On Your Own

The writer is an entrepreneur who hopes to share his experience and insights with readers who want to take that giant leap into business but are not sure if they should.

14/2019 – Late bloomers

Last night I arrived late for Caring’s 25th annual dinner celebration at Berjaya Times Square. I did use the excuse of horrendous traffic but it was really my own fault for not starting earlier from home. But I also had the excuse of not being able to wear my bow tie (which took 15 minutes) because the last time I wore one was during my own wedding years ago. As you can guess by now, I am wearing a new tuxedo, recently made and 30 years apart from the first one.

In view of my second son’s wedding next month, my dear wife had insisted that I get a new tux since I could barely put on the old one let alone cover my rotund belly. As my wardrobe consist of a few old jeans and tailored pants that could not fit anymore, I felt rather under-dressed whenever there was an official event that I had to attend. I have left it too late as my fashion sense has completely disappeared, now wearing jeans, t shirts and old shirts wherever I go.

I have always been a “late” person except for business appointments. As a late night person, my earliest appointments are normally fixed for late mornings. I will only wake up early for golf and morning flights. I work best when under time pressure which is actually foolish because I choose to delay, dilly dally and start working only when I put myself under time pressure. Like writing this article which I am horribly late in submission. Hope this article sees the day of light today.

I was a late bloomer in school and coming from a Chinese-speaking family, I had my problems learning and speaking English in school until I took up English Literature in Form 6. I was motivated by my (English Literature) teacher’s stinging remarks – Stop speaking English like a Chinaman!

Standard 1 to Form 5 came and went without any appointments of class Monitor or prefect.

But in Form 6, I suddenly found the confidence to take on projects and leadership roles in clubs, the sport house, fund raising and class monitor. Thirteen years in La Salle PJ and everything came together in the last two years. Better late than never.

It is from such humbling experiences during my school years that I have learnt not to prejudge people, especially people that I work with. There might be a late bloomer somewhere if given the right job, right motivation and supportive encouragement. Confidence and proper attitude trumps paper qualification in most cases.

Perhaps our Education Minister Dr Maszlee Malik is a late bloomer. After all he is a late politician, appearing only before the last general election. I have always believe that we should be patient and give time to Dr Maszlee or anybody sufficient time to get used to his job. Yes, he is inexperienced and he got the Minister’s job because Tun Dr Mahathir Mohamad denied his own appointment.

From a mere lecturer, Dr Maszlee was suddenly thrust into the limelight. Despite his diminutive size, his ego has grown proportionate to his ministerial role.

His skin has toughened considerably, basic requirements of a politician in power. He has his posse of advisors travelling with him so safety in numbers and shielding him from snappy jealous remarks. He is learning fast and growing into his job both as a politician and a minister. He sounds and act just like any minister from the last administration.

In a commercial enterprise, a new staff member is given six months probation before he or she is employed as permanent staff. I would normally confirm the new staff if he/she shows promise of a late bloomer. What would you do in Dr Maszlee’s case? I know many people have been calling for his removal from the Cabinet citing his introduction of immaterial policies of shoe colours, swimming classes etc. I will put them down as lack of experience or he was ill advised by his advisors. Small issues do not warrant the sacking of a staff or manager.

My patience is tested by his lack of constructive ideas on how he intend to transform the education system in schools and universities.

Dr Mr has given clear instructions of teaching Maths and Science in English in schools, reduction of school hours on religious classes, retraining of the 450, 000 school teachers etc. Everybody and I mean everybody in the country seems to know about these basic instructions from Dr M except him and his posse of advisors.

Now way past his probation period and after 14 months in office, he is still clueless. I doubt he will be a late bloomer. This job is just too big for him. He never gave any excuses for being late with his transformation ideas.

That is because he never started in the first place. Does he listen to advice from his seniors like Tan Sri Rafidah Aziz and Tun Daim Zainuddin on the importance of getting our education system to prepare our children to face the future?

The buck stops with the person who employed him in the first place. Tun Mahathir does not need to reshuffle the Cabinet. A straight replacement will do as well. Let Dr Maszlee keep his lecturer’s job and appoint Iron Lady Rafidah to do the job.

Just do it. Before it is too late.

Published: https://www.thestar.com.my/business/business-news/2019/08/10/late-bloomers


13/2019 – Seven deadly sins of partnership investment

Once you get into your 50s and 60s, life is all about attending marriages and funerals. Similarly, in businesses, you would see more breakups in partnerships but life would go on for those still alive. Just like marriages, some partnerships do tend to break down due to so many varied reasons.

