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The second meeting was set up a week after all the requests for pricing had been submitted. Each response had its pluses and minuses. While most of the nonunion bids were slightly lower, they had certain negative components. For example, the plumbing contractor could not provide the number of skilled plumbers needed just when the project would most require their skill. The heating and cooling contractor cost pennies less than its union counterpart but had fewer licensed specialists on its payroll. The union contractors came in with bids that met all the special requirements and certifications needed, but they were slightly higher in labor cost. After reviewing the bids, John told Peter he’d like to go with the union contractors if the union would lower its cost by two cents per labor hour. That would make the union contractors’ bids economically competitive with nonunion labor. Peter thought the job would hire enough skilled labor to make the project worthwhile, so he’d ask the locals to tap funds from their Market Recovery Program—a fund union members pay into just for this sort of situation—to apply toward labor costs. But labor could offer things—such as certified skilled workers and the resources to commit to completing the job—the nonunion contractors couldn’t, and John knew this.

Marty and Jean knew they needed to work together to make their vision a reality. There was no question of working with outside partners. This was an internal partnership. But they needed to explore their compatibility. So, I asked them to complete a Partner Compatibility Analysis as a team-building exercise to help them begin thinking about how their relationship might develop. Marty balked. “Look, I know that I have to work with Jean, and I think we’ve identified the scheduling as one area we can work on. But I don’t want to waste my time with that compatibility thing. Can’t we just move on?” Jean replied: “Let’s just look at it, Marty. It might help.” So look at it we did. After a few minutes they started answering the questions out loud, so I suggested we just informally put down on paper what they were saying. Neither objected, and their compatibility analysis is what we came up with. Marty and Jean noticed they both answered no in areas that concerned their relationships. They vowed this was one area they were going to work on.

The first step in any family succession plan is to choose the appropriate heir for the business. Where there is only one heir, it is necessary to decide whether he or she wishes to, and is capable of, taking over the business. If there is more than one suitable candidate, it is necessary to decide which one will be chosen. The factors to consider include business aptitude and management potential. Potential is more important than experience, because you can groom your heir for the role as owner/manager over an extended period.

In theory, the steps involved and the logic employed in choosing the appropriate heir should be similar to those involved in choosing the best CEO for the business, or the lead manager in a management buy-out: that is, the heir you choose should be the one most capable of running the business successfully when you leave. In practice, however, the choice may be made for various personal and family related reasons, rather than on solid business-based grounds.

Where there is only one heir (or only one heir who is interested in taking over the business), obviously it might still be a mistake, on purely business grounds, to hand over the business to that heir. But, if this is to be the case, your task is to make the best of a dubious decision and to prepare this person as best you can for the role of running the business.

A family succession is different from all other exit options in so far as the emphasis is often not on maximising the owner’s exit price, but rather on ensuring that the business continues successfully under the ownership of the successor. Consequently, the tailoring (or grooming) is concentrated on the successor, rather than on the business. This alters the perspective of the business’s suitability for the exit option chosen and the notion of what purchasers are looking for. This will become clearer from what follows below.

Generally speaking, most types of businesses qualify for a family succession. However, if the successor is required to borrow money against the business’s assets to acquire the business, the business will need to be able to support the borrowings and the successor will need to have a professionally produced business plan demonstrating this ability.

As I have said, the emphasis in family successions is usually more on the suitability of the heir than the suitability of the business, so this question has to be changed to: ‘What are we looking for in the successor?’ This will influence the choice of successor and the way he or she should be groomed for the take over.

We will now look at the steps necessary for grooming (or tailoring) the heir for taking over the business.

Today, many organizations disappear from the list of successful business organizations on the popular ranking of some professional bodies (Agrawal, 2006). One of the factors generally reported as its root cause is the failure to manage innovation within the system. A critical psychological analysis of the attitude (statements as refl ected on interviews to
the media or the address of the Annual General Meeting) and behaviour of the respected business leaders and CEOs (as actually perceived by the group within or insiders, who really know the person well) reveals a wide discrepancy. It cannot be objectively established but inferences could be drawn that probably Indian business leaders and successful entrepreneurs possess a common style of managing people. At some stage in every level it is the personal relationship that matters in the fi nal decisionmaking.

This is based on the perceptual response analysis of those who aspire to get a chance to lead the organization. In case my thesis gets empirical support and validity, then the absence of entrepreneurial leadership in India requires further empirical examination. Thus, this leads only to routine success and normal achievement, which could be relatively better in that business environment. Any global business/ entrepreneurial leader of this century has to go beyond personalized relationships and feelings of insecurity (loss/absence of power) in order to compete and keep going. Therefore, societies, where leaders say something and do just the opposite, will have diffi culties in fostering and developing an entrepreneurial existence. The role of the top management in an organization is crucial in making an entrepreneurial initiative, a reality and the process effective. Here, a CEO has to go miles away from the transformational leadership if he/she is willing to take the organization ahead.

