The Hindu Business Line : Not easy to sell family business

Some entrepreneurs start a business, build it up, sell and start all over again. To most owners, though, it is not easy to decide about selling off, says Peter Leach in ‘Family Businesses: The Essentials’ ( www.vivagroupindia.com ). Reason: “Along with the investment of money, time and energy over the years in establishing the business, there is an emotional investment.”

Family businesses have unique characteristics that will be under threat following a sale, cautions Leach. “Many of the employees may be close friends, generating feelings of betrayal for the owner if the company is sold (especially if it is sold to a competitor).” Post-sale, the bureaucratic culture of many large businesses can be ‘so alien to that of smaller family enterprises that owners generally find the transition extremely difficult.’

Despite some myths to the contrary, there are no completely objective or scientific ways to value the business, rues the author. “The negotiated price will represent a hybrid of many factors including asset value, earnings (both quantity and quality), the growth rate and period, rate of return, comparison with other companies, tax considerations, and the market supply and demand of companies for sale.” A book that can show the way for befuddled family members in business.

Return on education

Education offers a very good return in India, comparable to that of other strongly growing countries. This is one of the findings Barry Bosworth, Susan M. Collins and Arvind Virmani discuss in ‘Sources of growth in the Indian economy’, an essay included in volume 3 of ‘India Policy Forum’ of the National Council of Applied Economic Research (NCAER) and Brookings Institution ( www.sagepublications.com ). Though the incremental returns to primary education are significantly lower than the average returns, there is a large jump at the secondary school level. “The additional return to a university degree was low in the 1980s, but it has been rising rapidly in the latest surveys.” The rising return in recent years is reflective of the changed economic situation, and the potential emergence of a scarcity of highly-skilled workers, the authors say.

For an in-depth study.

Branson’s secrets

One of Richard Branson’s less well-known talents is a razor-sharp negotiating technique, writes Des Dearlove in the third edition of ‘Business the Richard Branson Way’ ( www.wiley.com ). “Branson expects to haggle, always putting in a lower—and sometimes significantly lower—offer. On large purchases—country mansions, aircraft, a Caribbean island—that can make a very big difference.” Accountants may be happy to know that though Branson may not be an accountant, ‘he has always surrounded himself with people who can do the sums.’

The real secret of Branson’s success comes the last, in the book: ‘Never lose the common touch’. More than just humility, this is about the ability to mix with people of all walks of life, explains Dearlove.

Instructive.
Boosting investment

The World Bank conducted a survey in 77 developing countries, covering more than 40,000 firms, to measure business perceptions of the investment climate. It found that Governments in developing East Asia could improve the investment climate by paying attention to two things. First, corruption. “Survey respondents in China (73 per cent), Indonesia (44 per cent), the Philippines (45 per cent), and Vietnam (37 per cent) stated that they had to pay bribes to get things d one,” reports ‘Economic and Social Survey of Asia and the Pacific 2007’ ( www.academicfoundation.com ).

The second area is the time taken to clear goods through customs. “Claiming imported goods from customs took 7.2 days in the Philippines, 6.7 days in the Republic of Korea, and 7.3 days in India, compared with the developing country average of 6 days.”

The survey also recommends that Governments in the region should take measures to improve the investment climate for private investment, by paying attention to macroeconomic stability (including policy credibility and certainty), adequate infrastructure, and good governance (including political stability). “Governance is emerging as a major consideration in private investment decisions.”

The big picture.

Inner thermostat
Comfort zone in each of us works just like the thermostat, says Jack Canfield in ‘How to Get from Where You Are to Where You Want to Be’ ( www.harpercollins.com). “You have an internal psychological thermostat that regulates your level of performance in the world.” The author cites, as example, how if a salesperson’s self-image was that he earned $3,000 a month in commission, “then whenever he earned that much commissions in the first week of the month, he would slack off for the rest of the month.” So with savings, explains Canfield.
Filled with insights.

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