2000 bill corbin - entrepreneurial life - are you cut out to be an entrepreneur

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2000 bill corbin - entrepreneurial life - are you cut out to be an entrepreneur

  1. 1. Entrepreneurial Life: Are You Cut Out For It? by Bill Corbin Corbin Group Publishing http://www.CorbinGroup.com
  2. 2. ©2000 by Bill Corbin All rights reserved. Except for brief review excerpts or quotations, no part of this book may be reproduced in any form without written consent from the author or an authorized representative of CorbinGroup.com Printed and bound in USA by UN Printing, Division of UN Communications, Inc. Cover Design: Tim Tobias ISBN #: 189345602-1 First Printing: March 2000 For Information: Bill Corbin – CorbinGroup.com. 1429 Chase Court – Carmel, IN 46032 – 317 800 222 0590 x330 http://www.CorbinGroup.com email: BCorbin@UNCommunications.com LEGAL DISCLAIMER An entrepreneur is a risk taker. The purpose of this book is to help the reader toward a positive outcome. However, there are no words or ideas in this book powerful enough to guarantee success. Therefore, Bill Corbin accepts no personal liability should your business results be unsatisfactory (nor will he claim any credit for your success).
  3. 3. Table of Contents Entrepreneurial Life: Are You Cut out for It? Introduction................................................................................... 1 This is a book that presents the good, the bad and the ugly of entrepreneurial life. No sugarcoating. No get-rich-quick nonsense. The “15 Questions” asked in this book will challenge you to look deep inside for the ingredients of entrepreneurial contentment and success. (Author credentials are presented.) Chapter 1: Can You Come Up with an Idea “Good Enough”?.........................................................7 Is your idea good enough? Will you subject it to critical objective analysis? Have you thought through the multiple avenues to start-up? Most importantly, are you committed enough to start? Chapter 2: Do You Have the Right People Support?... .....................................................................21 Do you have the necessary moral/emotional support? Can you develop the operational support you’ll need? What about a partnership as a means of adding support—moral, operational or both? Chapter 3: Will You Risk and Can You Deal With Failure? ...................................................................29 The most fundamental question facing a prospective entrepreneur is simply this: Will you risk, and could you deal with failure? The answer requires family discussion and intense introspection. It is a crucial issue. iii
  4. 4. E-Lifestyle for You? Chapter 4: Can You Face Fear? ...........................................33 Failure is an event. Fear can be an ongoing companion along the entrepreneurial journey. The ability to face fear and operate effectively through it is vital. Chapter 5: Patience, Perseverance, & Willingness to Sacrifice...........................................................36 A growing business makes ongoing demands on your time, energy and money. Will you wait, persevere and sacrifice as necessary if your success comes more slowly than expected? Chapter 6: Can You Take Bitter Disappointment?......42 Can you take bitter disappointment? The potential sources are multiple: poor results, customer defection, employee or partner behavior. And disappointments sometimes come in clusters. The entrepreneur must absorb and bounce back. Chapter 7: Can You Be a Leader?.......................................46 Leadership does not require General Patton’s toughness, but involves multiple elements—among them are vision and the ability to articulate and communicate your vision. You must also be a disciplinarian, teacher, coach and mediator. Chapter 8: Can You Sell? ........................................................55 Even if you don’t personally sell to customers, an entrepreneur must become skilled at leadership selling. This involves effective communication and persuasion with employees, prospective employees, financiers and others. iv
  5. 5. Table of Contents Chapter 9: Are You Basically Honest? ..............................60 Less-than-honest entrepreneurs can make businesses work, but there are multiple risks including the possibility of legal repercussions. In the long run, a dishonest entrepreneur likely creates a culture of dishonesty that will be destructive. Chapter 10: Can You Analyze Objectively?....................65 Can you, or will you learn, to carefully and objectively analyze important issues? Many of an entrepreneur’s natural traits run counter to careful analysis. A process must be developed for thorough, timely, numerical (when possible) analysis. Chapter 11: Are You Decisive? .............................................72 The entrepreneurial experience may include nearly non-stop decision-making. It is necessary to prioritize, analyze and reach decisions within the relevant time window. Both attitude and process are important elements of decision-making. Chapter 12: Do You Have Personal Discipline?.............79 Personal discipline is necessary as the entrepreneur invests the time and energy necessary for effective launch. Organizational discipline results from the entrepreneur defining and enforcing the operational system necessary for smooth operation. Chapter 13: Can You Delegate?............................................84 Can you delegate responsibility and authority? Delegating is definitely optional but has enormous impact on growth potential and the entrepreneur’s life and lifestyle. v
  6. 6. E-Lifestyle for You? Chapter 14: Are You Flexible ................................................91 Flexibility is not a requirement to start. It is likely a requirement to survive, involving willingness to adapt to changes in your industry or in the general marketplace. Flexibility along with objective analysis and decision-making are the three-legged stool of preparation for the future. Chapter 15: Are You Willing to Learn and Grow?......96 As the business grows, the entrepreneur must grow. It is vital to be an ongoing student on subjects from technology to trends affecting the business. It is important to learn and grow to overcome personal weaknesses. Chapter 16: Why It Can Be Well Worth The Trip.... 101 The fruits of a successful entrepreneurial lifestyle. vi
  7. 7. Introduction The fact you are reading these words likely places you in one of three categories: 1. A person thinking about becoming an entrepreneur and wondering whether it's a good idea; 2. A person whose loved one is thinking about becoming an entrepreneur and you're wondering whether it's a good idea; 3. A person who has made the entrepreneurial plunge and is wondering whether to hang tough or try to find a real job. I promise this book will speak to you; and it will speak in an unusual way. Too much of entrepreneurial literature is either get-rich-quick nonsense or sugarcoated description of the good life you’ll find as a business owner. Anyone seeking fast and easy wealth should probably use this book as fireplace kindling. Overnight success visits now and then, but it is rare. After 25+ years of observation, I’m convinced that get-rich-quick schemes are designed to let the original schemer get quickly rich… and folks like you and me provide the cash. So I’m a believer that entrepreneurial success comes from intense effort over a considerable period of time. I can also state, from the trenches, that the entrepreneurial life isn’t all fun, freedom, glitz and glamour. I suppose there are a few charmed souls who start 1
  8. 8. E-Lifestyle for You? a business and experience smooth progress all the way to the Promised Land. I'd confidently estimate that for every charmed soul there are 100 people like me who have struggled, fallen, struggled some more and (hopefully) eventually made it work. A book on the entrepreneurial lifestyle does you no favors if it sugarcoats the reality. So here’s my promise. This book is reality based. It will challenge you. It will paint a realistic picture of the entrepreneurial experience, and it will ask you hard questions about your capability, commitment and willingness to learn and grow. Because it asks you to examine core personal issues, this book might occasionally remind you of the oft-told exchange between the parishioner and pastor: “I loved the first part of your sermon, Reverend, but in that second part you really started meddling.” It is tough duty to look inside and honestly assess strengths and weaknesses. But it is crucial. So remember, I’m on your side. The purpose of this book is to help you make a good decision about the entrepreneurial life. If you look at each of my challenges and decide to plow on, that’s wonderful. I welcome you as a fellow knight at the entrepreneurial roundtable. If the points in this book cause you to cancel or delay your launch, it’s likely the correct decision. If you are truly ready to be an entrepreneur, nothing I can say here will dissuade you. The Corbin Credentials A book like this should only be written by a person who knows of what he speaks. Here is a brief resume that I present as evidence: 2
  9. 9. Intro 1962–1968: A great deal of “higher” education including a BSIE and MBA [Note: Formal education is a good thing, but you won’t hear any more about it in this book. The community of failed entrepreneurs is full of MBAs. There are millionaire high-school dropouts. A hunger for continuing increased knowledge seems important. A wall full of degrees is A-OK, but doesn’t seem to be a crucial ingredient.] 1968–1971: Lower to maybe middle management, General Motors 1971–1972: Middle management, RCA 1973–1974: Founder, Concepts 4, Inc. Failed miserably, including loss of home and all personal wealth [In chapter 1, we’ll talk about why Concepts 4 failed. For the purpose of my credentials statement, suffice it to say that Bill Corbin learned the hard way that America is a land where a person can dream a dream, invest his time and money, and absolutely lose his shirt. In hindsight, this was an educational experience, but a major goal of this book is to help you avoid education by dismal failure.] 1974–1988: President, Unified Neighbors, Inc., a localized consumer magazine spun from $100 of invested capital that grew nicely and was sold profitably 1977–present: Owner, UN Printing & Mailing, originally developed to process the magazine but later spun into an independent business called UN Communications, Inc., with revenue now in excess of $3.5 million 1984–1996: Co-founder and husband of the president of Carmel Publishing, Inc. Carmel Publishing developed The Highflyer, a local magazine concept sold 3
  10. 10. E-Lifestyle for You? very profitably to Thomson Newspapers of Toronto and Stamford, CT [The successful operation of Carmel Publishing by Janet Corbin brings important depth to this book. Carmel Publishing was a classic woman-operated business that developed an excellent operating system. Its primary product was The Highflyer, a community magazine. It also became a skilled consultant in direct mail projects.] Miscellaneous: 1988, co-founder, Bereavement Publishing 1993, founder, Beckett-Highland Publishing and coauthor The EDGE Resume and Job Search Strategy, still in national distribution Additional failures include The Printing Place (early 1980s), Unified Neighbors of America (early ’80s), Carmel Happenings (early ’80s), UN Fulfillment (early’90s). More obscure efforts include a “To Your Home Auto Service” business, a “Family Photographer” business, and a firewood cutting and distribution business; all closed shortly after launch. Other Corbin-Family Ventures: ProSound Entertainment operated by daughter Lisa and her husband Jason; Kim Corbin Communications, iSkip.com, and related personal growth ventures operated by daughter Kim; UNWebDesign and multiple dot com businesses operated by son Brandon. 4
