Everyday people all over the world make the decision to start new businesses. They enter the world of commerce with optimism and fervor to be the best next best thing. Many have succeeded from very humble beginnings, to dominate the world with superior products. Microsoft was founded by two childhood friends, and Dell Computer had its beginnings in a college dorm room by a college student. Both have successfully ridden the torrential global business cycles to become successful stand alone entities.
Dell became a legend in sourcing; product management and marketing, and Microsoft started an industry, becoming so dominant that there are very few organizations in the world which does not use at least one of its products. These companies are benchmark in their field, and are also referenced for case studies in most business schools. However sometimes even when companies have good products, they discover that selling the enterprise is the most prudent decision for the organization and the product they sell.
The most common reason by far is a deficiency in capital. It restrains the entity from taking advantage of economies of scale, resulting in higher unit cost. Unless the product is highly differentiated it will be less profitable than similar products, because the market’s equilibrium price point will be set by competitors with scale advantage. The lack of adequate capital affects beyond the production line, and ultimately restrains the ability to gain market share and brand loyalty. For those who can, credit or partnering may be an option. However, this comes with the price of added carrying cost and the sharing of ownership. Loans have to be repaid and partners demand accountability.
The principals of Method considered the scenarios open to them and concluded that selling to the Belgium company Ecover was their most prudent option. They had developed a cutting edge product and took it to the maximum limit their resources could afford. Hopefully, this move will allow continued growth of the product, job security for its employees and at its least, an adequate return to the new owners.
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