In the first place, couples normally get married because of love. Love of the heart, love of the money, and love of the parents (arranged marriages). Men have proven that they have a larger capacity to love more than one woman as can be seen from them having more than one wife while women are more specific as to the reasons on why they marry. Macam-macam as they say in Malay. In a sole proprietorship, life is simple and straightforward. You make all decisions and you sign everything. But you are liable for all liabilities and all legal matters. In professional partnerships, all partners are liable and as such the partners will have to spend a fair sum buying liability insurance. Each firm have their own unique shareholder/partnership agreement.

For private limited companies, before the amendment to the Companies Act in 2016, there is a requirement of having a minimum two shareholders and two directors. So for sole proprietors like me having to set up private limited company with limited liabilities, it was normal to appoint my wife as a director with one share. My wife would have to sign all legal documents, bank matters, director’s resolution and final accounts. Thankfully, I have a wife who understands the necessity of such chores and she has supported me blindly all these years, so to speak. Sign saja la, they say.

There are many types of partnerships who start off as a private limited company. This is due to the fact that it has a limited liability when sued. Limited as to the total net worth of the company, shareholders do not have to fork out additional capital if the company goes broke unless as a director or shareholder, you signed as a guarantor to any bank loans, share sale etc.

Setting up a new company is easy. Partnerships normally start off as a bright idea or a good investment. When a group of interested investors invest in a new set-up, everybody start off with great optimism. Most of the time, there is no proper shareholder’s agreement done and the company secretary will just issue a standard copy of M&A or Memorandum of Articles and Association.

Nobody expect problems to appear anytime soon nor in the future. This company will make a lot of money and all shareholders will get annual dividends and everybody will be happy and smiley. Since we are all friends or relatives or family, we can overcome all problems by just meeting up and having a fruitful discussion. Semua masalah boleh kaodim.Nothing is further from the truth. Human shareholders suffer from the seven deadly sins of partnership investment. They are greed, lust, pride, envy, wrath, sloth and gluttony.

When the company does well, greed instincts amongst certain shareholders take over. From asking for more pay because I contribute the most profits to asking for more dividends at the expense of reinvestment to increasing your shareholding’s at the expense of others etc.

Lust for power has been the downfall of many partners or many shareholders. It gets bad when many operating shareholders try to build their own power base within the organization. No explanation needed.

Wounded pride is another common problem afflicting operating shareholders. If the partner’s ego grows in tandem with the company’s growth, it is just a matter of time when the other shareholders with a majority will deflate his/ her ego in a shareholders meeting.

Envy is the most common problem amongst partners. It is the source of all office and boardroom politics. Whenever there is a major dispute, the matters will never be resolved if there is an injured victim who feels that he/she has been aggrieved. Nobody will truly understand the extent of the wrath that this person can inflict upon the company. It is advisable to remove this person immediately before he/ she destroys the company.

Sloth in this case refers to apathy, to failure of the shareholders to do the right things that one should do. Whenever you see big trouble amongst shareholders looming, one should be proactive to do what is right before it becomes a major issue that will never be resolved.

Gluttony can be interpreted as selfishness, placing one’s concerns with one’s own impulses or interests above the well being or interests of others. How many time have one seen an operating partner indulging in their own interests and not for the company?

Many partnerships/ shareholders would have experienced such sins happening in their organization. When you can identify these sins early, then most problems can be solved. If you have a combination of these sins happening all at the same time and amongst different shareholders, I guarantee you that there will be no solution. Deadly sins.

My recommendation for you will be to sell the company, dissolve it (self liquidation) or major operating shareholder buying out every other shareholder. There will be a major fight as all shareholders now start to look after their own interest and only the company staff will suffer. Uncertainty and irregular instructions from directors and shareholders will demoralise the team.

As the value of the company is tied to the performance of the company, it is in the interest of the warring shareholders to argue and fight outside the company. Just as a marriage breaks down, the children should not be collateral damage.

To reduce future partnership problems, my advise is for all shareholders to agree to a shareholders agreement that covers all eventualities caused by the deadly sins. Minority shareholders should also protect their interest in the M&A especially on reserved matters.

Just as in weddings of rich kids and celebrities nowadays, it is trendy for them to sign a pre-nuptial agreement. This is because rich kids have rich parents who have experienced the peculiar sins of partnerships in their business life. Wealth problems, rich solutions. Mereka boleh.

Published: https://www.thestar.com.my/business/business-news/2019/07/27/seven-deadly-sins-of-partnership-investment/

12/2019 – Can an entrepreneur ever retire?

