This is a digest and recap of highlights, quotes, and comments from articles and discussions posted on this date on the Applied Entrepreneurship, LinkedIn group site.
*Are You Ready to Be Your Own Boss? By Keller Hawthorne
“Wanting to be your own boss and being ready for it are two different things. Throughout my years of self-employment, I’ve learned that many people who say they want to do what I do don’t fully understand what it means to work for yourself. Often their fantasies involve waking up at noon and fooling around all day. This is possible, but not 100% realistic.”
“The timeline for earning an income will depend on what business model you choose (ecommerce, affiliate marketing, blogging, etc) and the amount of time you spend learning how to properly grow your business.”
“You are your all-in-one employee – your accountant, customer care representative, VP of Marketing, head of advertising, complaints department, etc. It takes discipline to wear all of these hats.”
“In our rush to get online and execute our fantastic business ideas, it’s easy to bypass the learning process. I had to learn how to do it all myself and that learning process has made the biggest impact in my online success.”
“There are times when we can’t do it all ourselves. There are times when we need the help of others.”
“You need to work ON your business, not IN your business.”
“Consistency is a challenge. There are days when you just don’t want to deal with issues. You might experience writer’s block or become bored altogether with your work. Of course, we all need to indulge ourselves every once in a while, but we have to get back on the bicycle and keep riding as soon as we can.”
“Everything that can go wrong with your business falls on your shoulders. You don’t get to reassign yourself to a new project just because you don’t want to take the heat.”
It’s just not good enough to constantly rely on others to take action for you. You have got to take action on your own! If there’s something you don’t understand, figure it out.
“There are obstacles and learning curves, but you can push through them. It comes down to passion, determination and drive. If you really want this, then you may find these obstacles are not so bad – you can breeze on through them. If you find they’re harder than you expected, perhaps you just need to sit down and take a moment to think things out.”
*Why Less Is More for Startups by Vivek Wadhwa
“Less is more.”
“Yes; it’s a cliché. But it’s the best piece of survival advice for young companies, bar none. When a company is running on a tight budget, it will perform far better than a company that has gotten a chunk of cash from VCs. While this seems like common sense, it’s actually news to many entrepreneurs (and aspiring entrepreneurs) who learned that raising venture capital is essential for high-growth companies.”
“A venture’s success isn’t necessarily dependent on funding. What appears likely to matter more for these ventures is the creative transformation and use of resources at hand and a disciplined approach to cash management,”
“Founders, not outside investors, should determine the proper pace of growth for a company. And a founder who is about to lose his or her life savings is far more likely to drive a company towards profitability. A founder in this position turns every person in the company into a salesperson—and that’s the best model for a scrappy startup. In the end, creating a culture that emphasizes long-term profitability over rapid growth is critical for success.”
“Outside money means that founders spend less time thinking about customers and more time thinking about keeping the board of directors happy. Founding management is invariably far closer to the customers than the board. And the more time and focus management can direct toward customers, the better. The outside money blurs the perception of who pays the bills. In the short run, it may actually be the VCs who just sunk a chunk into the company. But in the long run, it’s always the customers.”
“Hungry companies figure out ways to keep eating because they don’t know whether there will ever be another meal. Industry veterans and serial entrepreneurs worry less about failure and are therefore more likely to fail.”
*Small companies need holistic midyear checkups by Joyce Rosenberg
“Savvy owners who schedule midyear financial checkup appointments with accountants or tax attorneys are likely to be seeking other kinds of guidance as well, such as finding ways to bring in more sales.”
“A thorough midyear checkup will always go beyond taxes and cutting expenses, and touch on a company’s strategy. Many owners are having to brainstorm with their advisers about ways to bring in new business, especially with the drastic changes in industries such as financial services and autos.”
“Financial advisers are also a natural place for owners to begin networking. Those who specialize in working with small businesses are often able to bring together clients who need each other’s products or services. Chambers of commerce and trade or entrepreneurs’ associations are also good places to go. So are trade shows, and many owners are making a point of going to more of them this summer.”