  11. 11. Intro The Bottom Line: Bill Corbin has seen all kinds of bottom lines, red ones, black ones, little ones and pretty decent ones. The failures were a tremendous education. The successes have been hard earned, delivering knowledge that can be helpful to fellow entrepreneurs. And along the way, he’s observed and counseled scores of start-up operations. I submit that this book is written by a cowboy who has earned his spurs. Before we dive in, there are a couple of important cautions. The book asks you questions such as “Can You Lead?” or “Can You Delegate?” Some readers don’t know the answer because they’ve never had a chance to try. Others would give a qualified “no” answer because they don’t feel comfortable with their skill. These are not necessarily reasons to abandon the dream. The entrepreneurial life should be viewed as an ongoing growth process. So the relevant interpretations of my questions are “Can You Visualize Yourself as an Effective Leader?” and “Are You Willing to Do the Work to Become an Effective Leader?” (delegator, etc.). In many respects, effective entrepreneurial leadership is like public speaking. It may not come naturally. It may be very uncomfortable. But it can be learned. Other issues in this book are related to your personal goals or philosophy. For me, “Can You Delegate?” is a key question because I believe long-term growth depends on building a team of empowered employees. I also enjoy the idea that, someday, my business will run profitably without my direct daily 5
  12. 12. E-Lifestyle for You? involvement. But there are successful entrepreneurs who choose to be extremely hands-on, delegating almost no authority. This kind of issue is essentially philosophical, and you can rightly discard my approach when your goals or philosophy differ from mine. One more intro item: The last chapter of this book discusses why, on balance, I am a committed lifetime entrepreneur. Between here and there is some pretty tough sledding. You are welcome to flip to the back of the book whenever you become fearful that dog-catching sounds preferable to many aspects of business ownership. And a brief style-note: This book does not include a chapter titled Do You Have a Sense of Humor? but many veteran entrepreneurs would argue that it should. Humor (or at least an attempt at it) has been very important to me personally and is so much a part of my communication style that—for better or worse—you’ll find it scattered throughout this book. Sometimes, in this entrepreneurial life, there is nothing better to do than shake your head, chuckle, and move on. Well, enough introduction—let's dive in. 6
  13. 13. Chapter 1 Can You Come Up With an Idea "Good Enough"? Not everything in this book is positive, but we can definitely begin on a positive note. YES! You can come up with an idea good enough to support a successful entrepreneurial launch. In fact, the role of “the idea” is less important than you might think. Too often, potential entrepreneurs sit and wait (and wait and wait) for that spectacular brainstorm—something like plastic or the personal computer, or maybe a great gimmick like hulahoops or pet rocks. Unfortunately, the years will become decades before most of us hit on a brilliancy. At the risk of sounding like a double-talker, I contend that the real key to starting your own business is starting your own business. The operative word is start. Tonight, in pubs across the land, people will talk about starting a business. Many of them will talk about an idea plenty good enough to support the launch. But tomorrow they’ll be back at Acme Corporation working for the man (or woman). Why? Because they didn’t make the firm commitment to start. Once a genuine start decision is made, you can begin looking for opportunities that fit your interests, skills, goals and lifestyle. The opportunities are there. The next several pages discuss some of the issues related to a sound start-up idea. 7
  14. 14. E-Lifestyle for You? Full-time or Part-time Launch? There are several reasons to consider a part-time first business, the strongest being experience. You can begin climbing the entrepreneurial learning curve before giving up your regular income. If your idea is “market testable” on a part-time basis and turns out to be a stinker like my Concepts 4 launch, you can gracefully exit without sending your loved ones to the street to beg for food. (Actually, I must confess to a bit of melodrama here. When Concepts 4 tanked, we sold our house and moved to a decent apartment. Our kids, then about 5 and 3, were elated because we gained a swimming pool. Janet, though, wasn’t nearly as pleased.) If you do elect a part-time launch, the idea must be compatible. If your part-time business requires full-time energy, you will soon be in trouble with the boss. Ideally it is an idea strong enough to eventually support full-time effort. If so, you can transition smoothly from part-time to full time. Some part-timers, though, are aiming solely at experience—time in the entrepreneurial saddle—before making a full-time commitment. If so, the part-time business may be in an arena entirely different from the eventual full-time effort. For some, this book may lead to a no go decision about the entrepreneurial life. For others, the conclusion may be “part-time makes a great deal of sense.” If this book’s 15 questions suggest weaknesses that should be worked on, a part-time business may be an ideal personal growth opportunity. An argument against the part-time launch was illustrated by that legendary military leader who landed his 8
  15. 15. Good Enough Idea? troops on the shore of an island he meant to conquer and ordered his aides to sink all their landing craft. “We are committing ourselves to success” was his clear message to the troops. A full-time business launch is definitely motivational, especially as car payments, grocery and dental bills come due. As is true throughout this book, the right answer is up to you, depending on issues such as skill, risk-aversion, available capital, and the relative familial power of your mother-in-law. Inside or Outside Your Direct Skill Base? An attorney or accountant who leaves the big firm and hangs out her shingle is classically inside her skill base. An attorney who buys a bagel franchise has moved a mile and a half outside it. While it makes sense to be as close to skill base as possible, opportunity often knocks elsewhere. In my experience, flexible people who are willing to become serious students of new fields can develop and/or hire the skills necessary to operate a variety of businesses. My personal path led to publishing, printing and mailing, fields in which I had zero prior expertise. Purchase an Existing Business or Start a New One? In theory, purchasing an existing business helps assure success. Issues like location, market acceptance and operating system are proven. This may be true, but I advise great caution. A sizable percentage of “business opportunities” are for sale because the present owner is operationally sick of the whole mess, losing his shirt, or 9
  16. 16. E-Lifestyle for You? both. Too often, it is a game played among you, the selling business owner, and the selling broker to see whether you can find the weenie before you become the not-so-proud owner of the seller’s headaches. Here are steps I’d take before purchasing a business: Find out the real reason for the sale. Retirement is a good reason. Sometimes genuine life change (spouse moving to a distant city, for example) is a good one. “Just tired of doing it” or “seeking opportunities elsewhere” are caution flags deserving careful scrutiny. Be sure the purchase price makes sense. This may require serious study of methods of evaluation in various industries. The purchase price should be considered in three ways: (1) Is it fair, given industry evaluation methods? (2) Can I make an adequate return on my investment? and (3) Could I take the same amount and start my own business from scratch? Look at a minimum of three years of actual financial statements and have a person knowledgeable in the field review those statements. Consider, but be suspicious of, claims of “fabulous owner perks” such as cash, vehicles and trips that are not…um…exactly clearly shown on the financial statements. Carefully review and fully understand any negative trends affecting the business: changes in fashion taste, technology, competitive activity, availability of skilled employees, community growth and shopping patterns, and the like. Remember that an intelligent seller will try to sell at peak value. It may not be intelligent buying to buy at peak value if things are likely to go south. 10
  17. 17. Good Enough Idea? Physically watch the business run for several days. Talk to key employees if this is acceptable to the owner. Observe them, in any case. Invest in a carefully crafted purchase agreement that spells out both the assets you are purchasing, the seller representations that were key to your purchase decision, and your recourse if the business’s value has been misrepresented. Escrow a sizable share of the purchase price with release based on your learning that “things are as they’re supposed to be” once you’ve assumed operation. Of course, starting a business from scratch eliminates the risk of buying a turkey, but it brings its own set of risks and potential gremlins. Franchise Vs. Independent Start-Up? Franchising is immensely popular in America, primarily because it blends the best features of a new business and buying an existing business. You have your own ribbon-cutting ceremony but are utilizing a (hopefully) proven business system. There are a bevy of issues related to this decision. These are among them: You pay well to become a franchisee. There are almost certainly an initial fee and ongoing royalty payments. There may be assessments of various kinds. Understand these fees well and be absolutely sure they make sense in terms of value you receive. You should be receiving substantial benefit in terms of trademark, marketing support and ongoing operational support in return for your payments. The alternative of “going it 11
  18. 18. E-Lifestyle for You? alone” should be considered when value doesn’t match cost. Some franchises are so operationally restrictive that you’ve really bought a well-defined job. This may be OK, and profitability may justify the giveaway of flexibility, but free-spirited entrepreneur types may chafe under franchise regulations. Some franchises carry a risk similar to purchasing an existing business. An entrepreneur sets up shop in Peoria. The business has some glitz and glamour—maybe even an article in the national business press and a mention or two on talk-TV—but isn’t working well enough in Peoria for the owner to support his family. So he decides to sell franchises! The logic flaw is hopefully obvious. I would not consider a franchise purchase unless I could visit two or more randomly selected locations of existing franchises. While there, I would speak directly and frankly with people who are actually operating the business. Government regulation requires franchisors to provide considerable “disclosure” detail. Read carefully and skeptically and seek analysis help from knowledgeable sources. Enough Investment Capital? When fledgling businesses expire, the autopsy report often names “inadequate capital” as the primary cause. This is likely true for reasons obvious or subtle. Obvious Reasons: Start-up capital must cover initial costs of getting organized; equipment, facilities and furniture; inventory; announcement marketing programs; and overhead, including labor costs until revenue reaches 12
  19. 19. Good Enough Idea? break-even levels. One of business’s wise old sayings is “Your start-up will take twice as long as you think...and cost twice as much.” While the math may not be precisely right, the sentiment usually is. A very large number of entrepreneurial start-ups simply don’t have enough capital to survive until sales revenues are adequate to support the enterprise. Less Obvious Reason: A closely related, but less obvious need for capital is “the learning curve.” Some ideas, especially highly creative ideas, cannot be fully visualized on spreadsheets or in written five-year plans. The idea must go to market, be tried, be fine-tuned, be tried again, etc. until we get it right. An enormous advantage of giant companies is their resource base. They can afford the time, talent and money necessary to test and refine. Experienced entrepreneurs build contingencies into their business plans. Many first-timers don’t have a clue. But whether vet or rookie, having the cash to support the learning curve can be a tough challenge. Investment Capital Continued: What Source? The majority of start-ups are financed with personal savings often supplemented by some family loans. This approach is simpler than most of the following discussion. It also leaves you with 100% ownership of your business. If you need capital beyond family needs, the issues quickly become complex. In general your bank won’t advance a loan based on a start-up idea. If they think you can repay the loan whether or not the business works, you’ll get the loan. Hardy souls willing to battle through Small Business Loan application processes (SBA) have a 13
