The Blade

Thoughts for entrepreneurs from someone who's been in the trenches.

The Fine Line of Entrepreneurial Grit

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Image credit: jppi

It is well-known that “entrepreneurial grit” is a trait required to build an innovative business, but too many founders fail to understand a realistic timetable for taking a new idea and turning it into a viable business. Grittiness isn’t months of hard work with little noticeable results–it’s years.TweetTweet this

Case in point is the creation of $18 billion Xerox Corporation. Chester Carlson, who invented Xerox’s flagship product, the modern-day copy machine, spent a great deal of his life commercializing it. In 1934, Carlson worked in a patent department and became frustrated with reproducing his drawings several times over. In response, he set out to invent a device that could copy images.[i] It took him four years to make the first xerographic copy. By 1938, his prototype was a working machine and should have been ready to market and sell, but that didn’t happen because Carlson didn’t have the capital or experience to produce and distribute it. So he pressed on.

Carlson spent four additional years asking 20 firms to help him develop and market his invention. They all turned him down. Finally, a nonprofit company agreed to help him. Three years later, Haloid Company obtained the commercial rights to his xerographic invention. Eleven years after that, Haloid—now calling itself Xerox—finally introduced the office copy machine, making Carlson a multi-millionaire.[ii] However, from the time that Carlson imagined his invention until it became a viable product, nearly a quarter of a century had elapsed. Now that’s grit!

A modern example is the six-year creation of financial software firm Sageworks. Its founder, Brian Hamilton, spent 18 months, singlehandedly grinding away and building his first artificial intelligence software product, plus another two and a half years discovering a market for it—which ended up being CPA firms. That’s four years of trudging through grit for survival. After that, Hamilton pushed an additional two years, from 2002 until 2004, trying to figure how best to sell to CPA firms to make his startup viable.

Grit helped build my own startup, First Research. Check out my blog about the 6 reasons I kept my startup going.

In the book Grit: Perseverance and Passion for Long-Term Goals, by Angela Duckworth, et al., (See her Ted Talk) it is noted that many of the greatest professional accomplishments come from grit, not talent:

“In a qualitative study of the development of world-class pianists, neurologists, swimmers, chess players, mathematicians, and sculptors, Bloom (1985) noted that ‘only a few of [the 120 talented individuals in the sample] were regarded as prodigies by teachers, parents, or experts.’ (p. 533). Rather, accomplished individuals worked day after day, for at least 10 or 15 years, to reach the top of their fields.”[iii]

Chester Carlson and Brian Hamilton’s start-up stories show that building a viable business is often muddled, mind-numbing work – in many ways more akin to blue-collar work than white-collar, “ivory-tower” work.

So grit is more than just determination—it also derives power from its alternative meaning: hard, coarse-grained sandstone. Grit is messy. It takes failed experiments, grinding slowly through ups and downs, finally getting there while others are left spinning their wheels, wasting their time and resources. The most successful founders use mental and physical muscle to keep advancing their dream into reality.TweetTweet this

There’s a fine line between knowing when to bail out and when to press on with a fledgling startup. With so much emphasis these days on “fail fast…fail often” and being okay with failure, maybe there’s another way to look at success versus failure. Sometimes, grit does pay off. Just because you fail early on doesn’t mean you’ll fail at the same business later on. So consider this: if you have a good startup concept, are you willing to keep the fight alive?

 

[i]  (Encyclopedia Britannica 2012)

[ii] (Encyclopedia Britannica 2012)

[iii] (Duckworth 2007)

Giving Credit Where Credit is Due

If you are the founder of a startup, have you given thought to what…or who…set you on your entrepreneurial path? I certainly have, and there is one name at the very top of that list…


lockers

Photo credit: Elodie

Throughout most of school, I was a lousy student. In fact, my lack of maturity and short attention span led to my “repeating” fourth grade. I was hyperactive, and if I were a kid today, doctors would put me on Ritalin. According to my father, experts told him I’d never graduate from high school much less go to college. I could easily have hit the skids.