*What to Do if Your Startup Is Failing by Jason Calacanis
“There are two types of entrepreneurs in this world: real ones and the folks who play entrepreneurs for some portion of their lives. From a distance, most folks can’t tell who’s who. In up times, when the market is flush with cheap money and unexplained exits, everyone looks brilliant. It’s only when the tide goes out that you know who’s naked, to paraphrase Warren Buffett.”
“The faux entrepreneurs run for cover rather than dealing with the storm, while the real entrepreneurs suit up and clean up the mess.”
“You need to figure out your runway immediately. This is really easy to calculate: you look at how much cash you burn every month and divide that into how much cash you have in the bank. Your accountant can do this for you or you can simply look at your profit and loss and your bank statement.”
“Once you know how many months you’ve got left, you’ve got to do the hard work of trying to extend it by at least one quarter. This means cutting staff, negotiating with your landlord, and cutting any and all recurring bills. You then need to look at your revenue streams and figure out if you can double them. In most cases, if you do these two simple things, you will have increased your runway by 50% to 100%. If you double your runway, your chances of figuring out what your business actually is will go up exponentially. ”
“You also need to do a monthly P&L review with your management team. Look at every single recurring cost you have and figure out how to cut it.”
“When your company goes through this kind of economic boot camp, I think you get stronger. You understand which parts of your business are working the best and which ones are, well, not working at all.”
*How Entrepreneurs Can Survive a Cash-Flow Crisis by Jill Hamburg Coplan
“If you see a crunch coming, barter, liquidate inventory, ask clients for advance payments, and renegotiate vendor relationships, just for starters.”
“Read the fine print for unnecessary add-ons or mistakes in leases and contracts. When it’s time to extend those leases and contracts, shop around for other suppliers. Call your current vendors and raise the matter of a better deal openly and honestly. Some vendors might say, ‘I’d rather have some money than no money.'”
“Slash expenses as if your life depends on it. Tell your suppliers you’re running into a problem and need to extend payment over a six- to nine-month period. Then have a promissory note executed, with interest. Liquidate inventory. ‘Call it a ‘The Economy Stinks Sale,'”
“Let customers know this isn’t a normal business practice, which will make it easier for you to raise prices later. But bear in mind that, in commodity businesses, some customers will disappear when prices go back up.”
*Entrepreneurs Take Second Jobs to Stay Afloat by Raymund Flandez
“Small-business owners who are struggling to keep their companies afloat are doing anything they can to ride the recession, even taking on second jobs.”
“Small-business owners are looking for alternate sources of income to make ends meet and to fund their troubled companies. Some 18% of owners surveyed in April said they are working a second job, according to the latest findings from the American Express Open Small Business Monitor. Many of them have sacrificed their personal finances and have stopped taking a salary to deal with the current economic reality. It’s an indicator that small-business owners are experiencing challenges the type of which they haven’t faced for a long time,”
“The goal for most is to simply bring in enough money until business picks back up. The second job, she says, is “a bridge to better times. In an economic environment where hiring is bleak, many are using their networking skills and connections to secure a position.”
“A pressing worry for some business owners is that moonlighting may hurt their focus or impede business growth. Indeed, ‘you don’t want to get so busy with your job that you’re letting your business die on the vine,’ says Ms. Bredin. ‘It’s a balancing act, and it’s challenging.'”
*Build-A-Bear’s Founder Shares Her Story by Maxine Clark
“Maxine Clark left a successful corporate career to start her own business, Build-A-Bear Workshop, then a relatively new concept in retail entertainment.” Clark says “I left Corporate America on a mission to bring the fun back to retailing and to give back to the industry that had been so good to me. I was 47 years old when I left Payless Shoe Source in 1996. At that time, my financial rewards in retailing were very high, but my psychic income account was nearly empty.”
