Table of Contents with Excerpts
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Entrepreneurs are the underappreciated heroes of civilization. Virtually every advance in
art or science has either been in the service of business or has reached us through the
work of an entrepreneur.
Entrepreneurs are the people who publish and promote the artists. Entrepreneurs are the
people who make the results of accidental discoveries available to everyone.
Entrepreneurs are the people who seek out new and better solutions.
Writing was developed to keep business records. The seas and continents were explored
in order to find new business opportunities. In pursuit of profit, entrepreneurs have given
us the steam engine, the electric light, and one-hour dry cleaning.
The march of progress has been to the beat of the business drum. Entrepreneurs are the
Being an entrepreneur is the greatest job on earth.
Small Business Is Hard Work
The greatest job on earth is a very hard job. The people who are starting and running
businesses are, quite literally, running the world. And that takes a lot out of you.
The world is not run by the United Nations. The world is not run by the president of the
United States. The world is run by the people who run the businesses that milk the cows,
build the widgets, drive the trucks, and sell the goods.
Wal-Mart, General Motors, and the rest of the Fortune 500 do a lot of the heavy lifting.
But small businesses have a harder job.
Big businesses are huge machines. They are well documented, well staffed, and they
know what to do and how to do it. Yes, they are complex. Yes, they can fail. But, for the
most part, the people running them understand how the machines work and have the
resources to keep them going.
Small businesses, and the entrepreneurs and business owners who run them, are building
new business machines. These new machines are a lot harder to operate than the big
established businesses. Small businesses are:
- growing faster. Changes in revenue, number of employees, etc. are at a
breakneck pace in small businesses.
- innovating more. Large businesses may invent new products, services, and
processes too, but they do not have to invent their business model and processes
on the fly.
- taking bigger risks. Small businesses are financed with credit cards, personal
guarantees, and loans from family and friends. Starting a small business is not just
a risky career step; it is a risky life step.
Small businesses do not come with an instruction manual. The small business leader has
no guideline for operations, no procedure to follow, no boss to consult, and no leadership
training institute at the posh corporate retreat center.
Who I Am
I am an entrepreneur. I am actively leading Logos Research Systems, Inc., a business I
cofounded more than a decade ago. At the time of this writing, we have around 90 employees
and $9 million in sales, a subsidiary in South Africa, and hundreds of thousands of
customers in more than 140 countries.
I have purchased several companies and negotiated to sell my own. I have raised money
from family and friends and through a formal private placement. I have a partner and minority
shareholders. I took my company through an initial public offering and then canceled and
unraveled the deal before we broke escrow.
I have lived through years of 100% growth and years in which we shrunk. I have had to lay
off people. I have had a million dollars in the bank account, and I have been overdrawn
and owing a million.
I am not a professional speaker. I do not write business books for a living. I am not an
angel investor, venture capitalist, or business consultant. I am not an academic trying
out new business theories. And I do not have an MBA.
I have made a lot of big mistakes. From them, at last, I have learned enough to see
strength, stability, and success in my business. And I am not done yet: the business
is still growing, and I am still making mistakes.
I will never run a billion-dollar business. The business I'm in doesn't have a big market,
and I am okay with that. I will not do whatever it takes to get ahead. Though I fail sometimes,
I try to put my faith, my marriage, and my family ahead of my ambition.
I am telling you all of this to establish my credentials for writing this book: I am not
a celebrity CEO. I am not a one-in-a-million business genius. I am not on the outside looking in.
I am the guy down the street who is working hard, running a pretty good business, and who has
learned some lessons that may help you too.
The Purpose of This Book
In my travel down the entrepreneurial road, I have been blessed in many ways. I have gotten a lot
of good advice. I have read a lot of good material. I have learned from the experiences of others.
And, most importantly, the mistakes I have made were bad enough to teach me important lessons but
not bad enough to kill my business. (It was a very fine line.)
The purpose of this book is to share some of what I have learned with you, my fellow entrepreneur,
business leader, and hero of civilization.
This book is not intended to be inspirational. It is intended to be useful. It is not full of
business platitudes or step-by-step how-to advice. If you want to be told that if you dream it,
you can do it, get another book. If you want to know how to write a business plan, don't look here.
I do not have 13 Incontrovertible Laws of Excellence.
This book is about what to do, what not to do, and why.
When my business was just starting up, I knew a guy* who worked for a lawn care service and was
participating in a multilevel marketing business. Every time I ran into him he wanted to "talk
business," which to him meant parroting phrases from motivational tapes.
"There is nothing better than to wake up in the morning, look into the mirror, and say,
'Hi, boss!'" he said.
"What are you talking about, you soap-peddling, wannabe entrepreneur? You spend your
day cutting lawns for someone else's business. When I look into the mirror I ask,
'Are we going to meet payroll?'" I replied.
Okay, not really. I said, "You're right."
It is great to be the boss. There are some nice perks to being an entrepreneur. But
it is often a hard, lonely, and frightening responsibility.
