .

 

[platypus]

erm the guys who want to buy me out, at a low price? lol

And that doesn't tell you something?

they have a point however - as part of the procurement process, the organisations that would use my system would take into account the company size - and this limiting factor is working against me

Then employ a few people over time. I'll start at £50,000 per annum, and throw in my existing consultancy for free .

 

[bazaarboy]

How come you need to go straight from 1 man to 11? Can't you hire one or two to start with, or is that the minimum you feel you need to fulfill the big contracts?

Even as a doctor I'd hold on, it could be an epic retirement fund in 20 years .

That sort of company size is the right start - imo
Smaller means that I'd need to be thinking about recruiting all the time, or worse: there won't be enough momentum to take off properly
If/When I need expand further then the formula will already be tested

in terms of retirement - I don't I'll ever retire lol if I don't work at least 12h a day it feels like the day was wasted

 

[bazaarboy]

Then employ a few people over time. I'll start at £50,000 per annum, and throw in my existing consultancy for free .

bargain! ok to work on an earn-out clause?
what do you consult people on?

 

[platypus]

Anything you want me too.