Software to Money: A Private Company Approach

By Raad Chalabi PhD

The book describes the management techniques that were employed to transform a small software private company to a company worth millions of US$.

The book assumes that the reader already knows what software he or she plans to market and to what industry it is intended to be licensed. The book therefore covers some tested management tools that could be employed to make the venture a business success.

The book highlights areas that need special attention from a business prospective. It documents those management tools that proved useful in converting a small software licensing company to a major enterprise.

The concepts discussed are those most suited to private companies but could have a more generic value to those who are interested impractical management issues.

• Language: English
• Publisher: Xlibris UK
• Release date: Oct 28, 2011
• ISBN: 9781465372352

Book preview

Copyright © 2011 by Raad Chalabi, PhD.

Library of Congress Control Number:       2011918040

ISBN:         Hardcover                               978-1-4653-7237-6

                   Softcover                                 978-1-4653-7236-9

                   Ebook                                      978-1-4653-7235-2

All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the copyright owner.

This book was printed in the United States of America.

To order additional copies of this book, contact:

Xlibris Corporation

0-800-644-6988

www.xlibrispublishing.co.uk

[e-mail]

302512

Contents

Dedication

Acknowledgement

Why Read This Book?

Who Are Your Partners?

Intellectual Property Rights (IPR)

Selling Your Software

Implementing And Supporting The Licensed Software.

Technical Resources

Cash Flow

Private Software Company Valuation

The Business Of Joint Ventures

Subcontractors

Book Summary By Charts

Appendix I Card Tech Ltd Accounts

Appendix II Card Tech Research Ltd Accounts

Appendix III Company Profile

Appendix IV New York Stock Exchange Announcement

Appendix V Flame Retardant Master Batch

Appendix VI Enerco Patent

Dedication

This book is dedicated to the one who built my palace and super-palace.

ACKNOWLEDGEMENT

My special thanks to my business partners and colleagues without whom this experience would not have been possible.

WHY READ THIS BOOK?

The purpose of this book is to provide a pragmatic look into how to transfer a software product that matches a business opportunity into a flourishing private company.

The book does not advise on what software to invent, how to code it, or what business opportunity to exploit; it assumes you already know all that.

However, the book does assume that the software you have developed is being licensed to an industry (e.g. banking) and its licensing value is in excess of US$30,000 per licensed user.

My qualifications for writing this business book is based on the fact that my partners and I formed a two thousand US$ private software company in 1990 and sold it and the businesses generated sixteen years later for more than fifty million US$.

Appendix I and Appendix II show the audited accounts of the companies concerned ten years after their creation.

Appendix III shows the company profile at the date of those accounts.

Appendix IV shows the announcement on the New York Stock Exchange of the sale of the said companies and related businesses.

I believe this track record justifies the time an entrepreneur interested in the subject would invest in reading this book.

The intention of the book is not to tell a story but to convey the management experience gained on a business journey independent of the personalities that travelled it.

Although the nature of a character that fits a required job is discussed, his or her personal circumstances are never covered in the book. No names, just concepts and themes.

The book assumes that the reader agrees that the measure of a successful private business is how much income and benefits it generates to its shareholders and employees within the strict requirements of the prevailing laws.

For those readers who agree with the proposed measure for a successful private business, I sincerely hope that the time you invest in reading this book is rewarding.

For those readers who have other criteria in mind as to how to measure success in a private company, I hope the book will assist in giving you additional options.

If at any time the reader feels the author is preaching, this is the last thing I wish to do. I have no magic wand for making money; my sole intention is simply to convey a business experience.

WHO ARE YOUR PARTNERS?

In a private start-up company, there are no silent partners or minority partners.

Normally, the business opportunity and its surrounding circumstances define the pool of available partners.

Unless the potential partner is critically needed for the success of the business and you cannot afford to employ him, he should not be a partner in the business.

Therefore, as a follow up from the above criteria, all partners must be working partners. They benefit and suffer equally.

It follows therefore that every business partner by definition is a decision maker and an expert in the part of the business he or she is critical for.

Therefore, choosing your partners is the most important decision you make in starting up your software company.

Your business partner is not your friend, your social companion, somebody you like to be with, somebody you have married or wish to marry, etc. He or she is somebody the business at its creation must have. It helps if you are friends and like each other, but the relationship at all times must be professional. No emotional considerations are allowed.

Your partner however must be someone whose honesty and capability you blindly trust.

In a private company, you cannot afford to second guess a partner in his or her field of expertise.

The partnership is a relationship between individuals in the business. It does not necessarily extend to a relationship with the partner’s family members or friends. Such an extension may lead to problems.

It follows from the above that your partner’s or partners’ contribution to the business pot is something you cannot do and its importance is equivalent to what you can do.

It is not a question of the partner sharing the load, this is a function of an employee; it is an issue of the partner adding a new dimension to the business without which it is doomed.

Partners must fully subscribe to the concept that the measure of a successful business is how much income and benefits it generates to its shareholders and employees within the strict requirements of the prevailing laws and the long-term viability of the company. They must base all decisions on that success criterion.

Partners with other criteria for success will destabilise the business.

The right chemistry between the partners is critical. However, it is as critical to limit testing that chemistry to issues relating to the business and its success.

You may think that I, as your partner, master my field of expertise; you also respect my business judgment in terms of risk versus reward and share my management approach in promotion on merit and accountability for success and failure, and we both agree on the criteria to measure business success; however, you may disagree with my politics, dislike my wife, think my children are spoilt, and my hobby is silly. That will still make us good business partners but lousy social companions. Therefore, why raise with each other issues which are unrelated to business and why bring in, to the gathering of partners, topics or people unrelated to the operation of the business.

It goes without saying that a business partner’s personal problems could affect his performance and therefore impact the company.

However, if you have chosen the correct partner, he will ask for help if he requires it.

You should feel free to bring to his attention a work problem caused by his negligence, but he has no right to blame