Value Creation for Customers and Owners
Mr. Jeff Char (Profile) | Mr. Lance Lee (Profile) | Mr. Tim Williams (Profile)
EA-Tokyo celebrated their one year anniversary in style with a triple-banger seminar in front of a packed house on June 9 th at the Canadian Embassy in Tokyo. In a panel discussion, Mr. Tim Williams, Founder and Chairman of ValueCommerce, Mr. Jeff Char, Founder of J-Seed Ventures Inc., and Mr. Lance Lee, President of IGC (Japan) Ltd, discussed "What Does it Mean to Create Value. Creating Value for Customers and Owners." The mediator was Carl Kay.
Tim started the discussion off on the theme of value.“We think value is very important and that's why we put it in the company name, Ehe said.
ValueCommerce staff have the creed clearly stated on their business cards ∁E“Our customers' success is our value. Ebr> “Unless our customers succeed, they are not going to pay us, ETim said. “We have a very simple philosophy that the customer is god; we try and look after god and we try and provide services to them that either help them grow their own businesses, or let them cut costs. E
Describing his business, Tim explained “We run Japan's largest online marketplace. What we are best known for in the value-creation side is we will go to a client and ask ‘Do you sell products on line?' and they invariably say ‘Yes.' Then we ask ‘Would you like to sell more?' and they invariably say ‘Yes, please!' Then we help them sell more online and they say Ehank you.' So we keep it really simple. If it is easy for the customer to understand and you can help them create value, then you actually have some usefulness in life, they will be appreciative of what you do and you can build a relationship and that creates a Ealue bridge' from a revenue point of view, a personal integrity point of view and it allow you to create value that way. E
Next, Lance spoke about the value he has created in IGC Japan, a confidence-building program for young children. “We disguise the program by having gymnastics as the vehicle but we are actually trying to develop confidence in these children, Ehe said. “In some of the programs we have the parents with the children and that's where we can really see the value because the parents think we are talking to the children in the words that we use and the way that we go through each activity, but it is actually the parents we are talking to, and the child will remind the parents. We have one phrase we use all the time ∁E‘I can!' and then we have the kids understand what that mean. Through this philosophy we feel we are not only giving the child value, but the parents. E
Jeff described the value companies J-Seed incubators receive.
“J-Seed is a venture incubator, Ehe said. “Our real customers are companies we are helping to start up. We work with promising entrepreneurs and try to provide them not capital, but human capital. I have started a number of companies in the past and have made all the mistakes you could make and I try to use that to their advantage by telling them before they step on the landmine Eou probably don't want to step on that one' and help them in that way. Ebr>
Jeff helps customers incorporate some of the more mundane things in life such as dealing with the Japanese bureaucracy in setting up a Yugen Kaisha or Kabushiki Kaisha, planning strategy or trying to find a good sales partner, build a sales channel or hiring or firing. “Our real customer is the entrepreneur and we try to make it easy for them to succeed in Japan. Ehe said.
The panel then shifted gears to discussing wealth creation. How are they creating value for owners and investors?
Jeff mentioned he owns about half of the company. “We try to provide a monetary return to shareholders- obviously doing this prevents them from trying to sue me, and secondly it provides them with an incentive to help me with me with my next venture ∁Eto me this is very important. I can't burn a shareholder on one deal because I need them for the next deal, Ehe said. “I hope to provide them with opportunities to invest in new and interesting companies, concepts and new people and I am always trying to build the network. I believe the most important thing in terms of creating value is pulling together people with resources and trying to build that network. That is really what J-Seed is about. E
Tim described how he started a Yugen Kaisha with a friend.
“We were the only two shareholders and it was very simple, Ehe recalled. “At that point in time we were only accountable to ourselves and whether we succeeded or failed and the way we acted in business was completely a reflection of us as people. We started off planning to grow organically and for the first two years we just slugged it out. During that time, value to us was ‘could we pay our salaries' and ‘are we providing anything of use to the customer?' so we lived very much hand-to-mouth for the first couple of years, Ehe said.