Consider two facts:

A significant part of the value of many businesses is the real property from which they operate, being factory, warehouse or office premises.

The vast majority of management or employee buy-outs are funded by debt, as employees traditionally do not have large amounts of spare capital.

Obviously, purchasing real property with the business can be a problem for an MBO team, so if you plan for your business to be bought by your management or employees you need to consider whether it is feasible to include in the sale the real property from which the business operates. On the one hand, including the property will push up the sale price but, on the other, excluding it will reduce the hard assets available as security to support the borrowings.

If the company that owns the business also owns the property (as apposed to it being owned by another company or the owner privately) a sale of shares will automatically mean the property will be included in the sale. If you own the property in your own name, you can exclude it from the sale and rent it to the new business. There are also capital tax advantages in owning the property as an individual, rather than through a company.

Once you have decided that an MBO or an EPO is the optimum exit option you should review the ownership of any business properties and allow yourself time to adjust their ownership if necessary, subject to expert advice.

One can see clear regional differences in the same society or nation for the desire to establish entrepreneurship and further advance ahead. This however, does not mean that people of some places are made (gifted) for entrepreneurship and others are not. I am of the opinion that any place in this universe is a fi t case for an entrepreneurial activity. Some are able to sense (get insights) while others do not. Even getting insight alone will not be adequate enough for entrepreneurship unless the skills to exploit the market and utilize the resources as well as opportunities are not adequately developed.

An entrepreneur always has to have space for unexpected happenings in the process of any entrepreneurial venture. Market turbulence and unpredictable environment, organizational factors like strategy, structure and leadership, managing people and resources including technology, political stability, and sociocultural factors play a very crucial role in developing entrepreneurial culture in society. Organizations will find it diffi cult to involve a majority of the people if they are unable to create a culture where most are oriented towards innovative activity, leading further towards entrepreneurial outcomes.

VCs will look for the same aspects in a business that is being considered for an MBI as they will in an MBO. The only difference is that where the CEO or management is not deemed to be worthy of their support they will need to bring in someone (usually at CEO level) whom they are prepared to support and whom they are confident will achieve the business targets that have been set.

Management/Employees acquiring 100% of the equity. It is difficult to generalise about what type of business the management and employees will be looking for in this type of buy-out, as the motivation for launching buy-outs will vary widely. However, it is safe to assume that management will be looking for all or most of the following before they will go ahead with the transaction:

• Business must have sufficient growth potential for management to believe that buying it is a better option than being employed elsewhere.
• The business owner must set a reasonable sale price and, where necessary, be prepared to offer terms of purchase.
• The business must be able to support the purchase borrowings.
• The management team must believe they can improve the business because of their expertise. Most management teams believe they can do a better job than the current owner!
• A realistic, profitable exit strategy that will justify their risk and hard work.

Where a specialist EPO financier is assisting an employee buy-out, it will look for similar attributes in a business as are necessary for a traditional MBO.

There are also evidences to highlight the role that the government policies, and regional and cross-cultural factors play to facilitate entrepreneurial activities. Utilization of available opportunities and creation of market could be positively related to as entrepreneurial success. It is an outcome of making use of the opportunity to come out with a product that will be used in the market by the customers looking for a particular product.

Every individual has some talent or the other while in some this talent can be identifi ed, in others, it remains hidden. Entrepreneurship is not restricted to a specifi c person or group. It is an ability to explore, create and utilize the available explored and unexplored opportunities for novel or unexpected innovations and solutions. Therefore, to facilitate and create business, some competencies could be identifi ed and fostered as per the requirements of the entrepreneurship. It will help to realize where the scope for starting and pursuing entrepreneurial venture exists (sensing market). An entrepreneurial personality ignores the role of individual differences. Rather, it lays emphasis on the role of cognitive factors, and therefore we see substance in terms of entrepreneurial intentions and entrepreneurial
thinking, which occupy significant space in understanding the process of entrepreneurship. Encouraging all individuals towards developing competency that leads to the road of entrepreneurship in any field is the demand of the time and organizations must foster it.

Another major challenge of corporate entrepreneurs today is to explore, identify and recognize the opportunities available for developing new business enterprises. Large enterprises face such challenges more seriously than their counterparts, as the utilization of opportunities is crucial in the outcomes of entrepreneurship. Also, such organizations do have the problem of middle management crisis and confl ict between the young talent and the old experts. The middle management, particularly in large enterprises, is passing through a stage of transition. It does not see any space for contribution in decision-making or self development. Dissatisfaction of all kinds is clearly visible, leading to ineffective utilization of available talent for organizational effectiveness. Senior management can play an important role here in creating an environment supporting entrepreneurial initiatives and asserting their value for the organization.