I’m unsure when I turned the corner to actually try in life, but I’m pretty sure I know who had the most influence. He’s the person I owe the most to in terms of my becoming an entrepreneur and having a fulfilled, engaging career. Don Goodwin, my high school American history teacher, practically danced across the room, engaging students from the front to the back. He loved American history, and his passion for the subject helped me come alive, opening my mind to a love for learning. He was tall and lanky, wore cool glasses, and was a charismatic, confident outsider who humorously mocked sports events, proms, cheerleaders, spring break, student government, and pop culture.

The mediocre teacher tells. The good teacher explains. The superior teacher demonstrates. The great teacher inspires.  –William Arthur Ward

Yet Mr. Goodwin was an independent thinker in a highly productive way, instilling in me a sense of optimism and confidence that one can be different and still be relevant in a conventional setting. No need to be a conformist if you didn’t want to. His energy was contagious, and I ate it up more than anything I ever had experienced. I never knew that Thomas Jefferson and the Louisiana Purchase could be so interesting!

Sure, Mr. Goodwin was smart and articulate, but that’s not what made him influential. Rather, it was his coming alive with his subject matter in a quest for something greater. He excelled at his craft mostly because he liked it so much. It was from Mr. Goodwin that I first learned some of entrepreneurship’s most critical ingredients – passion for your idea and whatever is your “thing,” and genuinely caring about people.

My point of telling you this story is that if today, you’re happy with your career and doing things you love—think hard about who helped you get to that point. And be sure to thank them.TweetTweet this

I was fortunate enough to hunt down Mr. Goodwin, have a beer with him, catch up on life, liberty, and the pursuit of happiness—and thank him. I also provided him an advance copy of my upcoming book, The Hockey Stick Principles, which is dedicated to him.

Who inspired you on your path to entrepreneurship?
What did they do or say to light a fire in your belly?

“Fifty Ways to Leave Your Lover” & Other Embarrassing Startup Moments

Let’s not take ourselves… or our businesses… too seriously

Once when travelling who knows where, who knows when, who knows why–a young flight attendant was taking us through the safety precautions and says, “There may be fifty ways to leave your lover, but there are only four ways to exit this aircraft.” Ahhhh, clever– throw in some Paul Simon lyrics. I like.

OMG button

Image credit: Stuart Miles

The flight attendant strolls by me, and I exclaim, “You just slip out the back, Jack!” No reaction. She strolls by again, I add, “You don’t need to coy, Roy!” No reaction. A few minutes later, “Just drop off the key, Lee!” Nothing. At this point, I’m not even trying to be funny; I’m just looking for some sort of reaction. The flight attendant eyes me as if I’m crazy. The man seated behind me is belly laughing – so I believe this exchange is somehow funny. But she’s not amused and instead is clearly irritated. Now I’m just confused.

The man behind me finally explains why he’s laughing: “She’s only 25 years-old and has no idea what you’re talking about. She’d probably heard another flight attendant use the phrase ‘50 ways to leave your lover…’ and so she copied it.”

I tried to explain myself to the flight attendant, but the damage was done. The more I tried to clarify what had occurred, the less she cared and the more awkward the situation became. Passengers are just shaking their heads.

Truth be told, I’ve done some pretty stupid, silly, embarrassing things during the time I founded two companies. Here’s a partial list:

  • I inadvertently sexually harassed the sexual harassment trainer (that story is for another blog post).
  • I broke my assistant’s nose playing an impromptu soccer kick-around.
  • At a cocktail party meet-and-greet with customers at a very nice restaurant, I showed everyone in the room my geographic tongue.
  • I requested my salesperson and intern help me clean my house in exchange for pizza. What was I thinking? This one became legendary.
  • I once went postal on a few customers – shocking the room.

If you are a startup founder, I recommend you make your own list. How many times have we heard someone tell a work story that makes their boss sound like a complete moron (think: Michael Scott from The Office)? The reality is that, as a startup founder, embarrassment and vulnerability are inevitable. Best to go with it—laugh about it, be yourself, and enjoy the ride.TweetTweet this

I would never trade these stories and red-faced embarrassments for anything. The stories are a culmination of who I am and how I remember my startup experience. What would be sad would be looking back at eight years of me trying to become something I’m not. I could never be the CEO of a large publicly traded business; my personality would never lend itself to the necessary political correctness. But I can successfully create a positive atmosphere and grow a thriving small business by simply being myself.