You are the one who has to come up with the new ideas. Entrepreneurs clothe and feed
and entertain and supply the world, creating the wealth and the jobs. You are the one
who provides the place where people can work and grow to their greatest potential.
In these pages you will find tips that can help your business grow, warnings that can
keep you out of trouble, and encouragement to make the tough calls. It is my hope that
through this book I can provide to you, as so many others did to me, that one piece of
advice that makes all the difference.
You have the greatest job on earth, and I want to help you to keep it and to enjoy it more.
*Names and details about many of the people who appear in this book have been changed
to protect the innocent. And the guilty.
These are not just bad reasons; these are selfish excuses. Compassion is caring about others, but retaining the employee who should be fired is all about caring for ourselves--it is never about the employee. We want to protect our investment, our presumptuous feeling of parental responsibility, our time and energy, even our reputation for "being nice."
If employees quit, or were hit by the proverbial bus, we would find a way to address any real issues related to their sudden absence--we would have to, because their departure date would be out of our control.
The past is also out of our control; we can't go back and not make the hire, not spend on the training, or not create a "mission critical" job function. By firing we can at least make today the day we start investing in the future instead of continuing to waste resources and to delay the inevitable.
As the founder and head of a company, every aspect of the business and its operations reflects on you. You are responsible not only for yourself but for all of your employees and their actions on behalf of the company.
This is much more than making sure they do not make promises or sign contracts you do not approve of. It is making sure you are happy with the way your offices look, the way your phone is answered, the way your receivables are collected, and the way employees decorate their e-mail signatures.
I am not suggesting you micromanage every part of your company. I am suggesting that you do not consider any part of the company off-limits to micromanagement. By regularly reviewing and tweaking details throughout the business you keep yourself up-to-date on operations and ensure that your business reflects you.
Your business is your baby. You conceived it, gave birth to it, nurtured it, and protected it. You sacrificed to meet its needs, and you taught it how to live. Like any parent you can see beyond your baby's flaws to its fantastic future. And it's frustrating how your baby's potential isn't clear to everyone else.
You may have a great business. You may have a great product. You may provide a great service. But nobody is going to love your business, product, or service as much as you do. Nobody else can see things the way you see them. Nobody loves your baby like you do.
When I was a teenager I toured a factory and met its owner. Dreaming of having my own business I asked him for the best advice he could give me. His response was two words: "No partners."
We were approaching 100 employees. The majority had been hired without any involvement by me; the ones that I had hired had been hired quickly and with very little thought. Life in the office was one problem after another, and most of the problems involved the same employees again and again.
"Where did these people come from?" I whined at home.
"Well, you hired them," my wife said.
And she was right. The business was staffed with people we had offered jobs to. They had not inherited their jobs. They did not just mysteriously appear at their desks. They were not assigned to us by a government agency. We had actually entered into an agreement to pay these difficult and ineffective employees money to come into our office each day and waste our resources, agitate their coworkers, and grouse at the water cooler.
Why? Because I was willing to invest a week in researching a new technology but would not invest even ten minutes in hiring the right person for the job.
If there was a book of business poetry it would be full of odes to cash.
Cash is the only life and death issue for your business. There are lots of important things you can worry about--people, products, service--but they are important because they impact cash. Businesses with cash live. Businesses without cash die.
Profit is important, and it is the reason businesses exist, but it is not more important than cash. If you have the cash you can run an unprofitable company for years. Many companies in fields like bioscience have long research and development cycles and have yet to sell a product. There are a number of dot-com companies still in business today that have never earned a profit. They are all in business because they have cash in the bank.
The result was fewer customers--but better customers. The customers we retained were the serious users of our software, not the people who picked it up off a discount rack. And they were profitable. We were able to offer them better support even while reducing our support costs. We were able to invest in building higher-quality software instead of churning out lots of cheap new packages. Our spinning company stopped spinning and started moving in one direction. We returned from breaking even to being profitable again.
You should be optimistic about your business. Your salespeople should be optimistic about your business. Your parents, your children, your vendors, and your employees should be optimistic about your business. You do not want any negative, pessimistic, whining, cry-baby Chicken Littles on your team. Except for your accountant.
Your accountant, controller, bookkeeper, CFO--whoever it is that counts your money--should be a pessimist. Your accountant should not be the kind of person who thinks things are always going to get better. Your accountant should be the kind of person who thinks things are always going to get worse. Your accountant should be the kind of person who, when you say, "Good morning," responds, "We'll see."
I have talked with lots of small business people who also live right on the edge. Their business is in a perpetual cash crunch because their expenses always seem to be right behind (if not a bit ahead of) their income. Five percent is often the difference between losing money and making money.
Now I understand that lots of individuals and businesses have financial difficulties that make 5% look like pigeon feed. That is a whole other chapter: Chapter 11. I am talking about the businesses that are basically doing all right, but seem to be perpetually treading water to stay at the break-even point. For these businesses 5% is the difference between profit and loss--and that is a big difference.
