Recently an entrepreneur I know contacted me to help her figure out what many would call a “high class problem.”  She had a potential buyer for her business, and the buyer was asking her the price at which she would be willing to sell her business.  Not surprisingly, valuing her business to sell was not something that she had been spending any particular time working on – she was too busy growing her business – but even if she had taken the time she admitted she really had no place to begin.  Over the next few days we had series of conversations about how to value her business -- the overall themes of which I thought would be of use to other entrepreneurs.  So, with that, here are some thoughts on how you deal with the issue of “what’s your business worth” when an unsolicited buyer comes along.

For years I have been fighting a lonely battle against written business plans.  Recently some of my colleagues at the Smith School of Business published a study that suggested that VCs don’t really care about business plans.  An article about the report is here and a link to a podcast from the researchers is here .  In fact, the study, at least as reported by the NY Times, suggests that business plans are useless!  Now, that’s a tact that I had never taken but one that I think requires a bit of clarification and guidance for entrepreneurs. 

If I could teach only one skill to entrepreneurs, it would be Jujitsu.  This naturally enough brings to mind the thought of thousands of well coached entrepreneurs felling petulant potential investors with a single chop. That’s not quite what I am getting at…..  Jujitsu is a martial art that turns the energy of an attack against the attacker. If you try to punch someone and you are suddenly on your back looking up at your adversary’s smiling face while your wrist is pinned against his left leg – that’s Jujitsu.  The energy of your attack becomes the energy he uses for the defense – basically you are fighting yourself.

In the context of entrepreneurship, Jujitsu means something else – it’s taking the unspoken negatives that someone brings into a relationship with the entrepreneur and turning them into an advantage.  How to do this, and when to do this, is the most important thing any entrepreneur can do to improve his prospects of success.

Next week I am going to be doing a panel for the NVTC on how to grow a business without external financing.  The link to sign up is here .  This is certainly a topic that is near to my heart, as I am sure you know from some of my prior postings .  I have felt for some time now that as the economy adjusts to a reality of smaller amounts of Angel and institutional risk capital, entrepreneurs would find ways to adjust.  In other words, I do not believe that people stop being entrepreneurial merely because equity financing is harder to obtain.

With the upcoming panel and my recent experience with local entrepreneurs, I thought that I would catalogue some strategies I have seen entrepreneurs use to advance their business in the absence of venture capital or significant outside investment. 

“May you live in interesting times” is a phrase that has been bouncing around in my brain the last few weeks.  This quote, attributed to an ancient Chinese wise man, is often described as a curse –the Confucian equivalent of a Jewish mother’s exclamation “you should only be so lucky to have a son like you.”  As I watch the news reports about our government’s actions regarding the financial crisis and the economy, I often ask myself “What did we do to deserve this mess?  Are the politicians paying attention to what’s going on outside of Washington?”

We announced today the establishment of the Amplifier Business Accelerator Program. The link to the Program is here.  We did this for a number of reasons. The largest one is that as we looked at the local early stage community we saw that the recession has caused an almost a complete breakdown in the local company formation ecosystem.  For many years  there has been a tendency to couple an entrepreneur’s desire to obtain experienced help and access to contacts with the need to obtain an investment from a VC firm or an Angel group.  This worked very well when times were good – or at least there were enough successes stories when times were good to obscure the entrepreneurs and companies that didn’t get venture capital funding and missed out on its benefits.

For many entrepreneurs the biggest point of confusion when starting a new enterprise is identifying what is necessary to start a business and what is necessary to obtain venture capital.  In boom times, this differentiation is often not necessary.  Often you hear about start ups that obtain financing, and then “find a business model.”  It is certainly true that many venture capital backed early stage businesses seem to meander a bit, as the founders take advantage of a multi million dollar financing round to find the right formula for success.  And, these success stories (if success is getting money and then figuring things out) reinforces for many founders the idea that the most important thing for any start up that has aspirations of growth is to get capital first.

Unfortunately, for many entrepreneurs and others in the emerging company ecosystem the concept of obtaining capital, and then growing a business seems the natural way of progression.  While, this might be OK when times are good, when VCs are not financing start ups (and Angel investors are worrying about their stock portfolios), this formula appears to break down.  And, many seem to conclude, without venture capital there is no way to start a business. 

Last year, I ended my Outlook 2008 with the following sentences: “As we head into 2008 my best advice to entrepreneurs is to be flexible and creative. This is going to be a very interesting and probably volatile year.”  Talk about understatement.  Well, as 2008 draws to a close, I can safely say that one thing is certain: if you scare the stuffing out of consumers and businesses, they will stop spending money.  That’s pretty much where the certainty appears to end. As we head into 2009, uncertainty is the order of the day. That being said, there are some data points out there which I will try to connect to provide some guideposts for the coming year.

President-elect Barak Obama is one of the most entrepreneurial presidential candidates in American history.  He has shown himself to be an optimistic self-starter who can create and sell a vision to others.  His campaign and transition activities demonstrate his exceptional communication and organizational skills.  As a country that is based upon entrepreneurial behavior, it is not surprising to see that Americans elected an entrepreneur to lead them through a difficult economic crisis.  Professional investors back entrepreneurs who have the characteristics that Mr. Obama is showing.  The question now is whether this most entrepreneurial of Presidents will support those most like him.