Category Archives: Reflections

Reflection: 10 Lessons Learned in 22 Years of Successful Bootstrapping

(I posted this about two years ago on Small Business Trends. I’m reposting it here today because this is a good time of year for this kind of reflection. And maybe also for not writing a new post. 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.

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Thanksgiving: Gratitude is Good for Your Health

Today is the Thanksgiving holiday in the United States. It’s supposed to be about getting together and giving thanks.

My contribution to the Thanksgiving holiday is to recommend a Google search on the correlation between gratitude and health. It turns out that there are indications that being thankful is good for us all.

Of course that’s not just for today, the holiday. That’s all year.

And here’s my picture for the Holiday, courtesy of Shutterstock photos, by Inigo Cia. This is a view of Half Dome from Yosemite Valley.

(Note: I did this post last year, but it’s Thanksgiving morning, and I still like it, and it’s still appropriate.)

What Is An Entrepreneur? Says Who? Why Do You Care?

I used to start a university class on entrepreneurship by asking the class to define the word entrepreneur.

It’s a reasonable question. News and discussion is full of pat phrases about entrepreneurs, most of which we take for granted. Politicians talk about entrepreneurs along with job creation, small business, motherhood, and apple pie. Challenge: find a politician who isn’t in favor of entrepreneurship.

But is everybody who claims the title really an entrepreneur? Or, for that matter, do we care? If your annoying neighbor becomes an entrepreneur by having sold one piece of furniture on eBay, do you care?

I liked Robert Jones suggestion: Let’s just change the word entrepreneur. His post 5 reasons we need a new word for entrepreneurs, from last July, has at least four good reasons. He and I and others followed up, but we didn’t come up with anything that great.

His post, however, also inspired Startup and small business expert Rieva Lesonsky to follow up with her post asking what does it really mean to be an entrepreneur? She pulls a lot of different definitions together, offers a menu ranging from the heroic, dreamy, crazy-creative definitions to the way-less-glamorous project manager and social definitions, but concludes with tongue in cheek:

My favorite definition of an entrepreneur comes from Doug Mellinger, the co-founder of Foundation Source, who once told me, “An entrepreneur is someone who will do anything to keep from getting a job.

All of that discussion, however, came jsut a bit after Steve King posted Comparison Small Business Owners to High-tech Entrepreneurs on his blog Small Biz Labs. Steve dives into available research to highlight the huge differences between these two groups. We all talk and think like they’re the same thing. It turns out that they aren’t. Compared to overall small business owners, the techies are way more likely to be well educated, motivated by money, and (unfortunately) male. Steve concludes:

we think policy makers need a better understanding of not just high-growth firms and their founders, but also the less glamorous businesses and business owners that make up the vast majority of small businesses in the U.S. economy.

My favorite definition, in the real world, is from Chris Dixon’s simple milestone post, there are two kinds of people in the world. It’s in this first sentence:

You’ve either started a company or you haven’t.  ”Started” doesn’t mean joining as an early employee, or investing or advising or helping out.  It means starting with no money, no help, no one who believes in you (except perhaps your closest friends and family), and building an organization from a borrowed cubicle with credit card debt and nowhere to sleep except the office.

Chris exaggerates. Sleeping in the office isn’t necessary. And the ones who develop a plan and raise money are still entrepreneurs. But I’m shocked, by the way, at the level of anger and angst in some of the 263 comments. It’s a simple two-paragraph post, a simple statement, overwhelmed by comments. It shouldn’t be that controversial: You’ve either started a company or you haven’t.

Amen to that.

(image: istockphoto.com)

My Niece’s Question About God

What a week. Steve Jobs, may he rest in peace. On Wednesday we distributed my stepmother’s ashes. That same day my brother’s wife buried her father.

After our ceremony in Cape Cod, my brother said his daughter had asked: “why does God make people get old and die?”

Nobody there could answer that question. Several people, however, came up with variations on a common theme: that’s why it’s important that we live well. We should not waste time. Or love. Or spirit.

This morning I’m off to Yosemite with my youngest daughter.

So You Think You’re Smart? Prove It.

I’ve become increasingly more convinced that the best sign of real intelligence is being able to see both sides, or all sides, or any argument. You might call that having an open mind. You might call it listening. And you might call it having the good sense to say “I don’t know” a lot. dice

I love it that in the competition of debating the debaters must prepare to argue either side. They find out which side at the very last minute. That’s great preparation for life.

I think most entrepreneurs develop a good relationship with uncertainty. We deal with an uncertain future every day. If we can’t live with doubt and lots of divergent possibilities, we drive ourselves crazy.

On the other hand, I think certainty, being sure of anything, is not so good. We don’t know the past that well because it gets filtered through points of view. And we don’t know the future at all. Hope is good, concern is good, looking at scenarios is good. Planning, as long as the planning understands uncertainty, deals with it, and manages it, is good too.

I think the smarter you are, the less certain of anything. I think people who are sure of things, especially the future, are walking around on thin ice. The smart ones know that the ice can break.

But of course I’m not sure. What do you think?

(image: imagewell/Shutterstock)

When Your Gut Screws Up Your Analysis, Shut Up and Listen

True story: my wife and I wanted to move but we weren’t sure where. In true MBA fashion, I set up a spreadsheet to compare candidate locations for a series of factor including outdoor sports, weather, smog, traffic, lifestyle, public education, crime, and so on.