Every journey in life comes with continuous uncertainty. It is just so difficult to predict the future. Whether in bringing up your children or starting a business, one can only plan with hope that everything will turn out well. As parents or entrepreneurs, we can only worry that we have made the right decisions and let events unfold as we travel through the twist and turns of an uneven road fraught with potholes.

Recently, my daughter who is the baby of the family, joined the working class of the corporate world, preferring the consulting business rather than joining the family business. Her two elder brothers have also ventured into the “sexy” modern world of insure tech and private equity.

They have absolutely no interest in my ‘traditional’ businesses of manufacturing, trading and distribution and property development.

Every parent shoulders great responsibility in bringing up their children, hoping to provide the best education possible and hoping that they will turn out well as a responsible productive citizen and a humble, good human being. To a certain extent, in this context, I am relieved that my responsibility as a father has ended. They are literally on their own now.

My wife and I have to start planning for our own journey, the last innings so to speak as our children chart their own course in life. But first, I have to unravel all my commitments in my “traditional” businesses and I reckon it will take me at least a year to restructure my business interests and leave my children with just an investment holding company to worry about when I am gone.

Closing a company is not easy. It is easier to close a wholly-owned company than a joint-venture company with partner shareholders. More so if it is an ongoing concern. Divestment in property-related companies is easier as you either sell the properties or complete the development project which signals the end of the partnership. There is a definite timeline to such divestment.

Divestment from a listed company is much easier as the shares are publicly traded but divestment from a private limited company with an ongoing business concern is more difficult as your partners worry about the sustainability of the business without your presence.

Private equity investments only happen when the entrepreneurs stay invested (smaller stake) and continue to manage the company. This investment business model has worked out well hence more funds have been invested into private equity worldwide. Generally, entrepreneurs dislike running businesses based on numbers and forecasts as required by private equity partners but I guess the end results will help mitigate the entrepreneur’s unhappiness of losing control of the company that he has built.

My advice to entrepreneurs who decide to sell a majority control of your company – be very sure that you want to exit this business completely in five years time. No regrets will be entertained. It does help if you have decided not to leave the business to your children and you are not the sentimental type.

With so much disruption happening so fast, we are witnessing a record number of companies closing down. Big and small, they stand no chance of survival if disruptive forces attack their established business model in their industry. Most of the time they see disruption coming but they could not predict the speed nor the breadth of the attack.

Futile efforts are made to adapt existing distribution channels with new channels but in some industries, that particular business model does not work anymore. Like publishing magazines and newsprint business, advertisers have disappeared in big numbers and not all advertising budget have gone to digital mediums either. Just a fraction.

Fast-moving consumer goods companies reduce their total advertising spent and divert the dollars to supporting price wars at retailers who is under attack by e-commerce. This vicious price war reduces margins for all but it does benefit consumers. With a smaller value chain, middleman will be the first to go. Manufacturers will be forced to go directly to the market place.

Due to worldwide excess production capacity, manufacturers who do not adapt fast enough to new distribution channels and consumer preferences will be the next wave of companies to close down. From this disruption, we will see the emergence of brand savvy manufacturers, who work directly with retailers and e-commerce partners, crunching consumer data and producing in exact quantities as to what consumers need. Hopefully the problem of excess unsold stocks currently sitting in shops, warehouses and the logistic chain will be reduced substantially.

So my children’s decision to avoid participating in my “traditional” businesses does make sense as it will take a lot of hard work to re-invent its current business model. I was foolish enough to invest in manufacturing concerns as I thought that the future will still be in the hands of production capabilities but not knowing that manufacturers now have to absorb the middleman role as well. Gets more complicated but doable.

However, I am getting old and just the thought of the massive tasks ahead can make me feel tired. I guess it is time to call it a day as an entrepreneur. No more new business ventures and no more predicting the future. Just need to tidy up the loose ends, complete some projects, close some companies and reshuffle the few pieces of investments.

By the end of next year ( if I am still alive ), I will be twiddling my thumb every morning, planning my daily empty schedule and hoping to hold my first grandchild. I know predicting the future is difficult but without hope, there is no reason to live … especially for an entrepreneur.

Published: https://www.thestar.com.my/business/business-news/2019/07/13/can-an-entrepreneur-ever-retire/

11/2019 – Ambidextrous management

It has been a month since my last article. I found it awkward to type with my left fingers as my right arm is in a sling after surgery to reattach a torn tendon on my right shoulder. The culprit was a bone spur with a sharp edge probably formed from years of a bad golf swing which I now blame for my poor golf scores.

Having been a righ-handed person all my life, I found it difficult to adapt to doing normal chores with my left hand, from washing my hair to handling toilet paper to putting on clothes. I felt a tinge of regret for ignoring the usefulness of my left hand all these years, using it only when it was needed when I had to coordinate with two hands.

