WealthEsteem.org :: Psychology of the Deal

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I am an active networker and I see many requests from recruiters to find a suitable candidate for a role. Sometimes someone replies with a request to split the fee.

Can we talk about good etiquette for a fee split?

If you work as a recruiter then it is quite reasonable to accept a fee split of some sort. However if recruiting is not the finder’s profession should they charge a fee for helping out a friend/acquaintance?
Will the finder participate in the guarantees the recruiter provides? Will we consider sharing expenses? Overhead charge?

What about the friend of the finder who is suitable for the role? Would you not refer a friend to what might be a great role because the recruiter will not split a fee?

Take this beyond recruiting and consider your professional skills or requests for assistance. If you put out a request for an introduction for some new business, how would you feel if an intermediary hit you up for a commission?

We share of ourselves not because there is something in it for us in this transaction. It’s the goodwill generated across a range of favours.

Let me know what you think.

Over the years I’ve attended various “… for beginners” Q&A’s for writing, film making, script writing, blogging, and other creative endeavors. I remember a fan asking Harlan Ellison what computer software he writes with and thinking “If you met Shakespeare would you want to know how he trimmed his quill?”.

Sure that’s a but sarcastic, but really you should have some content ready before you worry about the technology. Otherwise there is always a better camera/microphone/software/whatever just accept what you’ve got and get started.

That’s my philisophy and sometimes I forget it. Why wait for something to be perfect? Once the project is underway then spend time perfecting if that will increase results.

This came up mainly because I was coaching a blogger today and they wanted everything perfect before launching into podcasting. Just start!

I’ve moved on from my role as Divisional Manager - Treco Garden Sheds at Oldfields Holdings Limited. At the end of my two year contract and am very happy with the results we achieved. The Directors’ Operations Review in the Preliminary Final Report to the Australian Stock Exchange for the year ended 30 June 2008 says:

Treco Garden Sheds

The Garden Sheds division performed well. This business is a solid contributor to the Group. This was assisted by the division’s management focus on better manufacturing efficiency. The company congratulates the Management for their Group contribution.

I’d like to thank my team at Treco for all their hard work and support over the last two years. Without them it wouldn’t have been possible to make record divisional EBIT in each of those two years. Thanks to Ian C, George D, Les J, Mario A, as well as my fellow ex-Treco’s Susan R and Brett C.

In manufacturing, I’d like to thank the production team: Tan Dat Ho, Minh, Frank, Ted, Ho, Tan Dat Ha, Suri, Michael T, Noelene, Toni, Neil, Mark, Maurice, Micko, Mick C, and Gabriel.

What did we do?

1. Focused on low hanging fruit, grab what orders we could without huge retooling.
2. De-hassle the workflow. We spent time and effort removing obstacles from our processes.
3. Use subject matter experts. I didn’t tell them what or how to do it, I set the goal and trusted them to find a way. Then I cheered from the sidelines. This worked for both sales and manufacturing experts
4. Use common sense. Just because we’ve always done something doesn’t mean we should still do it. Everyone can ask “why are we doing this?”

I will do a personal WWW/TALA on this over the next month (What Went Well/Take A Look At). Manager Tools podcast by Mike Horstman and Mike Auzenne taught me that acronym.

Anyway on the the next challenge which is with a fast growth firm. More later.

I was wondering that when I was investigating doing an MBA. May bloggers started to post on their experiences but then dried up.

Is the workload so onerous that they can’t find 10-30 minutes in a week to provide the update?

In my case AGSM MBA (Executive) is quite busy - it takes 8-10 hours of study per subject per week. When work gets busy I have to give up my family time or my online time. Sorry guys but my family comes first. Have you heard MBA = Marriage Breakup Academy?

I’ve decided to implement Peter Drucker’s advice to track where I spend my time. If you look at what you spend your time on you’ll see what your real goals are. If it turns out you are spending your time on the wrong things, it is time to change your behaviour.

At work I mix my time between my desk and meeting staff, suppliers and customers. So a wholly online solution is not ideal. I’m experimenting with two Java cross platform applications on my laptop: jWorkSheet and Rachota. Maybe I should use an online solution as most of the time my laptop is connected to the Internet?

Drucker recommended using a piece of paper and write down what you’ve done every 5, 10 or 15 minutes. I think I’d prefer something with a few more reporting tools.

Update: I’m favouring Rachota at the moment for it’s simplicity and design.

If you are an entrepreneur of any age and any stage you should be reading Australian Anthill magazine. For 24 issues now,  this bi-monthly magazine has covered entrepreneurs, angels, VC’s  and the startup scene in Australia. They’ve grown readership and circulation and are entrepreneurs themselves.

Business is a crazy rollercoaster ride and there is a huge benefit to connecting with others who’ve trod a similar path.

And if you’ve got some experience, consider contributing an article. Read the style and submission guidelines.

Crazy John’s founder John Ilhan dead at 42. The Aussie mobile phone entrepreneur was estimated by BRW to be worth $310 million.

I’m stunned at the moment, the news reports say he died of an apparent heart attack while walking this morning. Looking at his recent philanthropic efforts I think he died too soon.

It reinforced for me that work/life balance is important. Even when business gets crazy, it’s important to take time to enjoy the journey.

I’ve just finished my fourth week of my first subject, Accounting & Financial Management. I did Accounting 101 in my undergrad degree so I have an advantage that I have heard of this stuff (when Moses wore short pants).

