As promised, here’s an analysis of why and how i sold my 2nd company in 2006.

Business Lesson: Price Correctly - charge them the perceived value of your products & services.

Although I am proud to say i didn’t have to prospect (ie. make cold calls) for a single day in the 2 years i was running eNeighbourhoodStore, but having friends as clients is a double edged sword. On the one hand, they are a reliable source of business leads and referrals. On the other hand, they won’t hesitate to ask for”friendship prices”.

“Friendship prices” means i charge very close to cost and oftentimes lower than my competitors. I wanted to give my clients / friends the best service possible; i aim to please. I wasn’t detached enough from the deal to charge based on the perceived value of my product and services.

This would cost me dearly.

Business Lesson: Build capacity to handle more business & to grow your business

In the preceding months, i had shored up capacity by hiring more staff to handle the growing number of projects.

However, by January 2006 i had lost all my programmers. Uzyn went back to his studies and could only work part time. Jessica and Thomsom couldn’t quite hack it as programmers and left for various reasons.

With the capacity to handle these projects now gone, i was left to handle all of them alone. Deadlines slipped and promised work weren’t done on time. I really hate to fail - and i especially hate to fail my friends.

I had strove to build my business on integrity and trust. So it pains me to have to break promises.

Business Lesson: Cash flow is the lifeblood of the business

With higher overheads now (payroll, CPF, rental, phone bills, hosting bills, etc…), having constant inflow of funds became very important. We had to make sure payments from clients come in on time. However, with slipping deadlines / milestone, the payments weren’t coming in as fast as i would have liked it.

Furthermore, we had a few clients holding up payment. For example, a huge cheque payment from the Singapore Sports Council was accidentally sent to my old office address, by the time i realise the mistake, the cheque had expired. It took 6 months for them to reprocess the cheque.

I was walking on a tenuous line between being the black and red zone (financially).

Business Lesson: Have a contingency plan to fail responsibly!

I did some simple cash flow projections in December 2005 - incoming funds (planned & delayed) vs. outflowing funds - and it wasn’t looking good. It’ll probably be 2 months before i get into trouble.

I had a few options:-

  1. Close down the business.
  2. Get additional cash injection - possibly from new investors.
  3. Sell the company.

Option 1 was unthinkable and irresponsible to all my hosting clients and to walk out on my projects wasn’t good for my reputation.

Option 2 was available to me - i had spoken to 2-3 potential investors - with 2 willing to put money down immediately. The truth of the matter was that i was getting tired of doing everything on my own. By this time, i had worked for 2 yrs without a real holiday. The idea of sustaining my current pace didn’t appeal to me - neither does it solve the fundamental problem - i need help in running the business.

Option 3 was the most appealing - my clients get taken care of, i take my mind off running every part of the business (administrative + programming + customer support) and i can cash out my shares (and take a much needed break).

By end January 2006, i had finalised the deal with Comwerks Pte Ltd and sold the company to them. As predicted, inflow of funds didn’t come in for eNeighbourhoodStore… but the outflow was stemmed - payroll, CPF, rental & phone bills. So whatever money that came in were gonna be pure profit.

Although I had given up ownership of the company, but as the CTO of Comwerks Pte Ltd (yes, that was one of the conditions of the deal), i was still in control of the company that i built.

And i finally took a much needed break - treating my parents to a holiday in Hong Kong in mid-2006 where we visited our relatives there.


Me with my parents (Dad seated bottom right & Mum in pink) & relatives in Hong Kong.

Failing wasn’t so bad after all. :D

Next: Why i decided not be an entrepreneur anymore… ok… maybe take a break from starting up new companies.

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This post belongs to a series: "Why i became an entrepreneur?"

  1. Why i became an entrepreneur? (Part 1)
  2. Why i became an entrepreneur? (Part 2)
  3. Why i became an entrepreneur? (Part 3)
  4. Why i became an entrepreneur? (Part 4)