Craft a sound strategy Nurture the right people Generate a positive cash flow Dot your i’s and cross your t’s with your corporate governance and systems Get your operations process driven as soon as you can.
As a part of our series about “Five Things You Need To Know If You Want To Build, Scale and Prepare Your Business For a Lucrative Exit, I had the pleasure of interviewing Warsha Joshi and Evan Le Clus of Dare To Scale.
Warsha Joshi is a business scaling up coach specialising in strategy, people and leadership for the SME founder. Warsha began her entrepreneurial journey in the mid-1980s in India where she started, successfully scaled and sold two businesses. She is also the founder and pioneer of virtual business support services in the region through her company Platinum VA and lives in Dubai with her husband Evan.
Evan Le Clus is a senior corporate executive turned entrepreneur and CFO mentor, helping CEOs run profitable and efficient businesses. Evan gained his experience as a corporate finance professional of nearly 30 years with multinationals in varied industries such as hospitality, private equity and theme parks.
Thank you so much for doing this with us! Before we dive in, our readers would love to learn a bit more about you. Can you tell us a story about what brought you to this specific career path?
Warsha — We were both born into business families so the easy answer is we’ve always wanted to run our own businesses. The reality though is both our families had to ‘start again’ when we were sixteen.
For me, the entire family business (run by my dad at the time) came crashing down and at sixteen I had to leave school and start earning. It was my mom, the determined entrepreneurial person, who took the lead and took me under her wing, began mentoring me and we started a business. Every rupee counted and if I were to write my biography it would be called “Five Rupees” because that was the money needed to provide the family with the next square meal each day. We worked long hours and persisted with the business, opened a second and after a couple of years the family was back on its feet. For me, business runs deep in my veins thanks to my grandfather and it really is all I’ve ever wanted to do. My mother encouraged me to work abroad and I eventually came to Dubai and now run two businesses over here.
Evan — My family migrated from Zimbabwe to Australia when I was sixteen. My father and mother each ran a business but through the move a lot of capital was lost and the family also had to start again but this time my parents got jobs. It was very risky for them to attempt a new business at that time and I then became a wage earner too. I worked in Australia for many years and followed a mentor to Dubai where I remained in the corporate world for a while. I had still always wanted to run my own business and have now started Dare To Scale with Warsha.
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?
[Evan]
I’ll take this one. There are two that I can share. A couple of years ago the funniest thing for me was, in a way listening to the wrong advice (actually it was my fault for not listening properly). And that was to join a networking group and which actually ended up being so wrong for me. On the face of it very simple, where, you know, you go introduce yourself and your services, that sort of thing. But it was like, Oh, my God, who were these people? What on earth is this? It was just such a wrong fit because all that group really did was sell AT each other, apparently desperate for business. What I did learn was to ask better questions (listen better!) and seek some better advice. I ended up joining a different group and am so much richer for the knowledge, especially since the original joining fee was non-refundable! But the thing there was, and what I learned from that was getting the right advice is very important and taking that a step further, finding the right mentor, priceless.
The other funny a-ha is really from my corporate career. Having learned a whole bunch of theoretical stuff at university, you know, out of books, and then finding I had no idea what some of it meant and how it applied in the real world. So you do your exams, you have no idea what the hell you’re talking really about, but you get a good grade. And it’s only when you get to where the rubber meets the road, you’re actually in a practical situation when suddenly, you connect the dots and go “Ah, that’s what it was all about! Oh, I get it now!” And that sort of thing.
[Warsha]
I remember you telling me about that. The books and the degree have their place, and while that learning is great, it’s the applying the knowledge that is what actually matters. Especially with real learning that happens from people who have been there and done that.
Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?
[Both]
If you never fall, you will never learn how to get up. And being able to get up is one of the greatest lessons anybody or anything could teach you.
[Warsha]
Today, we live in a world where failure is considered to not be an option: a certificate or a medal is awarded for participation, because we don’t want to say somebody came second or last. Whereas it is those people who came second or lost or failed are the ones who actually know how to get back up, dust yourself off and continue with the race. They’re the ones who know how, what to do or not to do and to keep going.
This is something that both Evan and I learned in different ways at different stages in our lives. We both learned that you should never be afraid to start from scratch again. We all should know that we have the capability, capacity, strength and courage inside us to be able to start from scratch. There is no need to be afraid of anything.
