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.