So as Paul Simon advises, “’The problem is all inside your head,’ she said to me; The answer is easy if you take it logically…” Sometimes the problem is easy – Just don’t take yourself too seriously. You’ll be amazed by how much more fun your startup culture will become.

The Timeless Lessons of Ben Franklin’s Startup (Part 3)

This is the third in a three part series on how Ben Franklin’s startup story teaches us that the methods by which startups are conceived, grown, and evolved are timeless.

Ben by DodgertonSkillhause_smHitting the Growth Inflection Point

For five years, from 1724 to 1729, Ben had been a struggling founder who was attempting to find his way. He tried to open a business for two or three years without success, and then when he did open for business, he struggled with a lazy partner and debts. But Ben was a creative bootstrapper and learned methods to do work himself in order to save money, pay off loans, and eek by.

Much of Ben Franklin’s printing success in those early years was the result of his marketing creativity. He created popular writings that were remarkable and memorable—which he’d print and sell for a profit. He wrote like a modern-day blogger—providing entertaining, useful content in several subject areas. In 1733, under the pseudonym Richard Saunders, Franklin offered witty, worldly wisdom such as, “He’s a fool that makes his doctor his heir,” through his widely-read pamphlet Poor Richard’s Almanac.[i] To stand out, Franklin was the first to print cartoons and maps with his essays, the visuals increasing the appeal of his words.[ii]

Poor Richard helped Franklin’s printing business as its circulation grew to more than 10,000—keeping his presses busy. His creative content also helped him improve revenue at the Pennsylvania Gazette, the newspaper he had purchased, where advertising grew 42.5 percent under Ben’s management.[iii] This success also helped Franklin obtain larger print jobs, including being public printer for New Jersey and Delaware.

Five years after opening, Franklin’s forward-thinking print shop was now gaining momentum and was close to hitting a growth inflection point: “My business was now continually augmenting, and my circumstances growing daily easier, my newspaper having become very profitable…. I experienced, too, the truth of the observation, ‘that after getting the first hundred pound, it is more easy to get the second,’ money itself being of a prolific nature.”[iv]

Franklin at the printing press

Image courtesy of Archiving Early America

Surging Growth

Like many innovative businesses today, Franklin’s growth was also a result of his ability to duplicate good ideas. In 1733, Franklin entered into his first successful partnership with aspiring printers in other geographic locations. “The partnership at [South] Carolina having succeeded, I was encourag’d to engage in others, and to promote several of my workmen, who had behaved well, by establishing them with printing-houses in different colonies, on the same terms with that in Carolina. Most of them did well, being enabled at the end of our term, six years, to purchase the types of me and go on working for themselves, by which means several families were raised.”[v]

By 1748, when Franklin was 42 years old, his startup had grown into an empire of printing presses and publishing houses. Ready to take on new challenges, Franklin sold his printing company to his foreman, David Hall, in exchange for half the company’s profits for 18 years. Franklin’s payoff amounted to about 650 pounds annually ($943,044 in today’s dollars[vi]), after which he went on to discover processes, invent useful products, and play an important political role in effecting America’s independence from England by 1783 when the Treaty of Paris was signed.

The growth process of Benjamin Franklin’s printing startup resembles that of today’s innovative business startups. His success wasn’t predicated on detailed planning that, once followed, resulted in a quick success.

Instead, Franklin’s success was based on his resilience, eye for constant improvement, and personal ingenuity during the span it took him to turn his idea into a viable printing company.TweetTweet this

We unfortunately don’t have records of Franklin’s Printing Company’s annual revenue. As an alternative, I charted the estimated number of pages his company printed each year.[vii]

Growth chart of Franklin's printing company

What we can learn from observing Franklin’s innovative print company startup nearly 300 years later is that its growth track appears also to be shaped much like a hockey stick, a pattern that is timeless and repeatable.TweetTweet this

Every business you or I start today, therefore, is likely to follow the same growth curve as Ben’s printing business, one that calls for the same unflagging hard work, self-disciplined resilience to recover from periodic setbacks, and the fun of applying creative problem-solving in different ways again and again.