  20. 20. E-Lifestyle for You? decent shot at securing a start-up loan beyond the established ability to borrow and repay. Some states and communities have business development funding available. If loans are not available, sale of equity—a percentage of your company’s ownership—may be required. Here are some possibilities: Individual Investors: Most towns have a wealthy person or two willing to invest in good-looking start-ups. The search can be long and the turndowns hurtful, but this is a possible source of funding. As a wildly rough estimate of cost, you may need to give up 20 to 40% of the business for meaningful capitalization. Some start-ups may include an informal consortium of investors, perhaps five or even more, who share the opportunity and risk. Venture Capitalists: This avenue is similar to individual investors except the industry is established. You can find prospective investors in the yellow pages or on the Internet. Application procedures are more formalized. The percentage of control you relinquish is probably similar to the individual investor scenario, but the “oversight” after consummation of the transaction is likely to be more formal and more intense. Partnership: Individual investors and venture capitalists, along with legal entities such as general partnerships, are variations of the silent partner concept. The partners provide money but are not actively involved in day-to-day operations. The possibility of one or more active partners, involved in day-to-day operations, is another potential source of revenue. This concept is discussed in the next chapter. 14
  21. 21. Good Enough Idea? If you consider any form of equity sale, it is crucial to understand the pros and cons in terms of cost of capital. Let’s wade into some numeric analysis. Let’s say we need $100,000 to start a business and we sell 35% of the company to get the $100,000. If the business fails—hardly our plan, of course—we made a good decision, at least in regard to raising capital. The investor made a high-risk play in our idea and, regrettably, lost his money. But let’s be more optimistic. The business goes well, and five years later has annual earnings of $100,000 that can be distributed to shareholders. You get $65,000. The investor gets $35,000. We continue this happy outcome for 20 years. You’ve received $1,300,000; the investor has received $700,000. You decide to sell the business and are offered a million bucks. You receive $650,000; the investor $350,000. While this is an essentially happy scenario, and looks particularly good while you’re dreaming instead of doing, it looks a lot less good when you realize you’ve shelled out over a million dollars to secure that initial $100,000. If the $100,000 had been secured by debt vs. equity, you would have long since repaid the loan, and the later fruits would be in your basket. The above example illustrates a solid business, probably local, with good earnings but limited growth. If your business has immense growth potential the math probably changes. Typically, rapid multi-geographic growth cannot be funded by the entrepreneur or the cash generating capability of the business. In this case, sale of equity—perhaps venture capital, perhaps public stock offerings at appropriate points—may be the key to growth. You face the entrepreneurial dilemma: Would I rather own 15
  22. 22. E-Lifestyle for You? 100% of a midget or 25% of a giant? My personal path has included 100% ownership of various businesses, but when I read the proxy statements of small public companies and note that President Mary Smith owns 800,000 shares of her company’s $15 stock, I realize that 100% ownership is a debatable strategy. Creative or Competitive Business Idea Creative businesses tend to be entrepreneurial inspirations—an invention, a brand new service, pet rocks, pet sitting, golf balls that beep in the rough. Competitive businesses slug it out for existing markets: bakers, printers, restaurants, gift shops. There is more glamour in creative businesses. There is probably more chance of big bucks in creative businesses. But there is a vastly higher risk of failing in creative businesses. My Concepts 4, Inc. adventure was a classic creative concept. Long story short: I had learned that largecompany R&D departments generate “inventions” that aren’t suitable for their distribution channel. RCA, for example, had developed a wristwatch with built-in television in the early 1970s. They also had a TV-calculator combination that looked amazingly like early personal computers. But they correctly analyzed that their dealer organization wasn’t geared to sell or repair watches or calculators. So the products (along with others) gathered dust on R&D’s shelf. I talked to friends in other industries and learned that this “mismatch of product and established distribution channels” is a typical big-company dilemma. I was a restless entrepreneurial spirit at the time, and 16
  23. 23. Good Enough Idea? assumed, almost certainly correctly, that there were thousands like me around the country. Eureka! We’ll build a national network of aggressive entrepreneurs and make ourselves available to RCA, other large companies and smaller inventors. We’ll become the distribution system they need to exploit new inventions. Still sounds pretty good when I write it, but I totally missed its “chicken-egg” problem. I couldn’t interest RCA if I didn’t have a network. I couldn’t interest entrepreneurs if I didn’t have products. After a forlorn 15 months—the highlights of which were a weak novelty greeting card line and a $49.95 grandfather clock made of cardboard (which could be crumpled by any passing 3-year-old on a Big Wheel)—Concepts 4 disappeared beneath the waves of the entrepreneurial ocean. The idea was novel. It made sense to a lot of people. But it was unproven and apparently unexecutable, at least with my resources and skill base. I next invented Unified Neighbors, a localized consumer magazine that would tell you who to call to fix your washing machine or roof. Again, the concept was brand new. Making sales was like carving granite. But this time the idea worked. Because the magazine required printing, I secured some equipment, originally just to save a few dollars on our own printing costs. Since the magazine was monthly, our equipment sat idle much of the time. I notified readers that “we’ll be your printing company.” It was wonderful! They came, with budgeted money in hand, and suddenly I understood the advantage of a competitive business. The dollars are there! They’re already flowing to somebody. 17
  24. 24. E-Lifestyle for You? Sure, I need to find ways to be distinct and offer real value, but I don’t need to carve granite. On balance, as a long-time veteran of both kinds of start-ups, I’d vote for competitive businesses, but there are great successes and unhappy outcomes in both categories. What about a Dot Com? As I write these words, Internet ideas are everywhere. Some are extremely creative. Some use the power of the Internet to deliver traditional products or services. There are business-to-consumer ideas, businessto-business ideas, even business-to-pet ideas. Only fools are confidently predicting the direction of e-commerce as it applies to the small business entrepreneur, but all this chapter’s cautions apply; and there is one more caution. Many Internet start-ups are based on “appeal of the idea” not whether the idea can demonstrably make a profit. The apparent hope is that “website traffic can eventually be turned into dollars – somehow.” Unless your pockets are extremely deep, this is very risky thinking. The good old days when ideas were tested by their clear ability to earn a profit provided a much firmer foundation. The KEY Step Regarding Your Idea Whatever idea you decide to pursue, take this step. Find people, knowledgeable people—maybe even people who don’t like you very much—and ask them to brutally analyze your idea. What’s wrong with it? What might be wrong with it now? Later? Beat it. Smack it. Give it your best shot. 18
  25. 25. Good Enough Idea? If the idea is good, it’ll survive this scrutiny. Defending it will be good practice for you (usable again when meeting with people like bankers). If the idea is bad, better to have it exposed before you’ve invested your savings and much of yourself. In hindsight, I think Concepts 4 was a demonstrably bad idea that would not have survived serious scrutiny. But a combination of excitement, ego, and “don't mess up my enthusiasm with negativism!” kept me from seeking tough scrutiny. Don’t make that mistake! Each of our chapters includes a section called “To Ponder and Discuss.” The purpose of these questions is to challenge you personally and to provide discussion points with others. 19
  26. 26. E-Lifestyle for You? To Ponder and Discuss 1. Why, for many people, is starting the elusive first key to starting a business? 2. What is the key advantage to a part-time start-up? The key disadvantage? 3. What are the pros and cons of creative vs. competitive businesses? 4. What are the pros and cons of starting a business vs. buying an existing business? 5. What are the pros and cons of buying a franchise? 6. What are the pros and cons of using your own money vs. seeking investors? 7. Would you rather own 100% of a small business or 20% of a national business? Why? What are pros and cons? 8. Is it smart to risk discouragement by having a negative horse’s fanny analyze and maybe beat up your business idea? 20
  27. 27. Chapter 2 Do You Have the Right “People Support”? Two kinds of support are vital: moral and operational. It is important to understand both and not confuse one with the other. Moral Support: As we’ll see in the next several chapters, the entrepreneurial life includes some tough times. You may work harder than you thought you’d work. Success may take longer—and involve more sacrifice—than you dreamed it would. As you face operational trials, tribulations and disappointments, you’ll be affected in ways that impact both your business and personal life. This reality should not be sugarcoated. As I look back to 1974, the number-one critical success ingredient has been support from my family. They realized how much I wanted to be an entrepreneur, were willing to share in the sacrifices, and gave me vital moral support in the tough times. I can’t imagine a happy outcome without that kind of support, and I would strongly advise you to secure it in advance. Operational Support: Your operational support is the network of employees and associates who help operate the business. Especially in the early going, it is tempting to confuse operational and moral support. As president of 21
  28. 28. E-Lifestyle for You? your own company, you soon understand the phrase “It’s lonely at the top,” even if your top isn’t very high yet. Before you are comfortable with the process, you must do things like set strategy, make decisions, and patch the problems caused by not-so-good decisions. You may be personally involved in business details for which you feel poorly qualified. For example, many entrepreneurs, me included, were jolted when they first realized they were their own bookkeepers. For these reasons, it is tempting to consider an active business partner. You gain someone to share the burdens of leadership and someone to fill in the weak spots in your skill base. The whether and if so who questions of business partnership are remarkably similar to what happens in the marriage decision. For this discussion, partner is (1) a person (or conceivably more than one person) who owns a substantial percentage of the business and (2) is an active day-to-day participant in the business. When I was younger and more rash, I advised against all partnerships, saying, “A partnership has all the drawbacks of marriage with none of the advantages.” There is a kernel or two of truth in the statement. Indeed there is enormous pressure on business partnership relationships. They tend to operate on an “equal-in, equal-out” premise that is rarely true in practice. They require compatibility of goals that is difficult to achieve. As a simple example, let’s say the business has been quite successful and could financially afford a dividend of $200,000—$100,000 to each partner. One says, “This is great! I can finally afford the cabin in the woods I’ve been dreaming about.” The 22