[Evan]
Anecdotally, I would add Warsha has an interesting quip where she sees a mentee not getting up … she will ask the question, “I wonder who ties their shoe laces?”
Ok super. Thank you for all of that. Let’s now shift to the main part of our discussion. Can you tell us a story about how you were able to build a business from scratch, scale and sell it to a bigger firm?
[Warsha]
In the mid-1980’s my mother and I started a business because we had to — a necessity to put food on the table. We very quickly realized that what we thought of as a business was really a practice: it didn’t run if I wasn’t there. This realization then helped me develop a singular thought of how to “free” myself. And in those days, there was no nobody coaching me or my mother, teaching us what building a business meant.
We started Daffodils using ‘old school’ logic and common sense along with ‘old school’ business frameworks, ethics and values to bring in great people, train them up and mold them together in a tight knit community. My mother always said, “it’s your people who will keep that business going, with or without you being there, so look after them” — and that is what I began to do.
The second focus was to build (alongside the people) a very strong brand, a credible brand. We did know that credibility is key to what and how you deliver and that is evidenced by how strongly you stand for your values that you bake into your business. We discovered this strength then determines how strong and loyal your client base becomes … so we stuck to this approach and delivered the best way we knew how.
We were at the cutting edge of technology in those days in our business. We continued growing, consistently bringing in great people and we eventually built a very strong cash flow and one of the best client bases ever.
And 11 years later, when it when the time came for me to truly exit the business, finding a buyer for the business wasn’t even a major consideration. When the feelers were put out, we were getting the best of the best offerings to buy the business because they knew the solid foundation that the business was built on. It was built in such a way that the new owner could have just sat back and watched the business do its thing. And that to me is one of the greatest successes in building that company, or any other business for that matter: being able to free yourself because you built it on a very strong foundation.
Based on your experience, can you share with our readers the “Five Things You Need To Know If You Want To Build, Scale and Prepare Your Business For a Lucrative Exit”. Please give a story or example for each.
[Both]
The five things are:
Craft a sound strategy;
Nurture the right people;
Generate a positive cash flow;
Dot your i’s and cross your t’s with your corporate governance and systems; and
Get your operations process driven as soon as you can.
[Warsha]
Daffodils is a good case study in these five points.
A sound strategy allows you to create a very robust growth roadmap, avoid you, or the entrepreneur, getting stuck in a firefighting loop. Having the right people and building a beautiful culture with an ethos of accountability is the first step in successfully freeing the entrepreneur’s time and brain space. Then sort out your communication and proper delegation because eventually it is the people who underpin your business [when you are not there]. When it comes to positive cash flow … it’s like the game of Monopoly: play ceases when you run out of cash. Remember that the growth of your business calls for consistent cash flow, otherwise there is no sustained growth. So, keep a close eye on your cash flow, making sure your business is internally (organically) funded, so as to give you that extra strong footing as you move into the future. It also goes a long way into building the building the credibility of your business.
[Evan]
Your systems are actually the guts of your business in the context of lucrative exit. If your due diligence fails, you won’t sell the business for the right price. So, in order to tick all of the boxes, including the next step, which is your operations being relentlessly process driven, get your systems in order and wrapped up in a very robust business plan that you can work towards and also share with your potential buyer.
[Warsha]
Totally. And with operations it is more than ‘process-driven operations.’ There are two reasons why you would want this: to maintain efficiency in delivering a consistent experience to your customer (and thus built your reputation and credibility) and to feed back into the consistent cash flow. When you know your resources are tightly managed, in process-driven efficient operations, you know that you’re running a tight ship. Everything circles back to that some having the sound strategy which actually drives everything else within it.
In your experience, is there a difference in approach for building a service-based business versus a product-based business when you have the intent to eventually sell the business. Can you explain?
[Warsha]
There is not a great deal of difference in building the actual foundation of your business — product or service based — the difference actually comes through in resource allocation and building your market share. The R&D and innovation for a product-based business is easy to see but for service it is a little different.
[Evan]
In a service-based business, you’re talking about a lot more training for your people. This is your R&D or product improvement.