 

[i] (Franklin) 1733)

[ii] (Independence Nat’l Historical Park 2012)

[iii] (Miller 1974)

[iv] (Franklin 1996) p.51

[v] (Franklin 1996) p.51

[vi] Currency Conversion

[vii] Franklin’s Printwork.

The Timeless Lessons of Ben Franklin’s Startup (Part 2)

This is the second in a three part series on how Ben Franklin’s startup story teaches us that the methods by which startups are conceived, grown, and evolved are timeless.

Ben by DodgertonSkillhause_smPart 2: Ben the Bootstrapper

In Part I of young Ben’s startup story, in 1724, he had been burned after traveling to England to buy equipment. He remained there for two years and had learned about modern printing concepts and how to properly manage a shop. Ben moved back to the U.S., working for Samuel Keimer at the print shop where he had first apprenticed, essentially starting all over again. Franklin applied there what he’d learned in England to become innovative—he was the first to manufacture type in America and the first to generate a new font still used in many newspapers today, Franklin Gothic. “I made the ink; I was warehouseman, and everything, and, in short, quite a factotum,” or handyman, Franklin writes.[i]

But Ben was miserable working for Keimer, partly because of the printer’s authoritative attitude and lack of work ethic.

Ben had an independent, rebellious streak, so he struck out on his own again, this time with co-worker Hugh Meredith, whose father agreed to invest 200 pounds ($313,101 in today’s dollars)[ii] in Ben’s print shop. Franklin sailed again to England and purchased equipment and fonts with a “generous array of … page decorations, marked features of his typography through his printing career”[iii] that would later help him differentiate himself from Keimer and another pair of Philadelphia printers, Thomas and William Bradford.

In 1728, when Franklin and his partner started their business, Meredith & Franklin, they knew they had to adhere to a bootstrap mentality—keeping costs low by living in their print shop and taking a sub-lessee which helped pay his rent that in today’s dollars was $37,000 per year. Doubters expressed concern that a new printing company would survive, but Franklin and Meredith finally acquired their first customer, who paid them five shillings ($395 in today’s dollars[iv]). Even though the job was small, the first sale gave Franklin “more pleasure than any crown I have since earned,” a crown being the equivalent of 21 shillings.[v]

Franklin took advantage of his personal strengths and inventive nature to get his print shop off the ground. For example, one of Ben’s strengths was networking, so he created a club for mutual improvement, “Junto,” that catered to the city’s movers and shakers. The group met on Friday evenings to discuss morals, politics, philosophy, and business. Junto also helped Franklin find customers for his new business.

Despite some small early successes, Franklin’s business faced setbacks. Meredith’s father had promised to provide 200 pounds in capital, but only delivered the first 100 pounds, leaving Franklin 100 pounds in debt. “The merchant, who grew impatient, .. su’d us all. We gave bail, but saw that, if the money could not be rais’d in time, the suit must soon come to a judgment and execution, and our hopeful prospects must, with us, be ruined, as the press and letters must be sold for payment, perhaps at half price.”[vi]

To make matters worse, Meredith wasn’t holding his own in the partnership. He didn’t enjoy print work and was spending most of his time drinking in pubs. So in 1729, Franklin and Meredith decided to part ways—leaving Franklin to endure greater financial debt in order to buy out the Merediths’ interest in the business.

Image courtesy of Archiving Early America

Image courtesy of Archiving Early America

Franklin was forced to work alone tirelessly to pay off the debt. “…To show that I was not above my business, I sometimes brought home the paper I purchas’d at the stores thro’ the streets on a wheel-barrow,”[vii] noted Ben.

Franklin gradually earned enough revenue to make his loan payments. Here’s how: he adopted vertically integrated processes to reduce costs and increase revenue. Franklin manufactured his own ink, a skill he had learned in England, and sold it to other print shops, diversifying his revenue sources. And to gain more customers and use of his presses, in 1729, Franklin purchased an ailing newspaper, the Pennsylvania Gazette, and also opened a store that sold stationery and books.

