I have the good fortune of being involved with an exciting entrepreneurial movement at my MBA alma mater. They are doing some unique things to help support and grow the entrepreneurial spirit already present throughout the school. It has been fun and I look forward to watching as the plans and meetings result in real world experience for these new entrepreneurs. As a part of this process, I occasionally get to be a part of some meetings that include some of Utah’s most successful and well respected entrepreneurship experts. At these meetings I have enjoyed hearing from two of Utah’s best – Greg Warnock and Alan Hall. Although their attendance at the meeting was brief, their impact was great. It made me reflect upon an important topic that both of them mentioned a few times in their comments (and I have touched on it here in my blog). I think this especially applies to new, perhaps even first time, entrepreneurs. The comments, generally, were centered on the following idea: Don’t get too caught up in raising money for your business. Don’t even get too caught up in making money with your business. Focus on giving it 100% – getting it up and running, living and breathing. The experience, particularly as a new entrepreneur, is worth more than the money.
This is a tough concept to grasp at first (I think). I remember quite well when I was starting my first set of businesses. I was all about raising the money to do them. I was much less focused on the experiences associated with the fundraising, creation, operation, growth and exit of the business. I was all about getting the money and turning it into more. This isn’t a bad thing necessarily – but I missed out on some stuff because of this mistaken focus. I would have been much better off if I would have channeled a portion of my efforts towards those endeavors and the rest towards the other details I was missing. What did I miss out on? Well, here are a few things:
1 – I didn’t get to know my co-founders, partners, investors, customers and employees nearly as well as I could have. I have gotten better at this as the years have progressed (because I have slowly learned that the people matter more then any other factor in the success/failure of a company). Focusing primarily on getting and growing money dulls a lot of the skills you will need…namely, building successful relationships with customers, employees and even the investor’s who gave you the money in the first place.
2 – Learning how to operate a business takes a lot of focus. It is a skill that is learned – people aren’t generally born with an ability to run a company. Trial and error is the only way to really learn how to run a business. For some people the learning curve is steeper then others. At least there is a curve though. If you get too caught up in your funding and bottom line, you will miss out on many of the day-to-day operational decisions that no one other than you should be making. No one. The hair on my neck stands up when a young entrepreneur tells me how within six months of starting their business they will turn operations over to someone else so they can focus on another part of the business or go work on something else (because by then, the company will be “running itself”). What a joke – and a huge mistake! The experience associated with making all of the little decisions associated with the daily grind of a growing company are critical to your progression as an entrepreneur. At some point you will likely divide and delegate, but it better only be after you know every nook and cranny of your business personally.
3 – Doing matters more then planning, talking or meeting ever will. Business plans are a big waste of time unless you need a loan or want to get VC money (and even then, most VC’s pay little attention to your business plan anyway). Most angels want to meet with you to discuss your company – they want some financials – but they don’t want some bloated business plan with a bunch of useless information in it about how your market is a 10 bazillion dollar industry with no direct competitors. I can’t think of a single entrepreneur that I know that actually refers to a business plan. DO IT – talk about it, write about it, and hypothesize about it – but do it LATER.
4 – When I couldn’t get the money, sometimes I wouldn’t start the business. I figured that if no one would fund it, the idea must not be that good. Wrong! I read somewhere the other day that Hotmail got turned down several times before it got funded and changed email as we know it. There are surely hundreds of other examples of companies that got turned down many times only to find huge success down the road. Maybe one of the the businesses I didn’t start could have been one of those?
5 – When I couldn’t get the money, and I didn’t start the business, I was missing out on the opportunity for a cheap mistake. I have said it before and I will say it again – you learn a lot from failed businesses. In fact, you may even learn more from those. What a great way to learn from a failure when there is no real money at stake! If you get your focus off start-up funds you can still get your business going – and maybe it won’t work. In this scenario it cost you/others very little. Don’t worry, if you stick with entrepreneurship as a career, your turn for expensive mistakes will come along.
Hindsight is indeed 20/20. There is no way I would have been able to understand this post 10 years ago as I understand it now. It is so clear to me that the entrepreneur that I am has been shaped by the experiences I have had – not the money I have raised or made. Those are merely byproducts associated with the milestones of my career. They are important, but they don’t make up what I really know and have learned.
So, the moral of the story is this – if you are thinking about starting a business, DO IT. Don’t wait for the money, it may never come. Unless you are starting something that absolutely has to have outside funding (like an apartment complex), there is no reason why you shouldn’t start rolling out your first product/service to some customers. If it does require some outside funding, and the pieces are in place, your moment to sink or swim as an entrepreneur has arrived. What matters isn’t how many laps you do but whether or not you learn how to keep yourself from drowning.
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I agree with your blog to a certain extent about managing the details of your business operation, however I think there’s an equilibrium involved with that and a focus on growing the business. In grad school the mantra that was drilled into us was that we should “Do what we do best, and outsource the rest”. The underlying concept being that we shouldn’t get caught up in the minutia of all operations because it impedes on the time we should lend to the 20% that counts with expanding the business. (Recall the 80/20 rule, 20% of what you do accounts for 80% of your performance) For example, an attorney could be an excellent typist and quickly bang out memo’s and documents for his clients. However, his time would be better utilized with growing the business by focusing more on high level attorney work and outsourcing the typing duties to someone else. I think the key is knowing which 20% to focus on within the operations arena so that one can effectively balance cultivating the people factor and growing the business.
That’s just my two cents.
I think you made some insightful and valid points about “doing it” vs. “planning it”. Overall the blog was an interesting read and worth the time.
@Craig Smith – excellent point. I guess I was thinking more of the early stage entrepreneur who doesn’t yet have a skill that is quite as polished. As one improves though your point is well taken. Thanks for taking the time to read and comment. I learned something from your point of view. Return and share. -Alex
Some great thoughts Alex. I particularly liked number 5. Greg Warnock used to explain that companies highlighted on the Inc 500 list are on average funded with less than $10K. That number has gone up a bit ($25K as of Inc Magazine September 2008 – pg. 182) but the truth is that a great business can start with little resources. Another benefit when using little capital is that if the business succeeds then the proven organic growth helps you raise the capital because their is proof in the pudding as they say. This early time when a handful of customers determines your businesses fate can teach the timeless lesson of LISTENING to your customers and solve their needs well.
I’m starting a social media website called SuperNack and your tip about the business plan is really great. Since I will probably be looking for funding in the near future I think I’ll try to hit some of the main points in the business plan but not all the details. Thanks again Alex. I’ll have to check back here for future posts. -Ryan