I enjoyed this thoroughly and I’ve been meaning to post about since Scott Shane first posted Entrepreneurs’ Job Creation: Expectations Versus Reality on Small Business Trends last March. His chart, shown here below, compares what entrepreneurs said were their hiring expectations to the actual hiring:
You can read the details on Scott’s post. I don’t really care about the research specifics. I think it’s wonderfully eloquent as is, a picture worth at least 1,000 words.
Once again, research based on asking people what they are going to do is inherently flawed because most people don’t know and most people say what they feel good hearing themselves say, not what they really think.
Entrepreneurs are optimistic about hiring.
Entrepreneurs are most optimistic about hiring when asked by a pollster how many people they are going to hire.
If you could invest in the difference between what entrepreneurs say will happen and what actually happens, you’d be very rich.
(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.
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.
…. 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.
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?
With due respect to some of the great thinkers who have, I don’t understand how anybody even tries to define, teach, or even predict good management technique.
Even if it’s just one manager and one person being managed, there are already three huge factors: the manager, the other person, and the situation. Both the people involved have their strengths and weaknesses and all that. And the situation itself, what’s going on, is an entire additional set of factors. Then there’s baggage from the past, and, well, it becomes an infinite problem. Higher math. Condemned to infinite case-by-case analysis.
I think about what I’ve heard about coaches in professional athletics. Sometimes a supposedly hard-nosed, tough coach will win the championship, and sometimes a supposedly “people person,” softer coach, will. And occasionally you hear about a coach who is either hard or soft to each individual player, depending on his sense of how that specific player responds. There too, though, with coaching, it’s a pretty complex problem, because it’s about the nature of the coach, the nature of the player, and the nature of the situation.
So too with wielding authority in your own business.
What reminded me today was Karen Hough’s Handling Tough Conversations in 3 Simple Steps, on Small Business Trends. She’s sharing data from interviews with more than 1,000 of managers in larger companies. She found that the hardest part of their job was “tough conversations.” Here’s a quote:
Conflict makes most people nervous, so we avoid having those tough conversations, even if we know it may produce a better outcome. A study of more than 1,000 project managers across 40 companies found that if project leaders were willing to break a code of silence, they could substantially improve their ability to execute on initiatives.
Although that study was done with middle managers in larger corporations, I know that it applies very well to small business and entrepreneurship. The code of silence is a reluctance to deal with poor performance, bad news, and negative feedback. It’s certainly a problem every manager has to face.
In her post, Karen shares is three-pronged strategy to break what she calls the code of silence, changing the motif from authority to coaching. It’s not a cure-all by any means, but it could help. And I wish I had a better solution to offer, but I don’t.
Does this happen to you? You read something, love it, realize you sort of knew it, but this author puts it in a new context, new light, or new list, so that it’s very useful to you just to see it again? I found three of those this week in three blog posts:
For a good practical review of what makes your website work, read 6 Must-Haves for Your Small Business Website, by Lisa Barone, on Small Business Trends. She mentions intuitive navigation, sticky content, a blog … that’s another good collection of reminders.
Seth Godin is amazing. He so often says so much in so few words. His post Pleasing is maybe 100 words long. If you’re in business, read it. You know what he’s saying there, but you keep forgetting.
I saw an interview with Seth Godin where he says he puts labels on things we already know. I think he’s underestimating himself with that description, but still, give me those labels. Well done.
The government protects U.S. business from foreign competition
Hiring goes up when taxes go down
Small business owners vote as a block (bloc)
The government gives free money to start a business
Immigration hurts small business
I notice the imbalance in the results. People leaned a lot more towards false, the high numbers, than true. I managed to catch myths that nearly nobody believes – those four bottom points ranked higher than 8 of 10. I think that’s because I set the points up with a high degree of skepticism from the beginning.
The closest statement to truth, as voted by Huffington Post readers, was that the government favors large business. Frankly I was surprised to see so many people thinking points two and three were true; I don’t.
The biggest surprise here, in my opinion, is that slightly less than half the readers believe small business drives the economic recovery. I would have thought that was true. I’ve seen research showing that small business generates most of the new jobs in our economy.
Another thing that interested me about this post was a pair of comments asking for the facts. One said:
No links to hard data on each issue? Facts are not a matter of ‘HOT’ or ‘NOT.’
And the second:
some good questions, some questionable presuppositions, and no information, not even links to research
They are right, there are no links to data. That is on purpose and by design. Because, if you think about it, supposed facts and data are the first victims of politics the way we do it in this country. Here’s what I answered:
what makes you think we live in a world where the facts or the links to facts come riding into the scene like the cavalry in bad movies, to save us all with the actual real truth? More and more now, in our public political debates, slogans and half truths are presented by both sides as facts, and, worse yet, facts are virtually manufactured to match slogans. All the talking points, on both sides, are backed by alleged research. Which side do you like? You can find research to support it. That’s one of the points I wanted to make.
