Entrepreneurship
Lessons Learned from Small Business Ownership
I learned many valuable lessons over the course of the 8+ years that I owned my consulting business. Many were positive, a few were negative, but all were educational. These lessons shaped my perceptions about and approaches to business, and have served me well. This post will just be the first of many on the topic.
My lessons learned covered many topics: How to structure the business; Business Goals; Risk; Growth Initiatives and Investment; Employees and Benefits; Developing a High-Performance Culture; Marketing and Selling; Hiring and Firing; Bringing in Experts; Partners and Contractors; The need to let go; Exit Strategies and more.
In my case, these lessons learned were compounded by efforts to start a franchise for the consulting system we developed, and then our expansion to the UK with all of the challenges associated with international business. Each new effort built on the success and lessons learned from those previous efforts.
It’s amazing how more significant those lessons are (or at least feel) when the money is coming out of or going into “your own pocket.” Similar decisions at larger companies are generally easier, and (unfortunately) often made without the same degree of due diligence. Having more “skin in the game” does make a difference when it comes to decision-making and risk. I believe that this experience has made me a better leader, custodian of business, and employee – all because of this newfound understanding.
Businesses are usually started because someone is presented with a wonderful opportunity, or because they feel they have a great idea that will sell, or because they feel that they can make more money doing the same work on their own. Let me start by telling you that I believe the last reason is usually the worst reason to start a business. There is a lot of work to running a business, a lot of risk, and many expenses that most people never consider. You start a business because you are running toward something big, and not because you are running away from something.
I started my business because of a great opportunity. There were differences of opinion about growth at the small business I was working for at the time, and this gave me the opportunity to move in a direction that I was more interested in (shifting away from technical consulting and moving toward business/management consulting). Luckily, I had a customer (and now good friend) who believed in my potential and the value that I could bring to his business. He provided both the launch pad and safety net (via a three-month initial contract) that I needed to embark on this endeavor. For me, the most important lesson learned is to start a business for the right reasons.
More to come. And, if you have questions in the meantime, just leave a comment, and I will reply. Below are some of the statistics on Entrepreneurship that can be pretty enlightening:
Bureau of Labor Statistics stats on Entrepreneurship in the US
Acting Like an Owner – Does it matter?
One of the biggest changes to my professional perspective on business came when I started my own consulting business. Prior to that, I had worked as an employee for midsize to large companies for ten years and then as one of the first hires at a start-up technology company. I felt that doing hands-on work, managing, selling, and helping establish a start-up (where I did not have an equity stake) provided everything needed to start my own business.
Well, guess what? I was only partially correct. I was prepared for the activities of running the business but really was not prepared for the responsibility of running a business. While this seems like it should be obvious, I’ve seen many business owners whose primary focus is on growth/upside activities and not the day-to-day. That type of optimism is important for entrepreneurs – without it, they would not bother putting so much at risk.
People tend to adopt a different perspective when making decisions once they realize that every action and decision can impact the money moving into and out of their own wallets.
Even in a large business, you can usually spot the people who have taken these risks and run their own business. I was responsible for a Global Business Unit with $60+ million in annual sales and ran it like a “business within a business.” Having P&L responsibilities meant the decisions I made mattered to my success and the success of my business unit.
It’s more than just striking out on your own as a contractor or sole proprietor. I’m talking about the people who have had employees, invested in capital equipment, and gone all-in. These are the people thinking about the big picture and the future.
What do these people do differently than those without this type of experience?
One of the biggest things is they view business as “good business” and “bad business.” Not all business is good business, and not all customers are good customers.
There needs to be a fair commercial exchange where both sides receive value, mutual respect, and open communication. You know this works when your customers treat you like a true partner (a real trusted advisor) instead of just a vendor, or at least do not try to take advantage of you (and vice versa).
A business is in business to make money, so if your work is not profitable, you should not do it. And, if you are not delivering value to an organization, it is very likely that you would be better off spending your time elsewhere – building your reputation and reference base within an organization that was a better fit. While that may not be true for all business endeavors (think how long it took Amazon to become profitable and where they are now), it generally is true for employees at all levels.
For example, “bad” salespeople (who may very well regularly exceed their quotas) typically do the following:
- Only care about the sale and their commission – not profitability, fit, customer satisfaction, or the effort required to support that customer.
- Selling products and services people don’t need.
