Hello,

Most people create business empires by buying or starting several small or medium-sized companies and merging them into a giant centrally-controlled company. So we see companies like Microsoft, Google and Oracle growing bigger every year by buying up new companies. I have with this approach: I dislike big company politics.

In a small company, the manager is typically also the major shareholder, and he runs the business with a sense of responsibility that no hired hand can exhibit. He knows that most of the profit his company makes will end up in his pocket, so his interests are aligned with the interests of a company.

On the other hand, a large company tends to be managed by several layers of administrators who are really only concerned about their own pockets. At the end of the day, a hired hand becomes the CEO. The company loses focus because really, it's not clear who the employees are working for: the CEO? the directors? the share-flippers?

No one really owns the company, so it becomes a political ('corporate') establishment. Look at Microsoft. They can't even ship code anymore. They are just to big. Their company has no soul, unlike say Nairaland.

So I want to have a business empire - I really do - but I don't want to create or work in a gigantic corporate organism where politics, rather than ownership, is what determines who is in charge or what he company does. I want to be the one making the decisions in my empire, else I want the people making the decisions to be owners too.

I've decided that I'm going to organize my future business empire as a network of small companies, each of which has no more than 45-150 employees, and is managed by one person who owns 40% of it(while I hold 50%). Each company will serve other companies within the network and will also be free to look elsewhere for business.

Each unit within my empire will be a profit-making unit, unlike in big companies where most departments tend to lose money and most of the money comes from just one department. My managers will be entrepreneurs and not politicians because their capital will be tied up in the company and they won't be able to sell their shares. It'll be great.

I'll to have a website where I can log in every morning to read up-to-date reports on income, expenditure, contracts signed, and hires in each small company within my empire. If a particular unit is not doing well, I'll contact the manager to find out what's wrong. If I lose confidence in a any manager, I'll just buy him off (shotgun clause).

I'll also set up a loan market within the network such that a business in the investment stage will be able to borrow money from a current cash cow and pay back later when its investments start paying off. Any unit that runs out of money will be allowed to die. This way, the managers will pay for their incompetence.

I feel that with this system, I'll be able to create a strong business empire with soul. What's your take?

So far you can Walk the Talk, you will get there.

Thanks. I was hoping for more analysis of the idea, though.

I think you have a sound idea here.   It is logical to assume that if one owns a large stake in a business which he/she manages, one will be inclined to make it work.  You however need to have a thorough selection process for your prospective partners/managers.  You need to ensure that they are interested in longevity of the business and not short term dividend pay outs.  Otherwise you might have a high turnover of managers which is not good for the company.

You do not mention if these managers will actually buy into the business or are 'given' 40% by virtue of their position.   You could even structure it such that  they start of with a smaller share holding  say 15-20% (these are just arbitrary values) and then they gradually or quickly rise up to a maximum 40% share holding depending on their performance.  It would be good to have preset milestones which will dictate the pace at which they rise to the maximum holding.  The key thing as you mention is that they are only able to sell their shares to you.

You also do not mention what happens with the other 10%.  Will there be a clause which will prevent the manager from acquiring this extra 10% (this would ensure that you remain the majority share holder and prevent potentially disastrous clashes at board level).   

"Each company will serve other companies within the network and will also be free to look elsewhere for business." 
Will the goods and services be offered at competitive rates or discounts as they are sister companies? 

The idea of a loan market is sound as it ensure that sister companies can help the others take off at the investment stage.  Again I wonder if this will be at a competitive rate or interest free.  If so there would have to be stringent checks in place to ensure that the budding company does not underachieve because it may be reliant on the fact that it has a low or interest free loan rate.


If a particular unit is not doing well, I'll contact the manager to find out what's wrong.  If I lose confidence in a any manager, I'll just buy him off (shotgun clause).

As the major shareholder, you will have to agree before hand what "not doing well" means.

Anyways as I said I think you have a sound model and you should try to see it through.

Hello Liz.

Wow, thanks for your contribution to this topic!

Purpose of my plan:

1) To keep managers close to the people they are managing. I want each division to operate like a start-up.

2) To make sure managers own a significant portion of what they are managing, and behave accordingly. I want them to be owner-managers, not political mercenaries who really only care about their paychecks.

3) I want each unit of my business to be profitable. I want each manager to have to match her income and expenses. This way, I won't end up with a company where only 20% of the employees generate profits.