  29. 29. Support System other says, “This is great, but obviously we should invest the $200,000 in another part of the business so we can grow the business faster.” That kind of goal difference is tough to reconcile. Because spouses and families are often involved, the difficulty multiplies. When businesses are struggling, partners, being human, tend to blame the other for problems. Both tend to feel they’re working harder and sacrificing more. Conflict can be intense. Over the years, though, I’ve seen partnerships work grandly. So my old never is now a qualified maybe. Here are some of the issues: Fear (Moral Support) Is a Terrible Motivation In Chapter 1 we discussed those timid souls whose business start-up planning is done at the pub, over a beer. Fairly often (especially after the beer has worn off), the participants still like the idea of owning a business, but are fearful to take the plunge alone. So our pub buddies decide to become business partners primarily for moral support. It might work out, but the challenges of business partnership are vastly different from the challenges of swapping good stories or golfing and bowling together. The odds of partnership incompatibility are extremely high, and the ensuing conflict can destroy friendships. Fear of going it alone is simply not a good motive. Entrepreneurs can find comfort and fellowship among key employees, in entrepreneurial clubs, even in Internet chat rooms. 23
  30. 30. E-Lifestyle for You? What If You Need Money? As discussed in Chapter 1, the source of start-up capital is a key issue. You may need to give up some ownership to raise enough capital for a sound start. If so, it’s probably best to divide the issue of cash from the issue of operating talent. The phrase “silent partner” denotes a relationship in which the partner is involved as an investor only, NOT as a day-to-day participant in your business. If your primary goal is raising capital and you secure that cash by adding an active partner who happens to have some cash, you’ve essentially allowed someone to buy a job in your business. Your partner will assume that job is his—bought and paid for—and will be inclined to continue feeling that way even if his job performance is pitiful. As you realize that a doofus is permanently entrenched in the office next to yours, the significance of his initial investment soon pales. Fairly often, active partners do invest substantially in the business. This is A-OK if the primary goal of the original partnership was addition of key capabilities as discussed below. What About Key Skills You Lack? Let’s say you’re working on a restaurant concept, but you’ve never owned a restaurant and you’ve never cooked anything more complicated than Pop-Tarts and frozen pizza. This reality would definitely inspire the thought, “Maybe I should add a partner who knows how this business works.” As mentioned, it’s extremely common for an entrepreneur to lack one or more of the critical success 24
  31. 31. Support System skills: marketing, accounting, whatever. Without doubt, it can be tempting to consider seeking a partner who brings the skills you lack. As a general rule, it is not necessary or wise to add specific skills by giving away ownership in your business. The reason you hire employees is to add skill. In my own case, I’ve successfully operated a sizable commercial printing operation (complete with thousands of gears, pulleys and electrodes) with no prior background and with pitiful personal mechanical aptitude. Our key employees make it possible. If your start-up is on a financial shoestring, yet you feel the need for a marketing VP and can’t afford one, it is particularly tempting to offer a partnership position. I would enter such a partnership only as a last resort. It’s better than becoming paralyzed and never starting your business, but all possible alternatives should be explored. [I should pause here, in the interest of balance and objectivity, to say that not all successful entrepreneurs agree with the idea of maintaining ownership to the extent possible. There are strong success stories built around the concept of achieving teamwork, loyalty and dedication by sharing ownership with key employees. This kind of issue is discussed in more detail in Book 5, Entrepreneurial Savvy. I would argue that most first-time, start-up entrepreneurs are not ready to deal with the complexities of this kind of equity distribution, but I sure wouldn’t say “stop” to an E (our time-saving abbreviation for entrepreneur) who is philosophically dedicated to this approach.] 25
  32. 32. E-Lifestyle for You? What If There's One Person Crucial to the Business? A few business concepts are built around a single person’s persona or skill. Examples might be celebrities lending their name or artists bringing a specific talent. In these cases, as your business would be an empty bag without that person, you may need to consider a partnership arrangement. Even then, consider all possible alternatives first—for example, an attractive royalty arrangement that would assure ongoing participation in the business. What If You Lack Key Entrepreneurial Qualities? There is a crucial difference between business skills and entrepreneurial qualities. If you can’t successfully add a row of numbers, you lack a meaningful business skill. If you are paralyzed by quick decision-making, you may lack a critical entrepreneurial quality. The next 13 chapters discuss key entrepreneurial qualities. Some of these qualities are core—you really need them. For example, willingness to face risk and accept the possibility of failure is fundamental. A well-chosen partner might bring others of the qualities to your enterprise—for example, objective analysis and decision-making. You still need to clearly define roles, goals and expectations. You still face multiple pressures. But that person may be key to your comfort with entrepreneurial life and, accordingly, deserves consideration as a partner. Securing Equal Commitment Business owners often say, “No one cares about my business like I do.” This is usually true and, for some, carries the high price of being yoked—physically and 26
  33. 33. Support System emotionally—to the business. Vacations become too rare. The vacations that are taken can be interrupted by crisis in the business. The entrepreneur may be unable to fully enjoy relationships and activities because of mental preoccupation. In some cases, the problem is workaholism and will likely continue for a lifetime unless addressed at a core level. A partnership won’t help. But in other cases, the business is so demanding that breaking free from the physical/emotional yoke is legitimately difficult. If by entering a partnership, you achieve a fellow soldier willing to carry an equal burden and willing to fully cover for you while your family enjoys the fruits of your hard work, the partnership may be well worth it. Choose Carefully with Complete Understanding This book cannot detail all considerations of an effective partnership, but find books or people who can. Take the time to make a very good decision including the issues of personal compatibility, business philosophy, skills, approach to risk, and both short- and long-term goals. Invest in an excellent “buy-sell” agreement. This document covers the what-ifs of a partnership: What if a partner dies? Is disabled? Wants to sell his interest in the business? What if the business cannot support both partners? Who stays? How much does the surviving partner pay the departed partner? When? A buy-sell is crucial to a sound partnership arrangement. 27
  34. 34. E-Lifestyle for You? To Ponder and Discuss 1. Why is the support of family and loved ones so important? 2. Why do partnerships rarely achieve an equal-in, equalout equilibrium? 3. Why is partnership goal conflict so difficult? 4. Does it make sense to secure a partner’s money as well as his/her capability? Why yes? Why no? 5. When do partnerships make sense? 6. Is fear of a poor partnership reason to postpone your start-up? 7. When should you take action if it’s clear your partnership is not sound? 8. What is the role of a buy-sell agreement? Why is it so important? 28
  35. 35. Chapter 3 Will You Risk, and Could You Deal with, Failure? This chapter covers, with zero sugarcoating, the least pleasant issue facing a prospective entrepreneur. The sword has two edges. Your business may succeed; you may prosper grandly. But your business may fail. Our purpose here in Chapter 3 is not to discuss failure avoidance. Sure, you will do everything possible to succeed. You will do good prior research; you will plan your start-up capital and working capital well; you will develop a sound business plan; and you will carefully execute that plan. All these things reduce the odds that you will face failure. But the ugly truth remains: there is a chance that your business will not survive. As already discussed, your author knows of what he speaks. The tragedy called Concepts 4, Inc. was failure most grand, including the symbolic and literal loss of our second-mortgaged house. I might have failed less catastrophically, perhaps by pulling the plug earlier while there were still resources to finance a reasonably graceful exit. But even that would have been clear failure. I would know it. My friends would know it. My enemies would know it. My wife’s mother—not to mention her bridge club—would know it. All the skeptics who told me I shouldn’t have tried would know it. There is no way to duck a humiliation bath when a business fails. 29
  36. 36. E-Lifestyle for You? Let’s be deadly serious for a moment. In periods of American history like 1929, it was apparently raining bodies on Wall Street. The market had crashed. People had lost fortunes. Some, no doubt, lost their own fortunes and the fortunes of clients who had trusted them. So, in several tragic cases, people said, “I cannot live with this collapse,” and quite literally ended their own lives. I do not relate this story to be melodramatic. I certainly am not predicting some dire end for you if your business fails. Here is the key point. Those defeated souls of 1929 had entered a business arena that had a huge upside and corresponding downside. They knew it. They undoubtedly talked about it, maybe even joked about it, over coffee or cocktails. But when the potential downside became reality, there was not enough personal resilience to absorb the defeat and move on. The resume of many successful entrepreneurs includes at least one failure. Viewed philosophically, the failure is highly educational and an important, though certainly traumatic, step toward eventual success. Even if the outcome is a life-decision to return to a nonentrepreneurial career, the correct philosophical view is “At least I tried. I won’t be sitting in my rocking chair someday regretting that I never even stepped up to the plate.” • These are the key issues: You must understand and accept—intellectually and emotionally—that failure is a potential outcome of your decision to become an entrepreneur. 30