AGSM lectures are pretty fast, you’re expected to have done the work before the lecture. Jack Flanagan, our lecturer, assures us the hardest part of the course is weeks 3 and 4. That’s when most students freak out as they’re learning all the accounting jargon.

I started well, with all the reading and optional exercised completed in time for lectures. That was the first two weeks.

Then work got in the way! For week 3 I’d done the reading and the sample execises but hadn’t worked through the class exercise for discussion. Even so instead of listening to the discussion I was busy following the logic of the exercise.

Week 4 was worse. Work was insane as we got our annual report out to the market and I’m launching 2 new stores in Melbourne. I’d managed to only skim the materials, no exercises, no reading, no nothing. I almost didn’t go to the lecture, but thankfully changed my mind and went.

I’m not the only person in class who is behind. We’ve started a study group and it’s a great opportunity to revise, but it actually creates more work to prepared for it. But it does make me accountable to others. So at last night’s meeting we went through the major exercise again and we all think we understand it now.

So even the best intentions of staying ahead can be abandoned when life gets in the way. I’m finishing my catch-up tonight so I should be ok.

Photo credit: Number Crunch 3 by Benjamin Earwicker Garrison Photography

I met Richard Hayes at the Sydney OpenCoffee Meetup and he’s written an excellent article that he’s allowed me to reproduce below.

All people working in the Startup / Early Stage consistently asked the same question,
“How do you value business?”

The correct answer is there is no correct answer

Without trying to be facetious here is a number of models that may help.

Anyone wanting further information can attend Richard’s BEERonomics in a pub near you.

Courses in advance corporate finances cost you 2 beers / hour (Cheaper than a MBA)

• Sales Revenue
  Most businesses are valued based upon revenue.
  This means a business with $1 Million revenue would be valued @ $750,000 to $1,250,000
  or values each dollar sales between $0.75 - $1.25
• Price Earnings Ratio
  This is the number of years of after tax profit it takes to return your investment
  A typical private company sells for a PE of 2-5 where public companies sell for 8-20.
  Google sells with a PE 48Many people use EBIT, Earnings (profits) Before Interest and Tax as a measure of how much extra debt a company can take to help pay for the take over.
• Discounted cash flow (DCF)
  This technique combines all the cash generated from the business and then discount
  (reduces) them to a present value. (IE A dollar today is worth more than a dollar tomorrow)
  This can be a problem if the wrong interest (discount) it used.
  BTW, The interest rate is ALWAYS WRONG
• Replacement Value
  How much would it cost to get similar stuff either new or used?In software, many people use COCOMO which is a formula that count lines of code and examines the complexity of code thereby allocating a amount of developers time it would take to replicate it.slccount Is a free COCOMO tool that supports about 27 different languages.

  For many software startups this is a good starting point.

• Return on Investment (ROI)
  This combines a number of the above techiques to derive a single figure.Many early stage investors Angels / VCs demand +45% ROI as compensation for the higher risk associated with early stage. This is a serious market failure.

Example:
A team of 3 developers have written 13K lines of PHP source code to develop a DIY superannuation management software. It has taken 6 months part time (IE 50 hour/wk)

They are all leaving their “real” jobs to pursue their dream.

Sales: Nil

User: 250

Total Cash Spent: $5,800

What is the company worth?

1. Sale Revenue Nil

Future Sales Revenue 2009 $1,000,000 (FV)
Discounted @ 40% pa $510,000

Company valuation $383,000 - $637,000

2. Price Earnings

2009 Sales $1,000,000
2009 Profit $180,000

PE 2 (180K x 2 x 40%) $183,000
PE 5 (180K x 5 x 40%) $459,000

Company valuation $183,000 - $459,000

Replacement value $413,228

The following output is from a real project

Totals grouped by language (dominant language first):
php: 13409 (99.83%)
sh: 23 (0.17%)

Total Physical Source Lines of Code (SLOC) = 13,432
Development Effort Estimate, Person-Years (Person-Months) = 3.06 (36.71)
(Basic COCOMO model, Person-Months = 2.4 * (KSLOC**1.05))
Schedule Estimate, Years (Months) = 0.82 (9.83)
(Basic COCOMO model, Months = 2.5 * (person-months**0.38))
Estimated Average Number of Developers (Effort/Schedule) = 3.73
Total Estimated Cost to Develop = $ 413,228
(average salary = $56,286/year, overhead = 2.40).

As you can see there is no right answer but valuation is much more about art than science.

© 2007 Richard Hayes RHI Ltd reprinted by permission.

I’m awaiting my iPhone courtesy of working for a multinational. One of my coworkers travelling in the USA hopefully pick it up. However since lusting for one, Apple has rained on the parade by turning iPhones into iBricks with their latest firmware upgrade. The consensus seems to be Apple didn’t need to be so draconian on fans who have unlocked their phones.

Still I’m going to get an iPhone and I’ll unlock it eventually to use it in Australia with a local SIM.

I’ve come across the OpenMoko freed phone. It’s open source (except for a few drivers for legal reasons). The entire phone is open an if enough developers get behind it, it will become everything the iPhone should have been. Cool apps written on an open platform. WiFi, quad-band, GPS enabled out of the box.

It’s not production ready, but it looks like the mass-market version will ship in time for Christmas 2007.

I think the Wireless Voice and Data phone convergence will be one of the most exciting industries over the next 20 years, so this may be a project I invest some time into.