“Why do you want to build a company?” I asked my friend.
My buddy is nearing retirement. He is a gifted product manager and entrepreneur who is very close to his market. He has come up with products all his life which changed the way people did business, making them more efficient and more profitable.
“I want to build a company so I can make enough money to retire without financial worries,” he said.
“Building a company in this hyper-competitive environment is hard work and fraught with risk. Isn’t there another way to reach your goals?” I asked.
This question made him sit back and think.
I could see the wheels turning.
“You have a great product right now. You also have a great network and brand in your market. You can build a company around it and go for the massive valuation. But you can also build a licensing company which can generate cash,” I said.
He said, “That may work. I know the technology companies who would be excellent prospects for my product. Many of them have a product, but it is not competitive enough to generate revenue growth.”
“That’s right,” I said.
“What type of overhead would you need to have in place to execute on a software reseller licensing strategy?” I asked.
“A lot less than if I was trying to build a SaaS company,” he said.
We talked at length about how this licensing strategy would work.
He would need three elements.
- Proven Product. He needs companies already using the product who are raving fans. The product must be in use and already working well in the marketplace.
- Market Map. He needs a market map of the companies he will approach. He must be clear on who they sell to, their market size and opportunity, and their product mix. This will help him position his product when he approaches them.
- Deal Structure. He needs a deal and support structure which clearly delineates how much and for how long.
This strategy generates cash.
If my friend’s expenses are low enough, he should be able to bank a good bit of cash to meet his goals for retirement. It is clear to me this strategy could work because of who he is and what he brings to the market. He is uniquely qualified to pull this off.
I walked away from the conversation wondering how many entrepreneurs think about personal goals when planning their company.
If you are clear on your vision, you’ll come to a strategy which gets you to your vision. If you have no vision, you’ll just do what everyone else is doing. And that may not be right for you and your family.
Picture your life when the game is over and you put all the pieces back in the box. Now ask yourself, “Am I executing on the strategy that’s right for me?”