  37. 37. Risking Failure • • • • You must accept the possibility of a substantial financial setback along with loss of the time and energy you invest. To the extent that your self-worth is defined by the opinion of others, you must be willing to face the possibility of failing in full view of those people. Some will be disappointed in you. Others may laugh, cry or simply shake their heads at your folly. Your immediate family must be willing to face the agony of defeat and its potential impact on lifestyle and reputation. You must have the personal emotional stability to absorb failure and move on. This subject requires intense introspection and open communication with those who might be affected. A useful technique is “scenario projections.” Visualize the complete experience, making a worst possible set of assumptions about outcomes. Your start-up costs more than expected. The market demand is weaker than expected. There is more competition than expected. There is a run-up of key costs that you didn’t anticipate. And the ship sinks. Can you, and those you hold precious, deal with that possibility? If not, the entrepreneurial life is a highly questionable choice for you. If so, you can lay claim to a vital entrepreneurial quality. Then, make it a point not to think about this issue again. There is immense wisdom in the quote, “That which you fear will come upon you.” Put the thought of failure behind you and concentrate on success. 31
  38. 38. E-Lifestyle for You? To Ponder and Discuss 1. Have you accepted at the intellectual and emotional level that an entrepreneur is a risk taker and risk involves potential negative outcomes? 2. What is the role of family and loved ones in the risk-offailure issue? 3. Are you tough enough and secure enough as a person to absorb failure and rebuild? 32
  39. 39. Chapter 4 Can You Face Fear? The ability to face fear is a close cousin to the ability to risk failure. Failure, though, tends to be an event—a grim moment when the business must be diagnosed as being in a hopeless condition and removed from life-support. Fear is more like a nagging condition than a single event. Hopefully you won't face it often, but I'd bet heavily that every entrepreneur faces more than enough. Here are just a few of the challenges and dilemmas that might inspire a bit of justified fear: • • • • • • • • • Business is not growing at anticipated rates; working capital is running out; bank is running out of patience; not clear where more cash will come from. Major new competitor enters the market. Key customers begin defecting to new competitor. Major new technology or market trend threatens to make your approach to business obsolete. Key employee gives two-week notice. Key ex-employee then opens competitive business. IRS notifies you of impending major audit. Some key financial records are not in quite the auditworthy state they should be. Your business is targeted by a consumer or political group. Unfavorable media coverage results and you face interviews. 33
  40. 40. E-Lifestyle for You? • • You uncover dishonesty among employees and aren't yet sure the extent of your losses. Key customer who owes you a great deal of money declares bankruptcy. This list could be vastly longer, but I'm sure you get the idea. There are several topics in this book to which our “it's lonely at the top” phrase applies. Fear is certainly one of them. In our personal lives, fear is buffered by support from loved ones. In our “corporate career,” fear is usually shared among supervisors and other employees. The entrepreneur tends to face fear alone. Worse, the entrepreneur must often suck it up, put on a happy face, and convince employees and customers that all is well. A leader who has assumed a figurative (or literal) fetal position in the corner of the office will not inspire confidence. Note an important distinction. This chapter is not about feeling fear; it is about dealing with fear. World-class entertainers, reportedly including Barbra Streisand, experience intense stage fright before performances. You will experience a bit of “business fright” when first the IRS visits or other calamities befall. The issue is what you do with the fear. If you are paralyzed, depressed, or otherwise reduced to a less-than-effective state, that is bad. It will impact the situation you face, your self-confidence, and the confidence of those who rely on you. If you take a deep breath, square your chin, and plow ahead, you are doing the job that a leader must do. Note, too, that you can grow personally in your ability to deal with fear. With luck, your challenges will be small while your business is small. As the business grows 34
  41. 41. Facing Fear and you gain experience as a fear-processor, you will be able to face bigger issues. However, if the entire notion of facing fear and fighting through it is extremely…well…frightening, entrepreneurial life may not be for you. To Ponder and Discuss 1. Envisioning yourself in an entrepreneurial role, what kinds of problems or issues seem frightening? 2. How do you deal with fear in general? 3. How well do you hold up under pressure? What kind of example would your attitude and behavior provide for employees in your business? 4. If fear is a problem, can you imagine growing in your ability to handle it? 35
  42. 42. Chapter 5 Patience, Perseverance & Willingness to Sacrifice This book includes several irritating chapters. This may be the most irritating one of all. The entrepreneurial life of fiction and fantasy includes an initial financial investment and some hard work to get things going. Then it’s supposed to generate excellent profits that will support the good life: cars, boats, trips, lake cabins, pursuing your special life-interests, whatever. It might happen that way, but most veteran entrepreneurs would recommend you not bet the family farm on that scenario. Here’s the problem. It is widely understood that start-ups take cash and hard work. It is less widely understood that growing businesses take cash and hard work. Let’s look at cash first. The reasons your growing business will need cash depends on the kind of business. It may be more inventory, supporting higher receivable totals, new equipment, new store locations, ongoing hiring and training of new employees. There are many reasons. But the bottom line is this: The need for capital tends to suck the money your business can put on the bottom line. If you’ll pardon the double pun, taxes do some significant sucking too. When the sucking is done, the puzzled entrepreneur often sports a good-looking P&L and an empty billfold. 36
  43. 43. Patience, Perseverance, Sacrifice A clear road to entrepreneurial ruin is impatience. If you say, “I’ve worked hard, I deserve a much better lifestyle,” and prematurely begin funding boats, cars, etc. rather than growth, something has to give. The only other sources of growth capital will be selling equity or increasing debt. As already discussed, equity is an extremely expensive source of capital. Excess debt is also expensive and can make your business vulnerable to an economic downtown. Very often, the right answer is patience. As I write these words, I am still driving my 1990 Acura Legend. The reason is not entirely sacrificial. It has been a great car that runs today pretty much like it did when I got it. It looks fine. So my Scottish ancestry tells me to drive on. But another reason is habit. Over the years, I’ve learned to fund my business before my pleasures. The printing business has nonstop need for new equipment. Much of our equipment base has been internally financed through company profits. This is good for growth and good for the market value of my company, but not good for my line-up of boats and cars and such. This subject clearly involves your loved ones as well as yourself. If a spouse, for example, is not fully onboard your entrepreneurial ship, the potential need for longterm financial sacrifice will become a source of conflict. In approximately 1979, I first said to Janet, “If I just get a _______ (fill in name of piece of printing or mailing equipment), we’ll be all set.” I meant it. She believed it. But the business grew, so in approximately 1980, I said to Janet, “If I just get a ________ (fill in name of a larger piece of printing or mailing equipment), we’ll be all set.” I 37
  44. 44. E-Lifestyle for You? meant it. She didn’t quite believe it, but was hopeful. Eighteen years and maybe a hundred pieces of equipment later, I don’t say and she doesn’t ask. As will be clear in Chapter 16—Why It’s All Worth It—we haven’t missed much that we feel is important; but, along the way, there have been many sacrifices, and family support has been crucial. The ongoing investment of time and energy—physical and emotional—is somewhat similar to the need for more cash. A growing business sucks time and energy. You must serve a growing clientele while making the plans that will support future growth. You likely have more people to train and supervise. Your problem count is up. For a host of reasons, you will probably work harder in the growth phase of your business than you did in the startup. Willingness to make this kind of ongoing sacrifice is important to the entrepreneur. Again, family support is vital. It is important to be clear that “willingness to sacrifice time and energy” does not mean forever. If becoming an entrepreneur meant eternal forced labor in your own sweatshop, it would be a highly debatable choice. As we discuss in Chapter 16, you can build toward an enterprise that supports your desired lifestyle, including time outside the business. It may require team-building, delegation, even willingness to forego some income in favor of other perks, but it can be done. A less obvious, but highly relevant, area of sacrifice is ego. To illustrate, allow me to replay a phone conversation from a day when I was doing president and reception duty. 38
  45. 45. Patience, Perseverance, Sacrifice BC: Hello, Bill Corbin here. Caller: Hey, Corbin. Wow, I’ve reached the president of the company! BC: Well, that’s true, but you’ve also reached the janitor. I do not relate this tale to suggest entrepreneurs are doomed to latrine duty. But I will suggest that it reflects an important attitude. You need to say, “I’ll do what it takes.” If funding supports a hired janitorial crew, that’s great. If it supports hiring a necessary sales person or a bookkeeper, that’s great. But if you can’t afford to hire for it, and it’s gotta be done, guess who’d better do it? Another ego blow relates to one of the fundamental goals and misconceptions, of entrepreneurial life. “I want to be my own boss!” shouts the new entrepreneur. “You’re gonna have more bosses than you’ve ever had!” responds the grizzled veteran. This issue is subtle. I left corporate America because I wanted more control of my destiny. I didn’t like political games and I wasn’t confident that my superiors had my best interest at heart. They were clearly too concerned about their careers to worry about mine as a high priority. For me, the “more control of destiny” goal has been attained and is important. But the idea that entrepreneurial life generates a mini-kingdom in which you rule supreme is just plain not true. My earliest clear lesson was a summer day in 1977 when, unannounced, an IRS agent walked in to conduct “a routine field audit.” I spent most of a week jumping through hoops at the command of that boss. Many entrepreneurs become so dependent on key employees that, as a practical matter, the employees become bosses in multiple ways. This is to be avoided, and 39
  46. 46. E-Lifestyle for You? is the subject of Chapter 7, but it can happen. The clear boss for most entrepreneurs is the customer. If you establish a customer-oriented enterprise, you will soon realize that key customers have major power. Entrepreneurs who don’t grasp and adapt to the need to share and sometimes relinquish power will face tough sledding. Perseverance The willingness to sacrifice—money, time, ego—is likely essential to entrepreneurial success. Now let’s turn to its equally important first cousin: perseverance. In preparing this book, I conferred with many entrepreneurs. “What’s the most important quality?” I asked. The answers were many but the single most common theme was perseverance. In various ways, it impacts most of this book’s chapters. Simply stated, entrepreneurial perseverance says, “I am going to make this enterprise a success. I will work as hard as it takes and as long as it takes. If there are things I don’t know, I’ll study until I know them. When times are tough, I’ll be tough. I’ll fight my way through the bad times with faith and optimism that problems will be solved and good times are ahead. I will be a winner!” Here’s a recommended exercise. Buy lunch for a successful entrepreneur. Explain your business concept and ask for a realistic worst-case scenario of what you might go through to make it a success: How long? How much work? How much money? If you survive that lunch, without losing yours, that’s a good sign. 40