- Making promises they know will not be met is a typical sign of a person who does not think like an owner.
- Their primary focus is on personal short-term benefit, and not on growing accounts or the success of the business.
These are examples of someone who does not think or act like an owner.
How you view and treat employees is another big difference. Unfortunately, even business owners do not always get this right. I believe that employees are either viewed as Assets (to be managed for growth and long-term value) or Commodities (to be used up and replaced as needed – usually treated as fungible and easily replaceable). Your business is usually only as good as your employees, so treating them well and with respect creates loyalty and results in higher customer satisfaction.
Successful business owners usually look for the best person out there, not just the most affordable person who is “good enough” to do the job. On the flip side, you need to quickly weed out people who are not a good fit. Making good decisions quickly and decisively is often a hallmark of a successful business owner. The saying about hiring slowly and firing quickly makes even more sense when you are running a lean operation that requires every person to contribute to the company’s success.
Successful business owners are generally more innovative. They are willing to experiment and take risks. They reward that behavior. They understand the need to find a niche where they can win and provide goods and/or services tailored to those specific needs. Agility can be a significant competitive advantage. My company often contracted with Fortune 100 companies for this very reason. We could attempt something faster, for less money, and with less scrutiny than could be done internally. Those companies were outsourcing innovation.
Sometimes, this means specialization and customization, and sometimes, it means personalized attention and better support. Regardless of what is different, these people pay attention to the small details, understand their target market, and are good at defining a message articulating those differences. These are the people who seem to be able to see around corners and anticipate both problems and opportunities. This can be a learned skill, developed out of necessity.
Former business owners are usually more conscientious about money. I created a “my money” policy on expenses. If someone felt something was important enough for their success that they would spend their own money on it, then they had my blanket approal to move forward. This approach created understanding and accountability.
Every dollar in the business provides safety and the opportunity for growth. Most owners are not the people who routinely spend hundreds or thousands of dollars on business meals or who take unnecessary or questionable trips to nice places. Money saved on unnecessary expenses can be invested in new products, features, or marketing for the benefit and growth of their company.
While these are common traits of successful business owners, you can develop them even if you have never owned a business. Hence the title, Acting like an Owner.
When selling, are you focused on delivering value, developing a positive reputation within that organization and with your customers, and profiting from long-term relationships? When delivering services, is your focus on delivering what has been contracted – and doing so on time and within budget? Are your projects used as examples of how things should be done within other organizations? When leading, are you being fair and transparent with your team? Are you spending money on the right things – not wasteful or extravagant things?
These are things employees at all levels can do. They will make a difference and help you stand out. That opens the door to career growth and change. And it may get you thinking about starting the business you have always dreamed of.
Awareness and understanding are the first steps towards change and improvement.
Why I Love Technology
Technology was not native to me, at least relative to children and young adults today. Simple four-function calculators started becoming popular when I was in Elementary School. I only had a single computer course in High School (it was the only one offered). We had a Timex Sinclair and, later, a Commodore 64 computer at home. It was fun, but I wasn’t hooked yet.
I started a car and motorcycle parts business when I was 18. Initially, I was looking for a way to get cheaper parts for myself and thought if I could make money doing it, then all the better. Nearly everything I did was manual. Then I learned about a Radio Shack TRS-80 at college that had a word processing program. I used that to create mailings to parts companies, distributors, and potential customers. Before long, I had a catalog of products I could sell and a small but loyal customer base buying products and services from me. If Quickbooks had been available back then, I may have kept the business running. Doing everything manually just took too much time. Even so, this was my first technology win, and I liked it.
A few years later, I was programming at a local marketing company. The MIS Director (what IT used to be called) purchased a new relational database product with a 4GL application language. This was in 1987, and this technology was very new. The product was sold as saving “75% of your development time and effort.” Most seasoned people in the group did not want to risk their reputations on something that might not work.
I was new and had nothing to lose, so for the next month, I read every manual cover-to-cover. Before long, I worked on new applications and soon became the in-house RDBMS/4GL expert. This led to a fast track of promotions and being selected to develop the majority of new custom applications sold by our company. It was not easy, but it was fun and good for my career.
My first and arguably most influential mentor was my manager at this job (Jim). He taught me how to design parameter-driven systems that were flexible and extensible. He also taught me that “good enough usually isn’t good enough.” Most people are lucky to have one really good mentor during their career. I’ve been blessed with four of them at different stages of my career. It has motivated me to return the favor and help others whenever possible. This job helped me grow in so many ways.