[Warsha]
Building a business for sale in a service-based industry actually takes a greater amount of work because your offerings eventually depend on people delivering a service or delivering that product. Again, be sure to break free of a consultancy, learn to build a solid foundation and learn to run a business.
Essentially, building the foundation and strategy of the business and having it work on a solid footing should always be your goal. Your business needs to be able to stand on its own two feet so the more you treat it like your entity rather than ‘baby’ the sooner you will really be on track!
[Evan]
The only risk I can see with a service-based business when you’re selling is the question to retain talent. That that’s the only piece that you need to have absolutely clear and addressed in as part of the sale.
How does one go about the process of finding a buyer?
[Evan]
Find a qualified broker to help you. Consider it like selling a house — you will need someone with contacts who can find potential buyers. It’s not as simple as putting an advertisement in the classifieds. You will need to find comparable sales, industry EBITDA multiples in order to pitch your business at the right level.
[Warsha]
While a broker can find you a buyer, you are really after the ‘right’ buyer. It is also useful to know that you would be keeping your credibility intact. Maybe a word of mouth or a confidential referral is one of the best ways to go through in identifying that buyer and making sure that while you can go through a broker and you can get a lineup of buyers if you will.
It is useful to also not turn your business into a commodity when it’s time for selling because this is something that you and your people have built from the ground up to a place where if it commands a premium. price, he did better go to somebody who respects and values what you have built and continues to build upon that. Not take it apart. So, there are several legs several aspects to it’s not just about finding a buyer, I think it is about finding the right buyer.
How can one decide if it is better to build a business in order to exit, or if it is better to stick around for the long term and let the company bring in residual income, or if it is better to go public?
[Evan]
Ideally every business should be run ‘as if’ it was for sale at a moment’s notice. This means governance, systems, business plans, strategy and processes are all documented and in sound working order. Moreover, it means the founder is not tied up in any day to day detail but is running the company by working “on” it and not “in” it.
[Warsha]
“Better” is a relative term relative to the founder’s original vision. Is there a right or wrong on what you do with your business? No, there isn’t.
Just as not every company will be listed on the stock Stock Exchange, not every company will be sold with the founder exiting with millions in their pocket. And not every company will be run by the founder till their dying days.
So, I bring you back to first of all, there is no better or worse. A company’s success is when it meets the founder’s original vision for the business. And conversely, every business should ideally be built like it’s going to be sold tomorrow, built on solid foundations.
Can you share a few ways that are used to determine a good selling price for the business?
You can do projections on a discounted cash flow basis but it’s not always about cashflow. You can also work on EBITDA multiples that take into account other non-cash aspects like:
Positive cashflow every month based on growing revenue trend;
Consistent profit margins that are equal to or better than industry;
Founder is not involved in the detail of the business;
Processes and people take care of lead generation and customer conversion / sales all the way through to delivery, after sales and cash collection; and
Loyal client base that you bring to the table (the value of your list!).
You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂
[Evan]
For both of us, creating more action-taking mentality to clean up the oceans. We both snorkel and scuba dive and we cannot stand seeing rubbish in the oceans, it absolutely kills us. So that’s one thing: a movement to enhance the awareness and to get people more fundamentally engaged to take real action (really, say NO to plastic … and force the manufacturers to use less) otherwise it’s all just lip service. Do something — every drop counts!
[Warsha]
The second thing is to the girl child, educate the girl child. And why girl child, educate every child. Absolutely. The girl child because the child in a lot of developing nations in the world, the culture, naturally puts the boy in front. So educate the girl child, speaking for those who cannot speak for themselves.
Another is like the horses. I love riding horses, I just have this deep connection with horses, and I rescue and give a second chance at life to ex-race horses (OTTB — off track thoroughbreds). Totally. It’s tragic that after just three to five years most race horses are just simply turned out because they are no longer bringing in the cash.
Ah yes. And educating the founder. Most SME founders start a business, because they’re good at what they do, not because they’re good at running a business. So the movement that we would love to create in that awareness that when you start a business you need to learn how to run a business otherwise you’ll get yourself nice and stuck.
[Evan]
For me, it’s along those lines too, but it’s also about awareness more broadly about financial literacy. Okay. We’re not taught good money management growing up so the movement will be for all people, founders included, to be taught how money works and being able to make more informed financial choices.