  47. 47. Patience, Perseverance, Sacrifice To Ponder and Discuss 1. Why do growing businesses require cash rather than generate a great deal of cash for the entrepreneur to spend? 2. Is your primary goal as an entrepreneur to (a) build your business or (b) support your lifestyle? 3. Do you have the kind of patience required to sacrifice until the business is on sound footing? 4. Are you prepared to invest the time necessary to build your business even if it means foregoing favorite interests and hobbies? 5. Can you suspend your ego and dive in at any level of your business? 6. Can you accept that customers, governmental regulators, even employees will sometimes feel like “the boss”? 7. Are you tough enough and patient enough to persevere through tough times on your way to success? 41
  48. 48. Chapter 6 Can You Take Bitter Disappointment? At the risk of having you declare me a total gloommeister, let’s look at another of the real negatives of entrepreneurial life. Now and then, you will be spectacularly disappointed. We’re not talking here about those wee issues like “darn it, sales are 4% below forecast.” We’re talking about punched-in-the-gut-serious disappointment. While I am writing this book without benefit of a crystal ball, I’d predict disappointment of one or more of these types for 99% of entrepreneurs: Result Vs. Expectation Say you come up with a new business idea or develop a major program for serving a new account or a new market. You’re sure you’ve done everything 100% right. You are 100% sure your efforts will be rewarded. You execute your plan, proposal, seminar, and things don’t work out as planned. Perhaps you receive a combination of both business and personal rejection. For example, an indication (subtle or blatant) that not only was the idea bad, but whoever dreamed it up was an idiot. That kind of feedback can be very hurtful to the psyche. If your 42
  49. 49. Disappointment company’s business plan relied heavily on a successful outcome, it can also be very hurtful financially. Customer Defection If your business depends on repeat activity from loyal customers, you will likely develop close corporate—perhaps even personal—relationships with key accounts. Veteran entrepreneurs know that the great ebb and flow of business includes gaining new accounts and losing some existing ones. But the losses can carry a boatload of emotional and financial implications. If your maturity level is well developed, you will take these actions: • Learn immediately why the loss occurred. • Try to save the account by appropriate remedies. • In any case, learn as much as possible about the cause and thoroughly analyze your business system for flaws that need fixes. • Take decisive action. If your maturity level isn’t well developed—or if the account was central to the plan for financing your child’s college education—you may feel tempted to curl up in a little ball and cry. Again, this is not productive and is not inspiring to employees or other customers. Employee/Partner Disappointment There is no body blow worse than learning of a major breach of trust on the part of a trusted member of your business team. Breaches can include these: 43
  50. 50. E-Lifestyle for You? • • Out and out theft Negligence so severe that the result is similar to theft • Blatant lying about matters on which the truth was important to you • Breaches of confidence that destroy internal harmony or aid competitors • Sexual harassment This list could be extended ad nauseum. The result is the same; you have a trusted team member who bitterly disappoints you. In smaller businesses, it is quite possible you view this person as a friend. It may be a relative. Yet job termination may be necessary. Problems in Clusters When entrepreneurs gather to exchange war stories, a recurring theme is the multiple body blow. “We no sooner got those OSHA boys out of our hair when the dam up yonder broke and flooded the whole dang warehouse. About that time, Mildred announces she’s suing because of what Freddy said to her, and the bank got wind of that and called our loan. Man, that was a tough three days.” OK, you may never face quite the multiple blasts of this fictionalized account, but problems will likely befall you in clusters. Whether one at a time or in groups, disappointment will enter your entrepreneurial life. You must be able to absorb the jolts, take necessary action, and move on. 44
  51. 51. Disappointment To Ponder and Discuss 1. In general, can you absorb disappointment and bounce back in a reasonably short time frame? 2. If bitterly disappointed by another person, can you set aside the emotional issues well enough to continue operating effectively? 3. If battered by multiple problems at the same time, can you absorb and bounce back? 45
  52. 52. Chapter 7 Can You Be a Leader? When you first select a business idea, you consciously or unconsciously(!) make a secondary decision: Will the business have employees? There are oneman or one-woman shops, usually service enterprises, involving the owners’ energy and personal skill. There are businesses that succeed nicely without staffing beyond a receptionist and a part-time bookkeeper. However, the majority of growing entrepreneurial efforts will require a team of employees. The roles of good employees are important: • • • • They allow you to multiply your efforts—the key mathematical concept stressed by many books on “how to become wealthy.” They bring skills that you may lack. They are the best chance you have to take a twoweek vacation before your 80th birthday. They can be part of a business family that becomes an important part of the fabric of a satisfying careerlife. On the other hand, our entrepreneurs trading war stories might be overheard to say “You know, I’d love running that business if it weren’t for two things: customers and employees.” Customers can be demanding and 46
  53. 53. Leadership unreasonable. Your employee group can give you close identity with the lonesome cowboy whose herd is bellowing loudly and running in all directions. If you have selected a non-employee business concept, this chapter is not key to your success. If you will have employees, read carefully The concept of leadership is complex and subjective. Some important points: Effective leadership does not require a gung-ho, General George Patton style. It does not require an imposing physical presence or high-level oratorical skills. There are extremely effective leaders who are reserved and soft-spoken. Many weigh in at 125 pounds or less. Effective leadership often involves honest recognition of leadership weakness. If your business requires strict cost accounting and you are a wild and crazy record keeper, you must hire and empower leadership in that area. If your sales team will require ongoing motivation and your own mother occasionally dozes off while you are speaking, you’ll need to hire and empower leadership in this area. There is ongoing debate about whether leaders are made or born. For entrepreneurial purposes, I believe they are made. You can learn to be an effective leader even if you never won a high school election, served as captain of the team, or were voted queen of the May Festival. HOWEVER, learning leadership requires hard work and willingness to step outside—perhaps far outside—your 47
  54. 54. E-Lifestyle for You? comfort zone. This willingness involves personal courage, one of the key qualities for entrepreneurial success. Courage is necessary to start in the first place; it is the real subject of Theodore Roosevelt’s tribute to the man who is willing to enter the arena rather than sit in the bleachers with life’s timid souls. Courage and toughness are required to face and overcome the disappointments that will surely come your way. But these qualities, like muscle, will get stronger with practice. As we discuss various examples of entrepreneurial leadership, you need not say, “Yes, I’m fully prepared in this area.” But you do need to say, “I can visualize myself, through practice and hard work, becoming effective in that area of leadership.” I will now attempt to list on-the-job entrepreneurial leadership requirements: Vision: You must correctly define a market and envision your new company’s products, services, marketing methods and administrative systems. This strategic vision must be correct for the present and must extend far enough into the future to allow ongoing business success. It may involve the need to anticipate and navigate rough seas, things like intense competitive reaction to your moves and fluctuating economic conditions. Articulation of Vision: Attracting employees in the first place requires that they believe your company is sound and will be successful. Employees will pull together, in the same direction, only to the extent that they buy into your strategic vision. They will remain energized and excited to 48
  55. 55. Leadership the extent you continue to paint a picture of success and progress. As your business grows, you will need a leadership group, perhaps department heads. These leaders will delight you if they are able to articulate the company’s strategy and value system. They will disappoint you if they articulate their own or someone else’s strategy and value system. It is your job to communicate the vision. Devices can include newsletters, company meetings and staff meetings. However the primary device should be short, ongoing, one-on-one discussions. Disciplinarian: This area is so important it has its own chapter. We’ll talk about the need to develop and enforce procedures such as quality control and accurate accounting. We’ll also talk about the need to communicate and enforce the “culture” of your company. Tough Decision-Maker: This area also has a chapter. You must be able to (1) identify problems that must be addressed; (2) objectively analyze alternatives; (3) make firm decisions on a timely basis; and (4) communicate and enforce those decisions. This process, in many businesses, is daily and intense. Fearlessness Regarding Employees: As mentioned, many entrepreneurs experience an early bubbleburst related to the notion that “I’m the boss.” It is quickly apparent that customers—particularly the demanding, highmaintenance customers—are the big boss. Less obvious, but more painful, is the possibility that one or more employees become your boss. “Hey, how can that happen?” 49
  56. 56. E-Lifestyle for You? you might ask. Well, they aren’t really the boss on an organizational chart, but if they become so important to you that you literally fear the possibility that they would leave the company, they gain a power that can be very boss-like. Real-life examples include these situations: • • • • A highly skilled employee whose personal skill is central to your ability to provide the company’s basic service; A computer-literate person who installs and becomes the only truly trained person in complex computer applications; A sales person who is bringing in a large percentage of your business but could likely take that business to a competitor; A popular foreman who has built a cult-like admiration among his/her employee group, causing your to fear the loss of multiple employees if their guru departed. Genuine entrepreneurial happiness is impossible unless you can reach a position of fearlessness regarding the possible loss of any employee. This doesn’t mean you must be hard, cold and indifferent. Positive personal relationships are enjoyable and improve the chance that key employees will remain lifelong employees, but you must not fear their loss. This fearlessness is required to maintain control of your business, to be able to negotiate reasonably during salary-increase discussions and to sleep peacefully at night. It also requires a dose of courage (a recurring theme in this book for sure). You must be willing to 50