Like entrepreneurs today, during his time of trying diverse innovative ideas to survive, Franklin’s new wife, Deborah, helped his business. “She assisted me cheerfully in my business, folding and stitching Pamphlets, tending shop…”[viii]

Learning from Ben’s Blade Years

After five years of trying, Ben was still struggling with his startup. Let’s dive into the timeless lessons from this stage:

  • His Blade Year struggles are par for the course: Ben’s startup reminds me of many of the startups I invest in today. During the first few years when revenue is low and growth is non-existent, founders have their backs against the wall and must be scrappy, penny-pinching, and do whatever it takes to survive, often bootstrapping, just as Ben did. He made his own ink and did much of the work himself. Remember, even today, bootstrapping should be standard operating procedure for startup entrepreneurs.
  • Partnerships don’t always work out: As much as we try to make cofounder arrangements work well, sometimes they do not. Don’t get down and blame yourself when partnerships fail, as was the case with Ben’s partnership with Meredith. Instead, press on with your idea and recognize it as a bump in the road, not a failure of the company. Remember, a business with momentum is much bigger than any one individual.

But Ben is just getting started; be sure to check out next week’s post as he presses ahead and his revenue begins to turn northward.

 

 

[i] (Franklin 1996) p26

[ii] Currency Conversion

[iii] (Miller 1974)

[iv] Currency Conversion

[v] (Franklin 1996) p.28

[vi] (Franklin 1996) p.31

[vii] (Franklin 1996) p.33

[viii] (Franklin 1996) p.37

The Timeless Lessons of Ben Franklin’s Startup (Part 1)

This is the first in a three part series on how Ben Franklin’s startup story teaches us that the methods by which startups are conceived, grown, and evolved are timeless.

Ben by DodgertonSkillhause_smPart I: Two Lessons from Ben’s First Four Years

Diplomat, inventor, statesman, businessman, and politician Benjamin Franklin (1706 – 1790) is credited with inventing many practical devices such as the lightning rod, the Franklin stove, swim fins, a “long arm” to reach books on high shelves, and bifocals, yet he characterized himself on the first line of his last will and testament as “I B.F., printer.”[i]

Ben’s entrepreneurial story from nearly 250 years ago is similar to many entrepreneurs’ stories today. In 1728 when Franklin started his printing company, the industry hadn’t changed drastically since Johannes Gutenberg first used movable type in 1440. Printing companies were a lot like the thousands of innovative internet companies today: entrepreneurial enterprises trying to deliver content in a singular, relevant manner in order to stand out from the competition and thus become necessary to their customers. Printing was the communications technology of the day.

As a youngster in Philadelphia, the smart, curious Ben had wanted to attend Harvard, but his father, Josiah, refused to pay for it, so Ben apprenticed with a candle-maker and a printer to learn a trade. Ben’s first opportunity to start his own print shop came in 1724, when he was 18. Pennsylvania’s governor, Sir William Keith, noticed Franklin’s disposition for good sense and hard work, so he wrote to Franklin’s father encouraging him to support financially a printing venture for his son. But Josiah’s return letter said Benjamin was “too young to be trusted with the management of a business so important, and for which the preparation must be so expensive.”[ii]

After his father’s help fell through, Keith promised to finance Franklin’s new printing venture, but then Keith reneged on his promise, even after Ben had quit his job and sailed to England to purchase printing equipment. But soon he was making the most of the unfortunate twist, remaining in England for 18 months to further his education as an apprentice in two reputable print shops.

During his trip to England, Franklin met Thomas Denham, a Quaker merchant. Back home in America, Denham and Franklin opened a store in Philadelphia. Franklin was a hard-working, diligent storekeeper, and learned a new skill: selling. “I attended the business diligently, studied accounts, and grew, in a little time, expert at selling.”[iii] Unfortunately, not long after the store opened, Denham fell ill and died, and Franklin hadn’t been written into Denham’s will to inherit his portion of the store.

Unemployed and with few prospects, Franklin was forced to start all over yet again.