(If I call myself a capitalist, then I should structure my company like one. Instead of a planned 'economy' I'll have a market-driven one. If a division within my business cannot generate profits, it doesn't deserve to exist!)

I agree with you on the criteria for selecting the manager for each business division. It's important, too.

Also, as you've pointed out, it's not clear what percentage of her division a manager should own, and how this ownership will come to be. Is 30% is good enough to motivate a manager? What about 20%? What about 10%? If the manager is buying into the business, how do we fairly determine what her portion worth? I don't know yet!

As for the loan market, it will be up to the divisions who have surplus cash to determine the rates at which they are willing to give loans to the divisions that are in investment mode. That won't be centrally determined.

I don't think there's any need to agree beforehand on what "not doing well" means. If I'm not happy for any reason, I'll boot out the manager or sell me shares so she can run the business in her own way.

There's one other thing that came up while I was thinking about this idea. The tax implications of registering the divisions as separate companies. If I do it that way, then each time money moves between the divisions, the government will get a cut. I think it might be more efficient to run the system within a single company but treat each division within the company as if it's a separate company. That can work, although the division managers will have less freedom.

Thanks so much!

Hi Seun,
I am a new arrival to the nairaland family. I heard a lot about what a young mind like yours could come up with, and most importantly foster to greater heights. I must say that I well pleased that a nigerian youth can come up with something like this in this digracing era of 'yahoo yahoo'.
I would like to get some advise from you. I recently venrured into some private business. I am trying my hands out at exportation. I have a website out now and it has been running for close to a month now. The responses have had their crests and troughs, but I am still very optimistic. I recently came across a friend who told me about e-gold, but thats basically all I know about it now. I have registered with them and I have an account, but I need advise on how to fully explore it's potentials. Secondly, how does adsense work? I have registered, but that's about it. Pleas advise.
Austinuba

I wonder if you guys have more comments on this topic: running a business empire?

Seun,
This is a big topic I wish I had more time but I will contribute a little.
Firstly, don't be fooled by big companies like microsoft or Google or Shell etc. Most of this big businesses are broken down into managable subsidiaries and very professionally run.
Your idea is very good and it reminds me of the way Richard Branson runs his business empire. The virgin business empire is run as a branded venture capital. Basically if you have a big business idea you can go to Richard Branson who will sponsor you and you will also have the use of the Virgin Brand he usually does a 60% - 40% split he gets the 60. Or if he starts a business on his own he gets the best manager or the best expert in that field to run the business and gives them a 40% equity in the business. Together with the managers expertise and the attractive equity no wonder VIRGIN businesses are a big success around the world. Just like you want, all his businesses are indiviually run and the Virgin Group acts as a parent company in which they can borrow money in hard times or if they want to grow.
To run an empire in this manner you need cashflow which basically means you need a source of income (business) that can generate excess cash to fund the growth of your empire infact excessive cash is needed. Creating a big empire requires a very very good business foundation. All the big investors made their first few millions by running their own businesses, selling it or raising an IPO and when they make their million they now have time to grow their business e.g by buying competitors, starting new businesses or generally growing and improving what they already have.
Business in itself is easy to manager the biggest problem is managing people, if you can manage people successfully and have a great cashflow you are onto a winner.
Your business model is good it just needs a little brush up and you will be fine, don't worry you will figure it out as you go. All you need to do right now is concentrate to making your present business a big success so it can fund your plans or at least give you enough leverage with the banks and suitable investors. Dont forget to be mega rich you gats to USE OTHER PEOPLES MONEY e.g bank loan, IPO, Debentures, investors (private placement)etc. That is why most businesses go on the stock market to raise capital so they can grow. In the process of an IPO the funders of the business beomes mega rich. Bill Gates was a millionaire before Microsoft IPO,Larry and Sergey were millionaire before Google IPO but they all became overnight billionaire after their companies IPO and so many other like that. Obviously the down side is the fact that you lose some control in your business as you are now working with peoples money. 
Nothing is too small to start. I currently have business partners whereby they run the business and I watch from a distance and receive my returns as apprioprate and yes I have a shot gun clause anyways good luck

It's a nice thesis for the people.It will really help the business people.




east london plumber

Seun, You are an inspiration to youths. I am really on a quest to build a business empire and i definitely want to build it the way you suggested. I think this is the same strategy used by British Billionaire; Richard Branson. He expanded and diversified his company, yet, he remained small.

Hold on to your dreams Seun, i will see at the gathering of Nigeria's self made Billionaires. I love you

how do you register such empire/conglomerate?

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