  57. 57. Leadership say—and believe in your heart—“If this key person departs, the company will be just fine. It may be bumpy for a few weeks, but we’ll be just fine.” Note that your courage level can be helped if you’ve developed a corporate discipline that all employees are to be “backed up,” through systematic cross training. This helps, but you will still have key employees whose departure would hurt. Can you be tough enough to rise above fear and remain firmly in control of your organization? Problem/Crisis Handler: Every seasoned entrepreneur has numerous “when it hit the fan” stories: someone dropped a pipe wrench into a machine running at full speed; a customer rejects a huge job and demands that it be redone immediately; a lightening strike sizzled the computer system and the phone system; a fire destroyed valuable inventory; the IRS auditor paid a surprise visit; three key employees departed in the same week; three key customers declared bankruptcy in the same week; a key employee was conducting his marijuana marketing company on company time and on company phone lines; one key employee was showing nude photographs of himself/herself to another key employee who really didn’t want to see them. The list could fill several pages. The leader has two key roles: (1) Absorb the crisis personally and operationally; and (2) avoid chaos or panic in the ranks (usually involving employees, but sometimes, depending on the nature of the disaster, customers). It requires genuine leadership to calm your own fear, attack the problem, and communicate—usually by observable behavior—that the 51
  58. 58. E-Lifestyle for You? ship will be patched and will sail on. It is not good if the captain is standing on deck sobbing loudly or throwing women and children out of the lifeboat to make room for himself. Mediator: Some sections of this book may or not apply to you. This one is 100% assured. As the employee group grows, there will be conflict. Some conflict is rooted in personality conflict. Some is rooted in honest differences of opinion; some is politically motivated; some is hormonally motivated; some seems to come from nowhere when the moon is full. Whatever the source, there will be conflict and the entrepreneurial leader must be strong enough to mediate differences and get people back to work on a positive basis. Our company operates with a mandate of “professional cordiality,” the idea that employees need not like each other but must operate cordially in the conduct of company business. This approach, if successfully instilled in your corporate culture, helps, but it will not eliminate conflict. It does give you a basis to bring people together; to make it clear that the purpose of the enterprise is to serve customers, not to provide employees an opportunity to practice for the Olympic debating or fencing teams; and to demand, then help facilitate, swift resolution of conflict. Sometimes you feel like a counselor; sometimes like a referee. But you must be able to handle this area effectively. Teacher: The role of teacher is extremely important and often neglected. If growth requires a growing number of employees, it is crucial that they have (1) technical 52
  59. 59. Leadership skills; (2) administrative skills to the extent they are involved in record keeping of any kind; and (3) “culture knowledge”—awareness of the goals and value system of the company. Department heads must have these skills and the ability to communicate and lead. Formal and informal training is a key element of entrepreneurial success. Motivator/Morale Builder: There are several parallels between the entrepreneurial life and marriage. One is this: It sounds exciting and glamorous to a newcomer and it is, in fact, exciting and glamorous in the early stages. But it lasts a long time. If time and familiarity lead to boredom or conflict, the bloom is soon off the rose. Entrepreneurial leaders must consciously work on maintaining the morale and attitude of employees. One method is activities or programs. These are fine. The best way is leadership by example. If the leader’s attitude is good and the working atmosphere is positive, even fun, the odds of a positive employee team are much higher. The leader must also be aware of factors, from rumors to disruptive employees, that threaten company morale and must be willing to move swiftly to eliminate those negatives. The leader must wear many hats. Many are crucial to success. 53
  60. 60. E-Lifestyle for You? To Ponder and Discuss 1. Can you visualize yourself as an effective leader? 2. Are your communication skills good? If not, are you willing to find ways to improve them? 3. Why is vision so important as a leadership quality? 4. Does it make sense to you that “the boss isn’t really the boss” in many situations? Regarding customers? Regarding employees? How/why does this happen? 5. How do you handle crisis problem solving? Mediation of disputes? 6. Are you, or can you become, tough enough to make difficult decisions such as disciplining or terminating employees? 7. Are you an effective teacher, including having patience as required? 54
  61. 61. Chapter 8 Can You Sell? Entrepreneurial selling has two broad categories. You can probably survive without handling one of them, but probably not both. 1. Marketing-related selling. This process involves advising prospects of the existence of your business, drawing them close enough to potentially transact with you, then inspiring them to part with their cash. It may be as simple as locating your hot dog stand near a crowd. It may be as complex as national advertising, a website, 800 phone inquiries, and face-to-face selling. There are a thousand variations and, for the most part, the skill-set required to conduct this kind of selling can be hired. So a potential entrepreneur who “couldn’t sell water to a thirsty camel-owner” can probably develop a business idea and/or an employee group that allows a talent gap in selling to be minimized. (As an aside, it is my personal advice to become a good salesperson within your own business, even if you’re uncomfortable with the process. It is the best way to understand the client’s needs and the competitive marketplace. It allows you to directly gauge your company’s ability to fulfill customer need. But, again, an intelligent entrepreneur can probably survive without direct customer selling.) 55
  62. 62. E-Lifestyle for You? 2. Leadership-related selling. The previous chapter discussed leadership. It may go without saying that leadership is a form of selling, but in case it doesn’t, let’s stress it. When you sit down with a potential investor, you are selling. When you interview a high-potential prospect to fill a key employment role, you are selling. When you tell the IRS auditor that your intentions were pure even though certain aspects of your bookkeeping system fell below his standards, you are definitely selling. When you discuss a new project with your banker, you are selling. When you explain a sub-par financial report to your banker or investors, you are selling. The previous chapter’s examples, such as guiding your employee group through a dark period, certainly involve selling. The list could go on, but hopefully the point is clear. The entrepreneurial life, in the vast majority of venturetypes, involves ongoing selling. If this notion is frightening, there is good news. The necessary skills can be developed if you work hard enough at them. Here are some of the elements: Knowledge: If you are a true student of your industry and your enterprise, you have the first ingredient for leadership selling. Know the trends, and the technology. A Well-Defined Strategy: If you combine industry savvy with an articulate company strategy, you are prepared for many of leadership-selling’s challenges. Your banker, for example, will forgive a mismatched suit and necktie…maybe even some “uhhs” and “aint’s” if it is 100% clear you understand your industry and your 56
  63. 63. Can You Sell? company’s emerging role. At a minimum, this strategy should include a written mission statement and a written multi-year plan. Reasonable Communication Skills: Leadership selling does not require great good looks or high oratorical talent. It does require the ability to communicate clearly and it is helped mightily by smaller touches such as a firm handshake and good eye contact. These skills can be developed by practice and by programs such as Toastmasters. For many entrepreneurs, the best teacher is a trusted mentor. Accept honest assessments and constructive criticisms and work hard to improve. Positive Attitude: Perhaps by definition, a positive attitude is a key ingredient in leadership selling. If you convey doom and gloom, who will follow? If you maintain and communicate a buoyant, positive outlook, your attitude will be infectious, whether you are dealing with investors, prospects, employees or bankers. (Grizzled entrepreneurs will quickly point out, particularly in regard to bankers, that bubbly optimism will go only so far. You’d best have a folder full of good information as well. But good bankers have a sixth sense for negativism. So, even in that arena, your attitude is a key.) One of American business’s great examples of leadership selling was the Lee Iacocca turnaround of Chrysler. He first convinced a virtually defeated employee group that they could be winners again. He convinced the government that bailout money would be a great 57
  64. 64. E-Lifestyle for You? investment in America. He went on television and convinced consumers that buying a Chrysler car made sense. (And no one ever accused Lee of having the suave good looks and mannerisms of the typical TV pitchman.) It was an amazing piece of leadership selling. As I write these words, Bill Gates, founding entrepreneur of Microsoft is proving that leadership selling can be a key role for the E. He probably started business life assuming himself a techno-person. As he faces the multiple challenge of communicating with lawyers, judges, clients, shareholders and TV commentators, he is certainly selling today. Successful entrepreneurs almost certainly cannot avoid—and should become good at—leadership selling. 58
  65. 65. Can You Sell? To Ponder and Discuss 1. What is the difference between marketing selling and leadership selling? Can you do both? Can you leadership sell, or envision learning to handle it? 2. What are other examples of leadership selling beyond those covered in the chapter? 3. Why is knowledge so important in leadership selling? 4. Which is more important: communication skills or attitude? Where do you stand regarding both? Will you take steps to improve if necessary? 59
  66. 66. Chapter 9 Are You Basically Honest? I considered not including this chapter for two reasons. It is not the purpose of this book to discuss (or to preach) business ethics or corporate responsibility. We’re here to discuss whether you are cut out for the entrepreneurial experience, not whether you will donate 10% of your profits to charity. There are, undeniably, financially successful entrepreneurs who don’t get hung up on old-fashioned notions like honesty. Therefore, I can’t argue that, unless you have it, you shouldn’t become an entrepreneur. Despite these reservations, I include this chapter because it has practical implications you should consider. The subject of honesty applies to many parts of entrepreneurial life. Probably the most obvious issue is tax calculations. Your business may be required to collect and remit sales tax. It will definitely be required to report revenues and expenses for income tax calculations. There is ongoing opportunity to under-report income or overstate expenses. Business cartoonists routinely depict a sweating business owner trying to explain that the fur coats were door prizes for the Cancun sales conference. I will not moralize on this subject, but there are definitely reasons to consider the business habit of 100% honest tax calculations. 60
