Curtain Call

The Bigger Picture

Some entrepreneurs might hesitate at the idea of working inside a public company. The restrictions of reporting to a boss and taking direction from those who are higher in the chain of command might give some entrepreneurs second thoughts.

Kevin McDonald, 35, would not be among those. Now executive vice president and general manager at the Nasdaq-listed Inforte Corp. in Chicago, McDonald was, until recently, the co-founder and CEO of Compendit Inc., a $9.6 million consulting business specializing in enterprise resource planning. In March of this year, McDonald and his team sold out to Inforte for $6 million in cash upfront-and as much as $6.3 million more paid on performance over the next two years.

McDonald could have walked away, but he didn't. With an eye on having a smaller slice of a much bigger pie, McDonald took the job as executive vice president and general manager, and the business now continues intact as a division within Inforte. His executive team and most of the 54 Compendit employees stayed, too. Although he now reports to the CEO of Inforte, McDonald jokes that he doesn't struggle with the chain of command. "As an entrepreneur, I have always worked for my team, my customers, my wife, the bank...what's one more boss?"

Being a part of a larger company was not so much an exit strategy as it was a strategic move for Compendit. "I prefer to think of it as finding a partner to help us get to the next level," says McDonald of the sale. "We knew the market demand [for our services] was there; we just needed the infrastructure. But focusing on building the infrastructure was a distraction." Rather than miss a window of opportunity, McDonald and his team decided to sell to a group that had the people, the technology and the capital already in place.

Has the sale affected his daily routine? "It is a little different," he admits. "I get to focus on things that I'm good at and where I can add value." Plus, there's that incentive to keep the business growing. So even though Inforte is taking some of the back-office load, McDonald is under the gun to continue sales growth. "The other difference is that I'm working 40 percent harder now," he laughs.

There is the occasional ambiguity of working for a public company. Former Compendit employees often find themselves asking where their authority ends and Inforte's begins. "We're learning the life of a public company," says McDonald, "but we share a pretty similar vision about where we want to take this business."

Nouveau Riche?
Not everyone can sell a company and join the high-net-worth club. But if you're among the fortunate few, you may be interested in Tiger 21, an organization providing peer-to-peer learning for high-net-worth individuals.

Started in New York City by Michael Sonnenfeldt, the group meets to discuss budgeting and family issues, such as "How do I keep what I earned?" and "Talking to my kids/spouse about money," as well as more technical financial issues like "How should I set up the sale of my company to get the best advantages in retirement?"

Sonnenfeldt says he started the group six years ago in response to his own needs for support and knowledge after he sold his real estate investment business, which at the time had assets of $1 billion spread over 200 properties. "It's hard to find the right environment to ask elementary questions when most people expect you to be an expert," he explains.

Managing new wealth is obviously a common concern among the members, so lessons on investing are a large part of the Tiger 21 curriculum. "Each of us is expert at something particular to our specific industries, but we aren't expert at investing," says Sonnenfeldt. "Now, as an investor, the world becomes more complex-exactly at the moment you've lost the infrastructure you had as a CEO."

Today, Tiger 21 has about 30 members with net worths from $15 million to $100 million each. Those members are divided among three separate groups that meet one full day per month. The result is strong peer relationships that build trust, loyalty and mutual support. Current groups are centered in New York City (though one splits its time between New York City, and Boca Raton and Fort Lauderdale, Florida), but Sonnenfeldt expects to have several satellite groups operational soon. So if the $20,000 annual membership fee fits your budget, you can find more information at www.tiger21.com.

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This article was originally published in the October 2004 print edition of Entrepreneur with the headline: Curtain Call.

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