Their focus was very, very basic and their value was “did we make some money, or not? Ebr> “As things improved we decided to localize software from overseas, ETim continued. “As fate had it we sold too much and we had an accounts receivable problem. We had great customers, and lots of money owed to us but we could see a cash flow problem coming. We thought we could go to our friendly banks and chat to them but we realized they didn't want to deal with venture capital people and they basically booted us out. We were then faced with a real value proposition where even though sales were going ballistic, we knew we could be out of business because we couldn't survive. So we went to a venture capitalist, encouraged them to invest in us and they were fabulous! Ebr> The deal was money for preferred shares, and it was at that point he realized that when someone gives you an enormous amount of money, your responsibility level changes completely. The pair accepted the offer, built up the company and took it public, creating a very nice return for the venture capitalist.
“Our business focus was on the value for the customer, the value of the service and money was a side product, ETim added. “I think if you focus too much on the value of how much cash can I get, I think you are going into business for the wrong reason from the customers' point of view. Ebr>
“With ValueCommerce, we had grown organically and realized we had to make the company more valuable. EAs an owner, Tim had to ask himself “Do I want to own 100% of something worth $2.50 E or “do I want to earn a lesser portion of something worth hopefully a lot more? Ebr> They thought the timing was right to take on venture capital and subsequently raised $40 million of capital in two years.
“We took on common and preferred shareholders who take a much more active seat on the board, so the value from their point of view is the more you put in, the less flexibility you as a business owner have, and the more you need to return to them in value. E
Tim and his team believed that to create value for shareholders, it is very important that all key executives and staff in a company have stock options.
“So first of all, you should all be owners, so you all have a common goal, Ehe said. “When we planned our value creation plan, we decided we would grow our core business organically as quickly as possible, we would add new value-added services that we could up-sell to our existing customer base, we would focus on some strategic alliances with companies that could really truly add value that could make money both ways, then the final one was an acquisition strategy. I think I created value for the company by realizing my strengths and weaknesses and I hired people who had a lot more strengths that I didn't have and they filled in my gaps. E
ValueCommerce have purchased three companies in the last three years and at present are doubling revenue every year. Tim emphasizes an acquisition strategy as part of a value creation plan “because you can get great people, great assets and great synergies between the businesses, and it is a great way to add value for shareholders faster than if you did it all on your own. Ebr>
Lance, who has run another company in the past, emphasized he has never been the sole owner of either of them. He has given shares to the people who have been working with him and made sure he only has 5% of the ownership of the company for tax reasons, while retaining all the financial control. “I learned after a while that ego was keeping me at a higher percentage of my company but it was also having me pay a large percentage of taxes, Ehe said.
In order to get out of the Eax trap', Lance found one of the best ways was to push ego out the way and take a smaller part in terms of ownership but take control of all the finances and purchasing decisions.
Tim believes if he had held the reins tight, “I would probably have stuffed up some things for sure. So, be aware of your own strengths and weaknesses. If you are running it all yourself, you have to learn every day and get all the skills you don't have by reading and talking to people. You have to skill yourself up until the day you die, otherwise your company will die. If you take the other route where you take on investment, then make sure you choose the right people, make sure you have worked with them for a number of years and make sure you have incentivised them correctly. When you have a great group of people around you, then you can relinquish some of that power. E/p>
Text: Jonathon Walsh
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Jonathon Walsh is a professional Editor and Writer based in Tokyo, Japan, originally from New Zealand and currently working for the Japanese-English bilingual magazine Hiragana Times. He is also a regular contributing writer for Eye-Ai and J Select magazines and a growing number of websites. He has written & self-published four books and had over 130 articles published in nine different media in Japan.
Jonathon is Director of Business Grow , an innovative company specializing in providing a wide range of top quality Editorial and Advertising services to Japanese and foreign organizations.