Just as in management, I tend to rely on my right hand man/woman in different departments all the time. When the right-handed person leaves, there is a big void as the left handed assistants, as in most cases, have not been exposed or trained to take over that role. Continuity of effective management is thus impaired and momentum lost while the replacement is brought up to speed.

Rather than being totally dependent on right hands or left hands, the modern CEO should be ambidextrous in nature, able to use both right and left hands equally well. According to my friend T.K. who is doing a thesis on ambidextrous management, he feels that ambidextrous CEOs are able to manage turbulence and disruptions in their business much better than one-handed CEOs.

To prove his point, T.K. sent me a link to an article on Ambidextrous Leadership by Deloitte which I thought was worth discussing. Ambidexterity is the ability to exploit present conditions by optimising the current business model’s operations while exploring opportunities to redefine that business model by taking pioneering risks. In short, taking risks on creating new values (higher margins business) while simultaneously squeezing out operational inefficiencies (higher margins, lower costs) in current business model.

When a business executes well on both fronts, it is positioned to experience rapid and sustained enterprise growth. This ambidextrous CEO and his company is now “undisruptable”. However, the three principles of ambidexterity must be adhered to before the company is undisruptible.

Firstly the CEO’s personal mindset must be ambidextrous, which must be translated into an expansive vision for action and communicated broadly throughout the organisation.

Secondly, enlist the C-suites (right-hand men and women) to become exploiters and explorers – those who seek order and optimisation and those who seek new innovative business ideas within their business units.

Thirdly, ambidexterity must be embedded in a company”s very design and infused into every team, group and division. Structural ambidexterity – where individual units operate in relative isolation with each group fulfilling a specific role in exploring and exploitation endeavors. Or contextual ambidexterity – an approach in which optimisation and exploration exists within every individual team, from the C-suite to the production line.

Are you an ambidextrous CEO?

On exploration, do you hold yourself and others accountable for novel ideas by thinking “outside the box” while fully committed to improve quality and lower costs? Do you and your team regularly and systematically search for and approach new clients in new markets, whether or not your current product or service fits their needs? Do you commercialise products and services that are new to your company?

On exploitation, do you introduce improvements to existing products and services as you better understand your customer’s needs? Do you find ways to increase economies of scale in existing markets and constantly seek ways to lower the cost of internal processes?

The key is in striking a critical balance between exploration and exploitation.

How then do we describe the management style of our Cabinet Ministers in the current and past government? Are they authoritarian, weak, ambiguous, collaborative or even clueless?

While past leaders were caught with one hand in the till, current leaders were caught in camera with one man in the buff. Both past and present leaders have their stand-up comedians caught with bad scripts and poor delivery. There were/are a few good men but their hands are tied to the back with constipated mouth delivering nothing.

Rather than being ambidextrous in nature, bisexuality crisis management go against the nature. Gutter politics is the name of the game, no gentlemen can be found and named.

Right hands fight with left hands, very soon left with no hands.

Umno and PAS rubbing their hands with glee, PKR implode amidst the melee.

Only Tun M stand tall and mighty, Bersatu will collect more MPs.

Management style still in the eighties, Malaysia will still be healthy.

You need both hands for your prayers, you need only one right hand man to create problems for your enemies. Am ambidextrous political leader who can use both hands will be deadly and effective.

Hands up for those who are disappointed with the quality of leadership in this country. One hand for very, two hands for totally. As I am still unable to raise my right hand, I will just raise a finger from each hand.

Published: https://www.thestar.com.my/business/business-news/2019/06/15/ambidextrous-management/

10/2019 – Can good corporate leaders be good entrepreneurs in startups?

I just got back from London yesterday after 12 days of travelling. Made a dash to Kraków and Warsaw, Poland in between hectic days of meetings in London. London was its usual busy metropolis whereas Kraków and Warsaw are two lovely cities that are very livable and relatively modern by European standards.

After eight years of spectacular growth since 2009, the London property market stalled last year and started its decline, with the high-end segment being the most affected. With Brexit still undecided, foreign buyers have been staying away unless big discounts are given, which will translate into a higher rental yield. Rental yields have been falling since 2010 as the growth in rental rates has been outstripped by a higher growth in capital value gains.

Currently, in central London, rental rates have held steady whereas selling prices have fallen. That is because there is still a shortage in housing accommodations. In Malaysian high-end property market (above RM 500,000) there is an over-supply with low tenancy demands especially from the expatriate community. So the selling price and rental rates are falling in tandem.

