(I posted this yesterday on Small Business Trends. I’m reposting here because this is my main blog, and it belongs here too. Tim )
Last week a group of students interviewed me, as part of a class project, looking for secrets and keys to success. They were asking me because after 22 years of bootstrapping, my wife Vange and I own a business that has 45 employees now, multimillion dollar sales, market leadership in its segment, no outside investors, and no debt. And a second generation is running it now.
Frankly, during that interview I felt bad for not having better answers. Like the classic cobbler’s children example, I analyze lots of other businesses, but not so much my own. As I stumbled through my answers, most of what I was saying sounded trite and self serving, like “giving value to customers” and “treating employees fairly,” things that everybody always says.
I wasn’t happy with platitudes and generalizations, so I went home that day and talked to Vange about it. Together, we came up with these 10 lessons.
And it’s important to us that we’re not saying our way is the right way to do anything in business; all businesses are unique, and what we did might not apply to anybody else. But it worked for us.
1. We made lots of mistakes.
Not that we liked it. At one point, about midway through this journey, Vange looked at me and said: “I’m sick of learning by experience. Let’s just do things right.” And we tried, but we still made lots of mistakes. We’d fuss about them, analyze them, label them and categorize them and save them somewhere to be referred to as necessary. You put them away where you can find them in your mind when you need them again.
2. We built it around ourselves.
Our business was and is a reflection of us, what we like to do, what we do well. It didn’t come off of a list of hot businesses.
3. We offered something other people wanted …
… and in many cases needed, even more than wanted. You don’t just follow your passion unless your passion produces something other people will pay for. In our case it was business planning software.
4. We planned.
We kept a business plan alive and at our fingertips, never finishing it, often changing it, never forgetting it.
5. We spent our own money. We never spent money we didn’t have.
We hate debt. We never got into debt on purpose, and we didn’t go looking for other people’s money until we didn’t need it (in 2000 we took in a minority investment from Silicon Valley venture capitalists; we bought them out again in 2002). We never purposely spent money we didn’t have to make money. (And in this one I have to admit: that was the theory, at least, but not always the practice. We did have three mortgages at one point, and $65,000 in credit card debt at another. Do as we say, not as we did.)
6. We used service revenues to invest in products.
In the formative years, we lived on about half of what I collected as fees for business plan consulting, and invested the other half on the product business.
7. We minded cash flow first, before growth.
This was critical, and we always understood it, and we were always on the same page. See lesson number 5, above. We rejected ways we might have spurred growth by spending first to generate sales later.
8. We put growth ahead of profits.
Profitability wasn’t really the goal. We traded profits for growth, investing in product quality and branding and marketing, when possible, although always as long as the cash flow came first.
9. We hired people slowly and carefully.
We did everything ourselves in the beginning, then hired people to take tasks off of our plate. We hired a bookkeeper who gave us back the time we spent bookkeeping. A technical support person gave us back the time we spent on the phone explaining software products to customers. And so on.
10. We did for employees’ families as we did for ourselves.
Family members — not just our own family, but employee family members too — have always been welcome as long as they’re qualified and they do the work. At different times, aside from our own family members, we’ve had two brother-sister combinations, an aunt and her niece, father and daughter, and husband and wife.
And in conclusion…
Bootstrapping is underrated. It took us longer than it might have, but after having reached critical mass, it’s really good to own our own business outright. It might have taken longer, and maybe it was harder — although who knows if we could have done it with investors as partners — but it seems like a good ending.
Family business is underrated. There are some special problems, but there are also special advantages too.