  67. 67. Honesty You don’t have to expend mental energy developing the systems required to conceal the true numbers. You don’t live in fear of an audit. If you do have an audit, you won’t have to go through convoluted steps like a guy I knew who took the washer and dryer out of his house and installed them at his retail shop the night before his audit. You don’t live in fear of doing jail time or being required to repay hefty tax obligations plus interest and penalty. You don’t live in fear of an “in-the-know” employee becoming disgruntled and turning you in. We’ll talk more about the employee impact of dishonesty in a moment. In many businesses—printing as a classic example—there are ongoing honesty issues in customer interaction. Examples include sub-par quality, which may or may not be noticed; under-delivery of expected quantity; accidental over-billing; and receipt of overpayment due to customer error. Every business faces the issue of “what to say to an irate customer.” If an employee runs into your office and say, “Holy cow, boss, I just found this work order behind the Coke machine, and the job was promised for delivery yesterday,” you have an interesting dilemma. There is no question that you’ll fail to hit the deadline. There is substantial question about the way you explain the problem. One option is to call the customer and out-and-out lie: “John, I can’t believe it, our material supplier’s truck was hijacked and is being held hostage in the Everglades. I 61
  68. 68. E-Lifestyle for You? can’t get a new shipment for at least two days.” The other extreme is unvarnished truth. “John, one of our employees is such a meatball that he dropped your work order behind the Coke machine. The only good news is that somebody found it at all.” Again, we won’t moralize, but out-and-out lies carry a very real risk, namely that they will be discovered to be lies. In a purely statistical sense, a company that allows a culture of lies will be caught in those lies occasionally. The downside in terms of lost trust and potential liability can be immense. On the other hand, common sense says that an aspect of leadership selling is to explain the situation in its best possible light. “John, I’m personally embarrassed about this. We had a mix-up in our scheduling process that is going to delay your job for at least two days. Is there anything I can do to help you until then?” Note that both the tax issue and the customer issue likely involve employee knowledge of untruth. Even if there is little risk of employees revealing deception, there is a powerful danger in employee awareness. Simply stated, dishonesty begets dishonesty. If the boss lies, the employees will lie. If the boss cheats, sooner or later the employees will cheat. And if the corporate culture allows dishonesty, eventually the company itself will be the exploited rather than the exploiter. In my experience, the most powerful argument for entrepreneurial honesty is the example it sets for employees. Let’s look at one final honesty issue that is again related to employees. There is a nonstop tug between your employees’ goals, particularly for more compensation and 62
  69. 69. Honesty benefits, and your goal of keeping the business afloat and profitable. Many entrepreneurs slip into the habit of “promises” that temporarily resolve the conflict by assuring that something will happen at some point in the future. If those promises are sincere, they are survivable, even if they can’t be kept for mutually understood business climate reasons. But employees have long memories, and a habit of broken promises will ruin attitude and eventually lead to lost employees. It is far better, though tougher, to be frank, open and honest in the initial meeting: “Mary, I wish I could assure you that you’ll get that raise within 3 months, but I just can’t right now. We’ve got to get some tough problems that must be solved. There’s definitely a chance, but I just can’t promise anything right now. Can you work with me on that basis?” To summarize: For most entrepreneurial ventures, a culture of honesty is important. Your company’s culture will reflect your personal beliefs and practices. Examine them carefully. 63
  70. 70. E-Lifestyle for You? To Ponder and Discuss 1. Why does a habit of dishonesty involve stress and hard work? 2. Does it make sense to you that “dishonesty begets dishonesty”? 3. Does it make sense to you that the law of averages works against the dishonest? 4. If caught in a difficult situation with a customer, is your instinct to tell the truth tactfully or to hide the truth as best you can? 5. Is there a difference between unkept promises casually made and out-and-out lying? In your mind? In the employee’s mind? 64
  71. 71. Chapter 10 Can You Analyze Objectively? This chapter and the next are closely related. Here we’re talking about objective evaluation—the process of gathering information and reaching correct conclusions. In the next chapter we’ll talk about decision-making—the process of taking your conclusions and implementing them in the day-to-day operation of your business. To illustrate the difference, let’s consider a couple of examples we can all identify with. It’s about 1984. The personal computer revolution is gaining momentum. You hear about a company called Microsoft. You study the industry. You study Microsoft. If you concluded that Microsoft had its finger on the pulse of the market and would experience explosive growth, you can lay claim to being a good analyst. If you picked up the phone, called your stockbroker, and picked up a few hundred shares, you can claim to being a good decision maker. I had a similar personal experience at Graph Expo, wandering around in the basement of Chicago’s McCormick Place in fall 1984. I discovered desktop publishing. Soon I discovered a little company called Apple. I returned home and announced, “I’ve seen the future of typesetting in the printing industry” (great analysis). However, I didn’t buy Apple stock (pitiful decision making). 65
  72. 72. E-Lifestyle for You? There are hundreds of examples of the difference in entrepreneurial life. You suspect that an employee is not doing the job, but is skilled at covering up his weaknesses. You gather facts through observation, study of performance sheets, and discussions with customers and fellow employees. Indeed, your suspicion is confirmed (good analysis). But three years pass, and somehow the employee has not been fired or forced to make major changes and improvements (poor decision-making). A single customer calls you and says, “I’d definitely be interested in your widget if it was available in lime green.” She further suggests that others might feel the same way. You quickly conclude that this customer’s desire reflects the wider marketplace. You add lime green to your line and fill a substantial corner of your warehouse with the new selection. Three years pass and the lime has turned to dust (poor analysis, goo —or at least emphati —decisionmaking). For the entrepreneur, there is good news and bad news on the subject of objective analysis. First the bad news: Many of the traits that are typical of successful entrepreneurs lead down the path of poor objective analysis. The person who is, for example, daring, bold and decisive, is often a bit opinionated and overly confident. Opinionated and overly confident are, of course, euphemisms for what acquaintances and employees will define as something like “pompous, know-it-all windbag who doesn’t give a hoot what anyone else thinks.” (Their description may be even more colorful than that.) The good 66
  73. 73. Objective Analysis news is this: With concentrated effort, it is relatively easy to modify pompous windbag behavior. You can—and probably MUST—improve your objective analysis skills. There are two main keys. First is simply an attitude that creates a process. Too much business analysis takes place in 100% violation of the principle of scientific method. Let’s use our example of the employee we suspect to be under-performing. A large percentage of entrepreneurial cowboys will mentally decide that the employee is underachieving, then set about confirming the suspicion. The process is prosecutorial, not analytic, and likely wastes whatever time and energy it consumes. The correct attitude is something like this: • It is a one of my jobs to evaluate employee performance. • It is critical that I analyze performance that I suspect may be sub-par. • But, in a fair process, I will learn one of three things: performance is actually above expectation; performance is at expectation; or performance is below expectation. • Here is a fair process for discovery: (a), (b), (c). • Here are fair, non-leading questions I’ll ask of those whose opinions I need. • Here is a fair process of receiving direct input from the employee involved. Revisiting our warehouse full of lime green widgets, the analytic process was nonexistent. A customer plants a seed in an opinionated entrepreneurial mind. The 67
  74. 74. E-Lifestyle for You? seed somehow grows and becomes 10,000 non-marketable widgets. The right attitude is this: • I wonder if other people want lime green widgets. If so, it might add excitement to our product line. If not, we sure don’t want to tie up dollars in poor merchandise. • Here’s a market research process that will let me decide (a), (b), (c). In my opinion, the second key is willingness to involve others in the analysis process. In my early entrepreneurial career, I was a classic lone wolf—chief analyst, decision-maker and day-to-day manager. As our business grew, it became necessary to develop a set of department heads. Their original purpose was to assist in day-to-day operational management. In the late 1980s and early ’90s, I made a few strategic errors which caused me to say, “Hmm, Mr. Lone Wolf, if you know so much, how come you’re losing your fanny on the last three major programs you’ve launched? I wonder if the input of others might help?” So I declared our department heads to be members of “staff” and pledged to present all key strategic initiatives at weekly staff meetings. I also empowered staff members to bring their concerns and observations about matters I might be overlooking. The results were remarkable, leading to bold changes and major improvements. Note these key points. The involvement we’re talking about here is not necessarily decision making. As entrepreneur, you have likely borne far more financial risk and carry more longterm responsibility than any other member of your 68
  75. 75. Objective Analysis company. Most high-level strategic decisions should be yours. But the involvement of staff can be an important contributor to objective analysis, helping you better see the key issues from multiple angles. Empowering staff requires you to relinquish some ego. You must say, and mean, “Team, if you think I’m full of hot-air, you are now duty-bound to tell me so. I may not like it. I may even argue with you. I may even pout for a while. But I’ll respect you for challenging me and will never hold your openness or honesty against you.” Three final points on objective analysis: To the extent possible, it should be numerical. Good entrepreneurs don’t need three semesters of calculus, but it sure helps to be comfortable looking at numbers. Over the years, I’ve heard horror stories like the restaurant that, as it was being closed, was declared to have had “so much overhead there was never any hope of making a profit.” That issue should have been analyzed, numerically, before the multi-thousand dollar chandeliers were ever purchased. You will need good numerical analysis to plan where you’re going and to measure how you’re doing. The analytic process must be consistent with the magnitude of the decision. Some entrepreneurs are so fearful of making an error that they often over-analyze. We’ll talk more on that subject in the next chapter. In general, you should never spend more on the analytic process than you might lose if you err. You must not spend more time than the relevant “window” for your decision. 69
  76. 76. E-Lifestyle for You? Again, of all the chapters in this book, you’ll find none more important, nor more learnable. A pattern of poor analysis will likely assure entrepreneurial shipwreck, eventually; but if you will, you can learn to become a good objective analyst. 70
  77. 77. Objective Analysis To Ponder and Discuss 1. What is the difference between emotional and objective analysis? Between opinionated and objective analysis? 2. Why are many entrepreneurs temperamentally unsuited for objective analysis? 3. Does the idea of “pre-defining” a process of objective analysis make sense to you? 4. Are you comfortable enough with numbers to find ways help your objective analysis? 5. How can employees help the process of objective analysis? 71

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