The Dharma Theory

Dharma & Greg was a television sitcom that aired from 1997 to 2002. The show starred Jenna Elfman and Thomas Gibson as Dharma and Greg Montgomery, a couple who married on their first date despite being polar opposites. Dharma was a free spirit daughter of 60’s hippie parents and Greg the son of a Wall Street Lawyer. Hilarity ensues.

In a season 2 episode, Dharma’s makes an impulse decision to open a store without first deciding what she will sell, contending that the location will tell her what it should be at some point. Throughout the episode, the story flashes back to the “store” getting busier and busier with each flashback with people waiting, reading, sharing stories and generally enjoying the atmosphere of the non-store.

In the final scene, Greg stops back to the store, finding a despondent Dharma left alone in an empty store. There is of course only one “logical” conclusion: she was bought out by Starbucks when they stopped in and saw how busy it was.

When you start a business there are only three options. You’re either going to go public, get acquired, or run the business until you’re 65. At various points, those options will fall away. Like Dharma, entrepreneurs often consider acquisition as a legitimate exit. But that’s a view you get when you look at acquisition as a by-product of entrepreneurism and not as what it should be — a goal. Not THE goal, but A goal

Tech consultant Joe Procopio recommends making three lists when devising your exit strategy; investors, customers, and partners. https://medium.com/@jproco/how-to-get-your-startup-acquired-e67f2a5528d8 . Customers are fairly self explanatory. Investors should be strategic — meaning they’re not angels and VCs, but large corporations for whom your company might be included in their innovation path. Then consider any partners, those companies who work with you to produce, market, or sell your product. Now pare this list down to only the largest and most deeply-pocketed.

If there are any companies on, or that potentially could be on, all three of those lists — customer, investor, and partner— they should be at the top of all three. Joe recommends that entrepreneurs drop the idea on potential buyers long before you’re ready to exit. These things take time, the acquisition cycle is usually much longer than the investment cycle.

There’s nothing uglier than realizing acquisition is your last, best option and you don’t already have those relationships in place. Preparing for your exit strategy is necessary, and the corporate buyout can be an attractive option.

BDC has some advice for entrepreneurs looking at selling their business. https://www.bdc.ca/en/articles-tools/start-buy-business/buy-business/pages/how-value-company.aspx .

Their basic valuation principles to determining the fair market value of the business say:

• Value is dependent on expectations

• Value is dependent on future cash flows

• Value is dependent on tangible capital assets

Net earnings, future earnings and cash flow all factor into the valuation of a company as does size of potential market, intellectual property and hard assets. Consider the risk, investment of time and resources needed to fully capitalize on your market. You may have a great product or service, but without the resources to bring it to market, you could find yourself in for a disappointing life lesson.

Col. Tom Parker, Elvis Presley’s manager, was noted for offering starving songwriters 5% of an Elvis Presley song, once they wrote it. The point was well taken most times. Owning 100% of an unrecorded song held little attraction compared to a piece of guaranteed success, and the royalties that a song sung by Elvis would bring.

In Buddhism dharma means “cosmic law and order.” Finding your exit strategy can be an important part of defining your personal goals to find your place in the universe. Dharma understood that.