Learning from Ben’s trials and tribulations

The first three or four years of adulthood were a bit rough for young Ben. He reached high, but each time was shot down. Here are the two main lessons to be learned from Ben’s early years:

  • Good luck doesn’t build success. During those first years, Ben did many things the right way, but he was unlucky. He found a reputable financial partner who let him down. He worked hard in a shop and earned the right to own it, but that didn’t pan out, either. Goes to show you – if during the first three years of starting you fail or have bad fortune, it doesn’t mean you’re going to fail in the future. You should ignore the cliché I guess it’s just not meant to be.
  • Keep learning. The climax of the story came when Ben had committed himself to starting a printing company by sailing to England to purchase equipment and then was reneged on after arriving. But Ben turned this unfortunate situation into a positive by taking an apprenticeship in England and learning more about the industry. Smart founders of today do this as well. They have a deep appreciation for the long-term nature of building a successful business.

In Part II, which will be posted in the next few days, we’ll see how Ben leverages what he learned in England to create an innovative shop.

 

[i] (Isaacson 2003)

[ii] (Franklin 1996) p15

[iii] (Franklin 1996) p25

The 6 Reasons I Kept My Startup Going

This is a follow-up from last week’s post, “Doing Things Badly,” which recounts the first year of starting First Research, my first company, which was eventually sold to Dun & Bradstreet for $26.5 million.

chess board_credit mconnorsFirst Research struggled during that first year. On paper, it was failing. Year-end 1999 revenue was just shy of $4,000. We had $399 in cash, $899 in accounts receivable, and a $20,150 loan payable to me. So even nine months into the venture, we had almost nothing to show for it. I was approaching that crossroads many people experience after a year of starting a new business: Should I keep going with First Research? Since I was unable to answer that question, I kept fighting with no stopping-point in mind. The six reasons I kept on were as much psychological as they were empirical.

First, First Research was about so much more than a business – it was a crutch to buoy my emotions after three crushing failures: My long-time girlfriend had just dumped me; before starting my business, I had been passed over for a bank manager job; and I found myself sitting on the bench while playing soccer for a local semi-professional team.  In a frustrated state of near wall-to-wall failure, I wasn’t interested in failing again. And I was not a rational investor–a $500 check made me feel rich. Thus, my desire to keep First Research going was more emotional than logical.

Second – I was motivated by a “me-against-the-world” mentality. I enjoyed playing the underdog because it confirmed my belief that I wasn’t supposed to be successful; therefore, I had nothing to lose. So why not give it everything I had? Managers holding me accountable or requiring that I do something had hardly motivated me. Instead, I was motivated by my own “inner manager” daring me: “This is a big challenge, Bobby; can you figure it out?”

Third – I loved trying to make something work that had never been done before. Somewhere in my DNA is the microchip, “Wants to build new concepts.” When I woke up every morning, creating something gave me a sense of wonder. My cofounder, Ingo Winzer, later told me, “After a year, we still didn’t know if we had a business. That didn’t matter to me. By then I was pretty confident something good would happen, mainly because you were so excited about what we were doing. I think every new business needs that–infectious enthusiasm. Just having a good idea isn’t enough.”

Fourth – my sixth-sense confidence told me that my idea was a good one. Common sense told me that a salesperson needed to understand a customer’s business before a meeting. Almost every sales guru in the country was preaching sales-call preparation and understanding the customer’s business. And from my own first-hand experience as a banker, I was confident that First Research was an effective new tool. I only needed patience and execution to convince others.

Fifth – I wanted to finish the puzzle. Parts of the puzzle, like product enhancements and reaching new customers, were yet to be pieced together. You can’t start a puzzle and not finish it. Putting its pieces together was fun and absorbing. Every time Ingo and I matched a puzzle piece, we created that wonderful feeling of accomplishment for ourselves.

And last – Ingo and I never defined failure. For example, we never decided that $4,000 in sales during the first year was an indication of how we had performed. We never talked about when or why we would quit because it wasn’t an option. We felt successful because we were in the game.

So Ingo and I just buckled down and did our thing. I woke every day and asked myself, “How can I convince someone to buy our amazing product?” And Ingo woke up every day and asked himself, “How can I write an industry profile that will blow the socks off our customers?” And that became our fight:  it was simple, precise, restricted in scope, energetic, and elegant.

