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Seven Greatest Ideas for Taking the Plunge • 13

Division A Total

Turnover 1 00 100
Divisional contribution 18 18
HO costs 24 24
Profit (6) (6)

Good isn't it? By refusing to believe that head office costs should be directly linked
to the contribution of the divisions, we are forced, once again with great regret,
logically to close the business. Many MBOs get a head start from this kind of non-
sense. One of the people I talked to while writing this book bought a division from a
big multinational. According to its accounting system the division lost £500,000 the
previous year. The entrepreneur bought it for £250,000 and it produced profits of
£500,000 the following year without his doing much at all. Simply put,the manage-
ment accounting systems were giving a totally wrong reading of the state of health of
the division.

It depends, of course, on the board strategy but most boards nowadays are
interested in anything that offers demonstrable shareholder value. This makes them
highly amenable to a well thought out bid by middle managers to buy out part of the
business. Could this work for you?

Idea 6 - Research isnot optional

Before you take the plunge, it pays to have a good look at the situation you are
getting yourself into. This used to be difficult. You used to have to hire some arro-
gant information company to give you the fruits of the interviews and document
researched information on the prospected market, competition and so on. Nowa-
days it is much easier. Take competitive research. As long as you know the names of
the key competitors you can plug into their Website and hey presto they will volun-