KEY POINTS:
Know yourself. That's about the most fundamental piece of advice serial entrepreneur Tom McKaskill can give people who want to follow in his footsteps.
"Being willing to admit what you don't know and ask for help is really important," says McKaskill, who is now, after building and selling four businesses, the professor of entrepreneurship at Swinburne University in Melbourne.
"You need to understand what your strengths and weaknesses are and understand you cannot build a business without other people. You have to learn to work with other people and in a sense empower other people. You've still got the vision, you've still got the passion, you've still got the energy, but you will not do it by yourself."
That's why a lot of his work at Swinburne is about basic business upskilling for entrepreneurs. How to read a balance sheet. What working capital is. The importance of cash.
"If people don't have that training, they make fundamental mistakes."
Everyone who starts or runs a business now is called an entrepreneur, but not in McKaskill's book.
"The characteristics of an entrepreneur are passion, optimism, a high tolerance for risk, persuasiveness and business creativity. They see things other people don't see in a business. They create opportunities where other people don't," he says.
"Essential characteristics of an entrepreneurial venture are an intention to grow and innovation.
"The reason your local doctor and your local retailer and your local service provider are not entrepreneurs is because they are doing exactly what everyone else does, so there's no innovation. They don't have any intention to grow. They get to a certain size and have a comfortable existence, and that's their life, whereas the entrepreneur is never satisfied with that."
Given that most entrepreneurs would make more if they got a proper job, the question is why don't they?
"They can't. They want to be in control of their own destiny, they have a passion for making things happen, they have a willingness to step out of their comfort zone and take risks, and you can't do this in corporate life.
"This is why so many drop out of school or university. They're just not comfortable with rigid controls."
He says there are two main sorts of entrepreneurs.
"There are the traders, the deal makers. These people often create lots of businesses but they are not always successful because they don't have the skills. What they are good at is spotting opportunities. These people need to build the business to a certain size and then sell it.
"Then you have the executive entrepreneurs, people who come out of large corporations in their 30s and 40s. They see a problem in their industry their current business is not willing or able to cater for.
"Because they understand systems, processes, networks, corporate structures, they actually build much larger businesses that last a lot longer."
Even when they sell up, entrepreneurs like to stay involved. McKaskill says United States research indicates 80 per cent of angel investors, those who put money in at the earliest stage of venture capital, are cashed up entrepreneurs.
While entrepreneurial talent is not gender-specific, other social conditions means the class is dominated by men.
"More women end up in home- based businesses, small lifestyle-based things, because they can solve problems around them."
McKaskill's own entrepreneurial history has been closely tied to this country.
Twenty years ago, he and his first wife, Anne, a New Zealander, were living in Britain, building software to run on Digital Equipment Corporation computers.
Digital New Zealand and Australia agreed to part-fund the development of Promix, an enterprise resource planning system for process manufacturing. Promix eventually became Renaissance CS, which is still in use in hundreds of steel mills, chemical plants, dairy factories and other manufacturing sites around the world.
"Renaissance CS solves a real problem in specialty chemical and biotech enterprises around lot-based inventory with quality characteristics, and it's too complex to put in those big ERP systems like SAP and Oracle.
"The most successful way to survive in business is to solve a complex problem for a highly defined target market that has a compelling need."
When the market turned down, the McKaskills sold their company, which by then had 170 staff, to Ross Systems, which had a US distribution system and was willing to pay a premium.
His next venture was to pick up the North American rights to software developed by Cimdec, a company formed by the former Digital New Zealand ERP team.
He sold out when Cimdec was bought by Motherwell and formed another business to build production scheduling software for process manufacturing of liquid products.
"It never went anywhere, but we merged it with a company in Baltimore which had other supply chain solutions, so we got a few rounds of funding."
That business rolled into Distinction Software, which set out to build a supply chain optimisation tool for process manufacturing.
"We have been in process manufacturing for more than 10 years, we knew the business well and could sell back into existing customers."
Distinction was starting to find its feet when Peoplesoft bought a competing product, Red Pepper, for 25 times the revenue.
"Suddenly we were in a hot market so we went out and got $2 million in venture capital, finished the suite, and then in a lesson in life, we woke up one day and SAP announced a programme to develop a suite of optimisation tools so we lost all our SAP prospects.
"Then Oracle did the same, Peoplesoft did the same, JD Edwards, Baan, so here we were with 30 staff and a market stone dead with all the prospects grabbed by big boys' vapourware."
Even though the business was on track to lose US$1 million ($1.29 million), had no future and no revenue, McKaskill quickly put together a deal to sell it to Peoplesoft for US$8 million.
"The biggest lesson I've learned in life is how to sell strategic value," he says. "What I teach these days is what constitutes strategic value, who are the right buyers, how do you build the proposition for them, how do you build a relationship with them and how do you do the deal."
That means traditional indicators aren't as important as identifying which global corporation can best exploit what's in the business.
McKaskill says the mistake businesses make is to only see things from their own perspective.
"What they don't think about is the buyer, who should be able to bring in energy and a bigger customer base."