Not taking outside investors enabled Ingo and me to have this simple mentality. An outside investor would have likely become impatient and frustrated by our inability to meet our business plan goals. Spending only the money we needed to get the product going kept us focused. Without investors, Ingo and I didn’t need to continuously satisfy someone else or waste our time explaining our failures—we simply recalibrated and fixed the mistakes. My lack of business experience was never a question because we were stuck with me—no hiring/firing quandaries there!

And so the fight went on.

Doing Things Badly

“If a thing is worth doing, it is worth doing badly.” G. K. Chesterton

I learned the hard way just exactly what this weird quote means. In 2007, my salesperson-friendly industry research company, First Research, was sold to Dun & Bradstreet for $26.5 million. But early on in the life of First Research, my fledgling company was in a sad state.

kayak on beachWhen First Research was initially formed in 1999, I was a burned-out 29-year old banker with little business experience. What I did have was a novel idea for an online product that would help salespeople quickly prepare for calls by researching their prospect’s industry, and on April 15, 1999, after quitting my day job, First Research opened for business. Eight months later, our progress was as follows:

  • First Research had one customer, far from the 25 customers I had forecasted in my plan.
  • First Research had produced 40 Industry Profiles, far from the 170 I had anticipated.
  • I had no concrete evidence that anyone wanted our product. While several bankers thought our product was interesting and helpful, I was at a stalemate in terms of their commitment and willingness to sign on the line which is dotted.
  • I hadn’t pinpointed a market for prospective buyers. I had planned to sell to banks, but limited success with them had me experimenting with other types of buyers, who also were not interested.
  • Maintaining our product had become more work than originally planned. We hired a part-time MBA student to help. The first two students didn’t work out – one quit and one I had to let go. I thought, “If I can’t hire and manage for this simple job, how will I one day hire and manage dozens of employees?
  • To find some personal income and make ends meet, I was spending precious time completing one-off research projects for companies instead of selling First Research. This wasn’t in my business plan.
  • Some people were not taking my idea seriously. One banker told me, in a deep Southern accent, “Bobby, we’re the bank; this is already what we do. I don’t want to see you get in too deep with this sil-lee thing, son.” (Calling me “son” was almost more than I could take.)

I truly believed that my company had tremendous potential, but despite my best efforts–as G.K. Chesterton summarized in his quote–until I learned from trial and error, I was doing things badly.

The lowest point in the early days of First Research was the result of a simple mishap. I worked out of a home office, and I had this a 8 ½ x 11 sheet of paper hung on the wall with a handwritten reminder: “Thousands will Pay a Thousand Dollars for First Research.” The mini-poster actually meant a lot to me because it was my source for hope. But when a friend was visiting, he noticed, laughing hysterically, that I had made an error and spelled it ReRearch. I thought that mistake was symbolic that perhaps it was time to throw in the towel.

But I didn’t. I hung in there and made a few decent sales the next year and managed to eventually build a real business–a $26.5 million business.

So if you’re starting out doing things badly, and living through some of these startup challenges, hang in there.TweetTweet this

From my own experience as well as talking to hundreds of other successful founders, I’ve found these “badly done things” are often par for the course.

Three Ginormous Industries Ripe for Disruption

idea imageDo you want start a high-growth company that puts it to “the man”? Consider taking on a huge industry that has holes in its current business model. Uber shell-shocked the taxi industry. Netflix flattened the video rental business. Airbnb is creeping in on hotels. Now, it’s your turn. Consider these behemoth dinosaurs.

>> Financial Advisory ($32 billion revenue, 13,000 firms, 180,000 workers)

Helping people plan for their financial future and manage their investments has already been disrupted (Wealthfront, Betterment, Motif Investing), but the vast majority of industry revenue is still generated by charging clients 1 to 3 percent of their investments …everysingleyear.  Think about it: if you invest $500,000 with an advisor, you’re charged as much as $10,000 per year for their advice. Really? Insane. And the reality is that your “advisor” focuses most of his or her time looking for new clients. Think about it. Learn more in this report from Deloitte.