“I realized that money alone didn’t translate into personal satisfaction if you aren’t doing what you are passionate about. I didn’t necessarily have an ‘aha!’ moment; the pieces just started to fit together for a change. I knew I wanted to get back in touch with the customer and be creating a new business idea, even though I didn’t know what that was at the time.”
“Quite frankly, I was bored by shopping and decided to put my money where my mouth was. I was looking to re-create the excitement and magic I felt as a child when I visited certain stores.”
Since launching its first workshop in St. Louis in 1997, the business has expanded to 300 shops across Asia, Canada, Europe, and the U.S., with sales of $437 million. In June, Build-A-Bear Workshop helped launch Ridemakerz a build-your-own model toy car retailer, in which it has a major investment stake.
“The lightbulb went off for Build-A-Bear Workshop one day in the summer of 1996. I was out shopping with my friend Katie, who was 10 years old at the time. We were on a mission to find Beanie Babies, but the store that had promised a new shipment had none left. ”
“Katie looked at me and said, ‘These are so easy, we could make them.’ She meant go to my basement and do a craft project, but what I heard was so much bigger and the idea for Build-A-Bear Workshop was born.”
“I have always believed in listening to what others have to say, but being careful about the advice you actually take. Rather than adhering strictly to the traditional ways of doing things, I challenge myself and those I work with to think more creatively. I’m constantly trying to come up with ways we can take a conventional product or task and put our own unique spin on it by making it more “bearish.”
“We put an entirely new spin on the teddy bear business. We saw possibilities like no one else. People always say to me ‘Why didn’t I think of that?’ Well, because teddy bears weren’t their thing, they weren’t their passion, but perhaps they have a passion for something else.”
“I encourage people to take risks and to make the most of the mistakes that do occur. In my book, The Bear Necessities of Business, I write about how mistakes make you better. We’ve taken some of our old so-called mistakes and turned them into the normal course of business.”
“You should always allow yourself to dream and dream big, it’s only through such thinking that great things happen. Don’t limit yourself because you don’t think your dream is attainable. You must start by believing you can truly achieve whatever you set your mind to, no matter how big it might seem. Not dreaming big enough is one of the biggest mistakes you can make, if you can’t see your dream, how do you expect others to?”
“The story of Chicago’s Threadless begins, appropriately, with a T-shirt contest. In 2000, Nickell, then a 20-year-old studying multimedia and design at Illinois Institute of Art, and Jacob De Hart, 19, an engineering student at Purdue University, met when they entered an online T-shirt design competition.”
“After working together online on a couple of projects, the duo decided to start their own T-shirt contest and company. They scraped together $1,000 and launched Skinny Corp., parent of Threadless.com. The concept was simple: People would submit T-shirt designs online, visitors would vote for their favorite, and the winner would be printed in limited-edition runs. But the duo kept their day jobs in advertising. Says Nickell: ‘We had no idea what it would become.'”
“To build buzz about the site, the two deployed ‘street armies’ to talk up the T-shirts. ‘Soldiers’ earned store credit for spreading the word about Threadless.”
“A year later, De Hart and Nickell quit their ad jobs and started hiring employees. Sales went from $600,000 in 2003 to $1.5 million in 2004. In 2006 they sold a minority stake to Insight Venture Partners in Chicago and this year added five employees to work in the new store. Threadless plans to open outlets in Boulder, Colo., and San Francisco. A store called Threadless Kids will follow in Chicago. The pair expects to hit $15 million by the end of 2007.”
“It all sounds great, but the shift from e-tail to retail is a risky one. Retailers are often unprepared for the costs of running a store, including rent, payroll, and utilities. Companies used to displaying their products online have to figure out the best way to showcase them in 3D. The retail experience has to be appealing enough to prompt people to travel to a store rather than buy with a mouse click.”
“Although Kalmikoff concedes running stores costs more than shipping T-shirts from the Threadless warehouse/headquarters, he laughs it off: ‘We’re planning on selling T-shirts to cover those costs.'”