So much for getting the facts straight.
(Note: if this looks a lot like what I posted on Small Business Trends yesterday, I apologize for the redundancy. I started with the same list, but I’ve had time to reflect more on those comments about facts and links; that wasn’t in yesterday’s post.)
The answer to that question is: no. Not any more than the next person. They just like their business better. They took risks because they saw the goal. It was the dark side of building the company. They had to. But when it comes to savings and investment, no.
Well, actually, the most correct answer to that question is:
You can’t generalize. Some do, and some don’t. Entrepreneurs are a bunch of hard-to-categorize individuals, and who has good data, because all we really get are successful entrepreneurs.
True story: An investment advisor noted once that my wife and I have the most conservative portfolio he manages. He thought for just a second that might be odd for an entrepreneur. But then he thought about the risk we’ve taken over 30-some years of building our own business, financing it at times with multiple mortgages and credit card debt, signing owner guarantees all the time, raising children, paying colleges … walking around for years with the knowledge that something as beyond our control as one of the major software distributors going under, not to mention a software giant accidentally rolling over us, could kill the business and leave us with a lot of debt and no house.
And it was suddenly clear to him. No wonder we don’t want to prospect now with what we’ve managed to save through the years. It was clear on his face, he understood. Capital preservation is what we want, now, not more risk. We’re safe now, at least to some degree, because of savings not dependent on the business. But we don’t want to lose those savings.
Field also worries that entrepreneurship might not be right for older Americans because these folks have spent too much time in the corporate world.
Hmmm … a bit of a generalization, no?
In honor of that thought, with a tip of the hat to comedian Jeff Foxworthy’s “you might be a redneck” routine, here’s my list of ways (none of them age related) you can tell that you just might be too corporate:
If, when you see $850 or $1,450 in the budget, you assume that means $850,000 and $1.45 million (you ask: the numbers are in thousands, right?), then you might be too corporate for entrepreneurship.
If every time you encounter something that has to be done, you look immediately for staff people to assign it to, then you might be too corporate for entrepreneurship.
If you measure yourself and everybody else by office or cubicle size and layout, then you might be too corporate for entrepreneurship.
If problems are to be ducked, and monkeys to be passed on to somebody else, then you might be too corporate for entrepreneurship.
If having a reason why not is the same as getting something done, then you might be too corporate for entrepreneurship.
But just age? Age might make a person too old, but not too corporate.
Brevity is good. Brevity for business pitches is good too. The idea of pitching a new business in a single 140-character tweet (pardon the expression) is intriguing to me. Do you think you could do that?
Celebrity entrepreneur Richard Branson is pitching a Twitter pitch contest as part of a startup training program he’s involved in.
That idea’s intriguing, but not completely new. I thought I’d heard of something like that before so I Googled it and discovered that none other than my friend and world-renowned blogger Anita Campbell of Small Business Trends (@smallbiztrends on Twitter) won a Twitter business plan contest last year, with this 140-character business plan:
Monetize answering research questions for readers on a section of my website – ad supported – listing fees featured research
And the runners-up were pretty good too, in my opinion:
zackgonzales @hoovers pink eraser scentd cologne in pink parallelogram bottle, distro thru urban outfitters, archie mcphee, and scholastic book fairs
AndyBeard @hoovers Business plan by tweet? Sim Startup (All formats – I am sure I could get Activision to publish)
I think every business owner, operator, and manager should be able to boil the core of a business down into 140 characters. Can you? Can you do that for your business?
Here are some of my favorite businesses, in 140 characters (and, to keep it honest and because I included that “hard sell” jab above, I’m skipping Palo Alto Software and/or our products). All of these are less than 140 characters. Most of them leave 20 or more characters for retweeting:
Trunk Club: good-looking men’s clothing with personal online service for men who need clothes but hate shopping.
Cafe Yumm: Really healthy really tasty fast food with slow food values in Oregon. Franchisor too.
Mini-Cooper-S: bite-sized transportation for one or two with a kicker: unbelievably fun to drive.
Klymit: simple knob insulation adjustment in high-tech sports clothing.
Zapproved: Add-on magic to untangle email threads making group decision making faster, easier and more accountable.
Java Juice: easily transportable high-quality great-tasting condensed coffee for coffee lovers who travel or backpack. Just add hot water.
In Context Solutions: amazing 3-D retail modeling revolutionizing consumer in-store on-shelf research in an online virtual model.
And that, doing it for these seven companies I happen to like, was fun and easy. What would your 140-character pitch look like? Could you tell your company from your competitors, with that limit on the text?