>> Residential Real Estate Brokerage ($115 billion revenue, 106,600 firms, 690,000 workers)

The book Freakonomics (2010) pointed out that, in order to maximize their profits, real estate agents leave their own houses on the market much longer than their clients’ houses. Surprised? I’m not. Most firms charge 6 percent for each transaction—a lucrative business model—so agents sell your house quickly in order to pocket that commission money. That is also why there are so many regulations and licenses in the industry. Of course, the exclusive “agent-only” database, MLS, helps the industry hang on, but eventually, someone will disrupt in a noticeable way. Keep your eye on London-based Yopa, a startup that is cost-effectively brokering property online.

>> Banking ($684 billion revenue, 5,477 firms, 1.5 million workers)

The number of banks is shrinking due to the cost of regulation, but the real challenge banks have is their enormous cost structures due to legacy systems built in the 1970s, 80s, 90s, and 2000s. Not to mention, many banks own or rent skyscrapers in pricy locations and have old-fashioned brick and mortar branches badly in need of renovation. “Fintech” firms have already started disrupting banks, but their efforts are just the beginning. Live Oak Bank is an example of a new bank with a fresh approach. Using modern technology, it built a bank exclusively for dentists—and has since added new target industries. If you can raise $20 million and create an imaginative business model with conservative lending practices, the sky is the limit.

Shake things up

To get started, I recommend you get a fire in your belly and dig into the great book Business Model Generation in order to figure out your game plan. Happy disrupting!

Why My Publisher Cut “What it Really Takes” From My Entrepreneurship Book

Photo: FreeDigitalPhotos.net_pakornMy publisher cut Chapter 2, “What it Really Takes,” from my upcoming book The Hockey Stick Principles and offered the following candid advice: “This is about entrepreneurship in general and doesn’t interest me as much.”

A central theme of the chapter was five “commonalities” I’d discovered about the successful entrepreneurs I’d interviewed while researching the book, such as:

  • An undying curiosity and sense of joy in the knotty challenges of problem-solving
  • A tough skin and resilience when encountering failure, which enables them to bounce back and persevere
  • A flexibility of mind about their plans, both for themselves and for their company, which allows and even welcomes the inevitable changes the plan will require over time
  • The combination of an inventor’s heart and skills with a good mind for management, or the good sense to recognize that they don’t have a business-management mind and must partner with someone who does
  • An attitude of hope, which is not blind to the obstacles or delusional about setbacks, but which fortifies them with a persistently positive outlook about their ultimate success

Experts in entrepreneurship have devised many lists of the five, eight, 10 or more personality traits of successful entrepreneurs; you can find reams of them with a simple web search. One well-researched list is the subject of Stanford lecturer Amy Wilkinson’s book The Creator’s Code, which offers six attributes of extraordinary entrepreneurs…they:

  • “…spot opportunities that others don’t see”
  • “…focus on the future”
  • “…continuously update their assumptions”
  • “…hone the skill to turn setbacks into successes”
  • “…bring together the brainpower of diverse individuals”
  • “…unleash generosity by helping others”

Amy’s list and my list partially match up. I’ve seen other lists saying entrepreneurs are risk-takers, competitive, leaders, and believe in themselves. Bill Aulet, senior lecturer on entrepreneurship at MIT’s Sloan School of Management, when asked in a CNBC interview what the stereotypical entrepreneur is like, also highlighted how iconoclastic and headstrong entrepreneurs are: “First of all, they have the spirit of a pirate. ‘We’re doing things differently!’ They disrespect the existing authority. And this is what we at MIT call ‘creative irreverence’ or ‘taking on the man.’”[i] I would agree that some do this, but not all.

The point is: you can drive yourself crazy trying to see how well you line-up with all these lists; it’s like reading the symptoms for an illness on WebMD. But the fact is that there is no one definitive list. Forget the lists!

I think all of the characterization of the traits of entrepreneurs misses the central truth. If there is one key thing about successful entrepreneurship I have observed and that arises clearly out of my research, it is that success comes down to the doing; it’s not primarily about fitting a personality profile in some silly checklist, it’s about taking action.

I’m just glad my publisher knows what it really takes to write a successful book!

[i] CNBC video interview online: “Entrepreneurship guru: ‘Need the spirit of a pirate’ Thu, 8 Aug ’13 | 6:35 AM ET