What I Think
I think Keller Hawthorne’s article hit the nail on the head, when he wrote “Wanting to be your own boss and being ready for it are two different things.” For over 35 years, I’ve watched hundreds of business start-up clients come into my office for a first visit, nearly foaming at the mouth with excitement over a new idea, which, inevitably, they say will make them rich. In many cases, they are so sure of themselves and their new business idea that they are initially reluctant to take the time to even talk about the “little things” that lawyers, accountants, bankers, and investors always like to talk about. Things like “due diligence,” cash flow, burn rate, and ROI seem things, which will “be fine,” according to the wannabe entrepreneurs.
Fortunately, those who refuse to talk about the details are relatively few. Most will eventually get down to some level of discussion about the reality of getting from “Point A” to “Point B.” I’ll admit, however, I’ve lost a few over the years when I send them home to do work on a basic business plan. They find the exercise too time consuming and difficult, so they go on to things that are more fun. These may include picking a cute product or company name, thinking up a “knock ’em dead” slogan, creating a nifty logo, or searching for the availability of a dynamite domain name.
Certainly, spending the time or money to do a proper trademark or service mark search can wait for a while, when you’ve just invented the better mouse trap. You can always come back to that when you get a breather. Likewise, getting a lawyer to draft a proper NDA or non-compete agreement isn’t necessary right now. Everybody you’re working with is probably trustworthy enough, so why do you really have to worry?
Many of these fauxentrepreneurs, as Jason Calacanis calls them in his article, What to Do if Your Startup Is Failing, may actually do fine for a while in a good economy or if they had worked a deal to start on minimal expense or with a book of existing business. If the economy shifts, as it obviously has in the last two years, a major client walks away, prices of components like copper or lumber packages go through the roof unexpectedly, that positive cash flow can quickly go up in smoke.
Times of stress are often what separate the “faux” from the entrepreneurs. Many of the faux spend more and more time working in the business while the real entrepreneurs spend their time working on the business. Eventually, it all becomes “just too much” for the faux, and they either find a way to go on to something else, or something else finds a way to send them on their way. As the saying goes, sometimes you get the bear, and sometimes the bear gets you.
Maxine Clark’s Build-A-Bear’s concept, of course, seems to be one of those cases where she got the bear. As a founder, she listened to all the advice and then used her own experience and judgment to decide which to accept or reject. She discovered an opportunity, came up with an innovation, and had the perseverance to see this to a successful conclusion.
Had some of the fauxentrepreneurs gone through the sort of periodic review described in Joyce Rosenberg’s article, Small companies need holistic midyear checkups, they might have been able to survive the inevitable rollercoaster ride of entrepreneurship. Their inability to do so, again, is a factor separating the faux from the real entrepreneur.
If Build-A-Bear’s success isn’t enough for you, what could be better than a cool T-shirt? Although customers do much of the work building the products at Build-A-Bear, the folks at Threadless seem to hardly have to lift a finger to get their products flying off the shelf. They put a different spin on the T-shirt story. Like Pat Wood and Claire Lewis, founders of TruffleShuffle.com, featured in my May 26th post, Lessons I Learned Today 5/26/09 – Create Your Own Second Life, the folks at Threadless let the customers design their own product.
Threadless holds a contest for the best design for the next product to be sold, a form of crowdsourcing, ala James Surowiecki’s The Wisdom of Crowds, and then produces it to a market which has already proven they like it. It doesn’t get any better than that.
It remains to be seen, of course, whether the Threadless folks can make a sustainable transition to a bricks and mortar location, in addition to their highly successful Web-based operation. We wish them well, and hope their heady success is not a distraction to getting down to the details of the start-up entrepreneur. After all, wanting to be your own boss in a bricks and mortar store and being ready for it are two different things.
If you enjoyed my impression of these articles, why don’t you read them for yourself and see what you and I missed or hit? Join the Applied Entrepreneurship group on LinkedIn. Membership is free and I try to post about ten articles a day there. We have some great discussions going and if you are an entrepreneur, we hope you will join us.