It has been proven that property cycles operate in the most simple economic form of demand and supply and yet many developers have been caught out in every cycle. Developers with good location developments and strong financials can afford to hold on and ride out the trough cycle whereas the financially strapped developer have to give away its margins to cover the bank loans.

Property developers in London have more difficult financing conditions compared to Malaysian developers. Build to sell concept means collecting deposits on off-plan sales while under construction, where the deposits are covered by insurance to protect buyer’s interests. No further progress payment is allowed which means developers are funding the development 100% from day one and can only get paid upon completion of the project.

Small developers have to fall back on mezzanine financiers (local ah-longs ) who charge between 10% and 15% per annum. Generally small projects/ refurbishments take between one and three years, relatively quick turnaround time if the developer hopes to make some money.

In comparison Malaysian developers have it easy from a financing perspective, are able to leverage off easy bank loans and progressive payments from confirmed sales helping to pay for construction costs. The trick in Malaysia is to get confirmed sales with approved bank loans. Then it is supposedly smooth sailing to completion if you have 60%-70% pre sold.

In a property downturn cycle, it does not matter which part of the world you are in, the problems facing any developer are the same. Critical cash flows, vanishing customers, banks tightening access to liquidity, suppliers chasing for payments and developers holding on to a supposedly unconvertible valuable asset. You are on your own. Alone and not a friend in sight.

Talking about friends, I was invited by Tomasz B, my classmate from Harvard Business School (HBS) AMP 182 program, 2012 to visit him in Warsaw. Tomasz was a rising star in the Polish banking scene, becoming the CEO of a medium size Polish Bank at the age of 43. After attending the HBS program, he was headhunted to be the CEO of a large French Bank in Poland.

Imagine our surprise when after three years into the job, he sent us a photo of himself in a hoodie working in a co-working space having invested in two fintech projects. He was 50 years old when he left the French Bank one and a half years ago.

Leaving a top corporate job is pretty common for high achievers but to immediately plunge into fintech startups takes guts and conviction.

From giving out loans, he is now searching for funding. Corporate perks vs startups peanut pay and what perks? He is learning to make his own coffee which is good sign of a wannabe entrepreneur.

My wife and I were invited to his home for a Polish dinner cooked by him and his wife, Iza. From red borscht (beetroot) soup with dumplings to veal pate, traditional salads of cabbages, cucumbers, mashed beetroots etc.

It was such an authentic meal, his whole family of children and grandchildren were present and pleasant. Tomasz has got a lovely family who is fully supportive of his new ventures. Another good sign for the wannabe entrepreneur.

Personally I would not recommend my corporate leader friends to leave their current jobs to join startups. Professionally, I would think that the fintech startups would benefit from the vast experience of someone like Tomasz. Insider knowledge on the banking system, disrupting the high margin segments, regulatory maneuvering, so much experience that will help minimize learning curve mistakes and being more focused on the right strategy from the start.

But can good corporate leaders be good entrepreneurs in startups?

Yes if the corporate leader has sufficient savings to invest and work for next to nothing wages for the next 2-3 years.

Yes if he has the right attitude in terms of starting again at the bottom of the food chain and he is not disappointed when his so-called friends in the corporate world suddenly disappear from his life.

Yes if he has the full support of his family especially the spouse. The entrepreneurial journey is lonely, stressful and problems often brought home. Family support gives you the strength to carry on.

Yes if he starts thinking like an entrepreneur and leaves his corporate gamesmanship behind.

Tomasz and Iza had recommended that my wife and I visit The Salt Mine in Kraków which is a world heritage site. What they did not tell us was that we had to walk down 135 meters or about 400 feet into the mines which was at the sea level of the Baltic Sea. Last year a total of 1.7 million tourists visited this site.

The Salt Mine Company is one of the oldest salt mining companies in the world. It has an amazing construction of 280 km of tunnels and chambers that the biggest chamber was converted into a chapel, some 135 meters below the surface.

While going down the steps and into one of the many tunnels, I was looking for natural light at the end of the tunnel and thinking of the property markets in Kuala Lumpur and London all at the same time. After two hours of walking underground, I was pleased to jump into a two level and two-sided chamber lift (for miners) and it only took 40 seconds to reach the top and into sunlight.

I would recommend that you visit this salt mine just once in your life time. Just like a wannabe developer should experience the trough of a property cycle or a CEO of a bank starting all over again in a fintech startup. Just once ….. in your lifetime.

Published: https://www.thestar.com.my/business/business-news/2019/05/18/can-good-corporate-leaders-be-good-entrepreneurs-in-startups/

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