A few years later, I worked at a software company creating a new standard product on this database platform. Nobody was trained on the product, and most wrote their embedded C/SQL programs like any other 3GL program (i.e., non-transactionally). I pointed out to the VP of Development that this would be a problem. He didn’t want to hear that. I pushed for a concurrency test, and everything locked up. Many people were suddenly upset with me, but the longer you wait to solve problems like these, the more expensive it becomes.
We spent the next two months creating functions to manage transactions, optimizing everything (even table structures to get the best byte alignment), and making this new packaged system work. The VP now liked and respected me, which changed our working dynamics. That shifted the focus from people and personalities to technologies and results.
We also worked on other aspects of the system to enhance performance. We created a system much like Memcached in Perl (back in 1990) that allowed us to handle the workflow of even the fastest warehouses in near real-time. We did many leading-edge things at the time (HA clusters with automatic failover, automated restart of remote devices to resume work in progress to the point of failure, outsourcing to India using an X.400 connection that I configured, distributed systems, client/server systems, etc.) I learned a lot from that experience and was proud of the results.
Later, I worked for that database company (Ingres). This was in the heyday of consulting, where projects were huge, and rates were high. My first project (started on my second day on the job) was to redesign a Risk Management System at an insurance company that had started using our products. I soon found that the project had been in progress for two years and had binders full of specifications, but nothing was actionable. I did not make many friends those first two weeks, as I pointed these things out.
I offered to facilitate a JAD (joint application design) session with multiple lines of business. This pointed out issues that even they were unaware of and allowed us to begin designing a flexible system that would accommodate all lines of business. We used an agile approach to prototype the new system, demonstrations to get buy-in, and moved the project forward quickly. Six months later, the first part of that functionality went live. The system was fully functional within a year!
I had the opportunity to work on some of the largest databases at the time (roughly 300 GB total, which is small by today’s measures), work on leading-edge technology (Clustering, VLDB, and Enterprise Unix systems), and really become a true Consultant along the way (with the help of another mentor – Bill). I was sent to several Unix Internals courses and then worked with our Engineering team to improve our products and create configurations supporting other large companies with similar problems.
A few years later, I worked at a small start-up company that created the world’s first commercial JDBC driver. I have worked with many very smart people before, but now I worked with a couple of very brilliant people. My main contribution this time was on the business side, but we learned a lot from each other as we grew the business to over $1M in sales within the first year.
One thing that sticks with me is that I became interested in VRML (virtual reality modeling language) during this time. I had an idea (1997) that we could create a website to show the insides of buildings, productize them, and sell them to real estate companies and larger apartment complex owners. My idea was not well received by the team, but a few years later, systems like this were being developed, and a few people were making a lot of money. That taught me to have more faith in ideas based on new technology, regardless of what others thought. It also brought me back to an important concept in business and consulting: being able to communicate ideas and benefits in ways that are easy for everyone to understand, rather than focusing on the technology itself.
Over the years, these lessons learned have helped with BI (business intelligence) – building dashboards using relevant KPIs tailored to the specific audience, mobile computing, cloud computing, IoT, and big data. Most people think these things are “not important until they become important,” often 6 – 12 months (or more) later. From my perspective, the real trick isn’t in trying to understand the next big thing, but in considering better, easier, and more efficient ways of doing the things you do today.
This is why I love technology. It has helped me accomplish many things that have had a tangible impact on the businesses I have worked for and consulted with. It has taught me to think about problems and ideas from various perspectives and to leverage lessons learned in one area to help solve problems in another (i.e., transfer knowledge and skills from one area to another). Technology has provided me opportunities to learn about and work on solving business and technical problems in several industries as I ponder, “Why not?” It has been a wonderful journey.
My interest in technology has allowed me to meet and work with many interesting and incredible people throughout my career in many industries and settings. That’s much more than I ever expected when I took my first programming course so long ago, and it has become a significant aspect of almost everything I do. My diverse background has proven beneficial many times over, but the greatest gift has been the ability to consider other possibilities based on those experiences.
Welcome to this journey of discovery and sharing.
- ← Previous
- 1
- 2
- 3
Where Ideas, Experiences, and Lessons Learned Intersect 