So for each of about 12 possible places I input scores from 1 to 10 for each of the factors I’d identified. And when I didn’t like the original conclusion, I (without realizing it as I did it) changed the input factors until it did. We wanted to live in Eugene, Oregon.

I didn’t realize it then but I do now. I set up an objective analysis and then subconsciously messed with the inputs to generate the conclusion I wanted.

Do you ever do that?

Another true story: One of my daughters struggled with a job decision for weeks. She had a job, and she had a new job offer, and she liked them both. The choice was driving her crazy.

Finally, late one night, she called me up to share a spreadsheet analysis she’d done. As she went through the analysis and the input factors, I realized she was subconsciously cheating the scores towards one of the alternatives and away from the other.

I told her then that I thought she had just discovered what she should do. Her gut had chosen. The evidence was in the way she skewed and biased her objective analytics.

When your gut gets your numbers wrong, and screws up your objective analysis, shut up and listen.

(image: istockphoto.com)

Critical Management Questions I Can’t Answer

Thirty-some years in business, and I’m still troubled by management style. Maybe it’s that (MBA or not) I’ve never been comfortable with authority — Not with accepting it, and not with wielding it. But I managed.

But lack of authority sometimes seems worse. Have you been in one of those situations where everybody on the team has to like something like a packaging design, an ad layout, tag lines, or messaging? Have you seen it when one person who does one set of functions is pushing strong views on something that has nothing to do with his expertise? I don’t think management by consensus actually works. It always reminds me of that old saying:

If colors were managed by consensus, every room would be painted beige.

Or maybe it’s that there’s no consistency in what works and what doesn’t.

For a really different view, the other day I listened to a Buddhist Geeks podcast called liberating the soul of the organization, an interview with Brian Robertson, founder of HolacracyOne. Here’s the description:

…. a system that Brian helped develop as a new operating system on which businesses can run. He distinguishes between what he calls “predict-and-control” management practices and “sense-and-respond” processes, which are much more like the dynamic steering of a bicycle.

That’s an interesting interview, to be sure. It includes parallels between management and meditation. I‘m not saying that’s the next new big thing; but change, new views, and different approaches are good. Change things up. Take a new viewpoint. There’s a lot to be said for a fresh new look, in management and leadership, as in about anything else.

And then that same day was also the day I read Anger is not a leadership skill on Small Business Trends. No argument with that one. Diane Helbig writes:

You don’t get people to perform at their best when you spend your time beating them down. Fear is not a motivator. This behavior isn’t something that is learned in leadership training courses. It comes from one of a couple of places – insecurity, fear or mistrust. I submit that you can’t be successful if you operate from any of these platforms.

I certainly agree with that one.

Could it be that good management, like good leadership, is an art? Unpredictable? Hard to learn and hard to teach? Or that good leadership is like good software: hard to predict, hard to describe, but you know it when you see it?

Magic of Metrics. Tyranny of Metrics. Management of Metrics

The tyranny of metrics is that I keep looking at my page views on this blog, my subscriber count, my Klout score, my blog rating, and I can’t stop. I have to keep blogging, tweeting, and conversing, or else it goes down. There is no taking a pause, no relaxation, or my rating goes down. There’s even that Small Business Influencers voting going on right now, and I’m watching that too. measurement

Before that it was unit sales of Business Plan Pro, web views, conversion rates, and profits. And before that it was sales and profits in earlier jobs, column inches published, newspapers using UPI vs. AP, GPA in grad school, GPA in college, GMAT and SAT, GPA in high school.

It never ends. Did you think when you got out of high school you’d be able to forget metrics like GPA or SAT? Or that when you got out of college you’d be able to forget that GPA and the GMAT? Probably not.

Which is also the magic of metrics too. Because most of us don’t want the numbers to end. “Immeasurement,” as Patrick Lencioni calls it, makes us miserable.

Patrick is the author of  The Three Signs of a Miserable Job. And he says most people want and need and want our metrics. “Immeasurement” makes us miserable. Here’s a quote from a blog post he wrote:Miserablejob

All human beings in any kind of a job need some way to assess their own performance that’s objective. It might not be numerical or easily quantitative, but it’s somewhat objective and observable by them, because then they are not left to depend upon the opinion or the whim of a manager once a year during a performance appraisal. People need to be able to go home from work every night, or every week, or every month, and know where they stand, and know what they can do to influence how they’re working.

So yes, metrics are pushy, but yes, metrics help you and others to care about what you do. You want your numbers going up. And you want your peers to see your numbers going up.  And that leads us directly to the management benefits of simple metrics. If there is some objective score to keep, then it’s objective, it’s motivating, and it helps us manage a team. To me, that’s supposed to be in the live business planning that sets up metrics and gets reviewed regularly. Others might call that a scorecard system, or critical factors … there are lots of ways to develop that same core function of metrics and management.

So choose the right numbers to follow.

The Brain Scientist’s Insight From Inside Out

She’s a brain scientist who studied the brain “from inside out” when she had a stroke. We should listen to what she discovered. And what we have to choose from.

http://video.ted.com/assets/player/swf/EmbedPlayer.swf

If you don’t see the video embedded here, you can click this link to go to the original on TED.com.