I recall my time working in the "basement" of a major telecommunications carrier with mixed emotions. It was an incredibly frustrating time, and yet it became remarkably rewarding. The way that transformation took place became my first life lesson in becoming an entrepreneur.
I spent seven long years toiling at the lower end of the corporate ladder, being told what to do by people who seemed far more concerned with process than results. I knew I could create value faster than my boss would let me, but that was before I began to understand the need for procedures in running a multi-billion dollar company. And so, day after day, I watched as the creation of business value flew out the corporate window. The only thing that made that time bearable was the enormous wealth of information that surrounded me.
I did my best to take advantage of this learning opportunity, however. One day, I was immersed in a technical lecture and suddenly a light when on. I realized that the computer protocol that we were discussing was so cost-effective for multi-system communication that everyone would be compelled to use it. Shortly thereafter, I left my employer and started an Internet company that grew to $12 million in revenue.
As it turned out, my seven years of paying my dues was absolutely critical to my later success. And so I received my first real entrepreneurial lesson, which I call Lesson #1: "Know the Business You Intend to Get Involved With." The best way to assess an opportunity is to first join up with a business you'd like to do yourself, and then decide if it's a reasonable place to be after you've been trained on someone else's dime.
My second lesson came almost immediately after my technical epiphany when it came time to act. When I told my wife and friends that I wanted to start a business, most of them looked at me with complete disbelief. They didn't understand or couldn't see the opportunity. That's a good thing and is Lesson # 2: "If Everyone Can See the Opportunity, It's Probably Not Much of an Opportunity."
I've learned since then that many sophisticated angel and VC investors look for that very characteristic in their prospective investments. Some of the best opportunities are well concealed beneath the cover of "experts" saying that it can't be done. Of course, experts only know what they know, and so their perspective is by definition incomplete.
Now, one of my favorite questions to aspiring entrepreneurs is, "Are there knowledgeable people out there who say it can't be done?" It's a trick question because people are afraid of those with "knowledge," and so the knee-jerk reaction is often, "not that I know of " But if everyone thinks it can be done, then it's probably not much of a business concept or it has already been or is in the midst of being done. In my experience, there's usually a correlation between the challenge and the corresponding value creation. The greater the challenge and opportunity, the more likely it is that knowledgeable people will say "don't bother "
Once I had acquired the knowledge that led me to my opportunity, I had a decision to make about changing my career path from that of a corporate soldier to one of an entrepreneur. I made that jump, much to the horror of my wife, who was convinced that I was throwing away a great career. But I got rapid traction in the new business because I had tested the waters first with entities that wanted to buy. So then came Lessons #3 & 4: "Don't Hesitate" and "Go Sell Something First."
Lesson #3 is obvious, but I really like Lesson # 4 because until you sell something, you're still just planning. And if you're still planning, you don't have a real business. It becomes real when you have customers and revenue. I've often been asked: "What's the most important thing for an entrepreneur to do?" My answer is always, "Forget everything else and go sell something."
The next one, Lesson #5, is also an important one: "When "Evaluating the Opportunity, Use a Simple Standard." When I look at business plans, they tend to fall into one of three categories:
It doesn't take a rocket scientist to recognize that you want to be in category #3! So why are so many business startup concepts in categories 1 & 2? Using a simple, instantly understandable yardstick helps keep you out of the muck. This is where Lesson # 6 comes in, which is about "sizing" a business opportunity. The following story explains how I came to learn this particular lesson and what it means.
Later on in my career, my job was to manage product design and life cycle for a Fortune 500 company. When I first started, my ambition reflected my previous experience to a large degree. So I brought a couple of business cases to the CEO and showed him how we could make another $14 million. His response? "Either you've got the wrong opportunity or I have the wrong executive."
Amazingly enough, I encounter a lot of that self-limiting perspective in today's business thinking. Many people design a business around a relatively small opportunity. That's fine, but you can't expect other people to get too excited about it because it's a lifestyle play. So, that brings us back to my Lesson # 6: "Size and Scale Is Important in Defining Opportunity."
I was involved with a small-business turnaround once. I had just joined the company as CEO, and in the first several days, I found several large cardboard boxes in a closet that were full of unpaid invoices. The company was technically bankrupt. That was the bad news. The good news was that if we started following fundamentally sound business practices, we could fix that problem. The previous management had made some serious miscalculations and decided not to deal with them either consciously or subconsciously.
That's normally enough to kill a business. But we had one thing that saved us we recognized that we were in the right market at the right time, and that dynamic can make up for a lot of business mistakes. What the previous management had failed to do was establish necessary controls. So, Lesson #7 is: "Establish Effective Business Management Processes." Without solid, basic procedures and tools, any business will have a much higher probability of failure. That's true of accounting tools, as well as other management tools and it's also true of planning tools.
I've known many entrepreneurs who hate planning because they love "doing." That's a good predisposition to have, but it can also lead to some colossal mistakes. We often think, "If I could only see into the future, my business would be so much better." Well, no one can see into the future, but we can try to approximate the business future with forecasting and planning. The whole idea is to make mistakes on paper so we don't make them in the real world.
One of my favorite planning tools is business valuation software. If you don't know the value of your business and how to create value within your business, then you're navigating without a compass. Today's software allows planners to accomplish in minutes what it used to take specialized skill sets and weeks of effort to do. These tools and services can be purchased online, and they allow planners to move rapidly in their decision making.
So, as it turns out, I've come full circle from working in the corporate "basement," where my vision was occluded to being fully appreciative of effective business processes and tools. They are as necessary to success as that first brilliant idea, for without them, execution will inevitably falter.
About the Author: Guy Cook is a Senior Partner at CreationWave, a consulting group focused on client growth and profitability results. He has held executive management positions at a number of high-tech, high-growth ventures, including CEO of SuperNet, which was sold to Qwest Communications for $24M. Mr. Cook thoroughly understands business valuation and currently consults with ValuSource.