The good news is that you can always find 5%.
Maybe because it sounds greedy, small businesses in particular do not generally talk about profit. Instead they focus on their secondary purposes: to help individuals find the best life insurance at the lowest rates; to provide a worry-free roofing future; to bring the authentic taste of Chicago deep-dish pizza to Podunk, Wisconsin.
Unfortunately, many people get so wrapped up in the secondary purposes of their business that they lose sight of the primary purpose. I was one of them.
A business is like a hot-air balloon: it is going up or it is going down. It is never standing still. The change in altitude may be slow, even imperceptible, but if the air in the balloon is not being heated up then it is cooling down. Cooling down is the natural tendency--you have to actively do something to keep heating up the air. If you do, the passengers are headed for the sky. If you don't, they are headed for the dirt.
You can never know when an employee is going to step in front of, or on, a bus. One minute you have the perfect employee who is taking care of everything for you, and the next minute he is gone, and you have no idea how the software works, who to call to reorder the raw materials, or where the key to the file cabinet is.
No amount of loyalty, good health, or compensation can save you from the buses. . .
When there is a disagreement in a relationship, however, or a difference of opinion on the interpretation of the agreement, the contract becomes something quite different. The dusty old text takes on all the characteristics of a sacred manuscript. It's inspected with a magnifying glass; definitions are looked up; phrases are parsed and reparsed to extract new meanings. Worst of all, you may discover that the text plainly commands something you wish it didn't.
The person least likely to be surprised by the detailed reading of a contract is the person who wrote it. That is reason enough to write it. There are other advantages as well:
You can learn everything you need to know in order to make your business a success by reading. . .
I think of academic journals as my secret weapon. Some of the best and most unique features in our product were inspired by things I found in academic journals. In some cases ours was one of the first commercial uses of an algorithm or idea that had been widely published and discussed in journals for years. So much of the academic world does such a good job of insulating itself from the business world that the commercial value of what the academics develop can remain hidden for years. There are huge rewards for the businesspeople who invest the time in reading the literature, deciphering the academic-speak, and slogging through all the useless byproduct of the "publish or perish" mandate.
A Profit & Loss statement is not a dashboard. A monthly report is not a dashboard. These financial statements tell you what happened in the past; a dashboard tells you what is happening now. A dashboard can even tell you what is going to happen next.
Knowing your customers is an idea that gets a lot more lip service than shoe leather. It is easy to think we are in touch with our customers if we are sending them surveys, taking their calls, and answering their questions. We do not really understand them, though, until we visit them where they live. And until we meet them in person we are just another anonymous and interchangeable supplier to them.
Even the most objective presentation of facts can be spun in many ways, and a reporter may have a different and completely legitimate interpretation of your story. One person's economy-building trade with a foreign tribe is another's exploitation of the less sophisticated. One person's strong leadership is another's unreasonable intransigence.
I've seen lots of brutal business stories in which a reporter made a compelling case for the subject's villainy or idiocy in words wrapped right around a smiling pose by the unwitting victim. Those interviewees were smiling at the thought of free advertising; they didn't see the hit that was coming.
Businesses are abysses. Businesses are bottomless pits of darkness that can not be fully illuminated. No one understands everything about a business. The only people who come close to fully understanding a business are the people trying to sell it, and they have no reason to explore all its dark crevasses with you even if they could.
Sometimes a business buyer gets lucky and finds a hidden gem deep inside a business. However, the buyer more often finds fool's gold and time bombs:
Every business meal is its own little world. The tone, the goals, and the strategies are different each time. The message of a meal has a lot more to do with the specific participants and the state of their business relationship than it does with a bunch of unwritten rules.
Unwritten rules, of course, are a lot more interesting. . .
There is a lot of inspirational stuff out there about giving 110%. That is great, though possibly exhausting, when it comes to effort. But success in business is not about how hard you work. Breaking rocks with a hammer is very hard work that will never put your name on a skyscraper.
Success in business comes from winning more than you lose.
Most employees are interchangeable parts in your corporate machine.
Your employees may be great people. They may be smart, talented, and attractive. They may be volunteer firefighters, soccer coaches, and great parents. They may never be sick, never be late, and never fail to deliver on time. It doesn't matter. They are still a dime-a-dozen.
There are thousands, if not millions, of people who can do a good job in almost every position in your organization. It doesn't matter how specialized or how technical the position is. Lots of people can do it well enough. There is no shortage of good employees.
There is a terrible shortage of exceptional employees.
I remember the first time I felt the responsibility of my job. I was starting to see the early signs of trouble in the business. I stood up on a picnic table to say a few words at the company picnic and looked out at more than 100 people--employees and their family members. Our business had been a great game to me, but it was a livelihood to these employees, and it supported their families. It was not a game to them.
Within a year, I was laying off some of those employees. Our growth had slowed, and my mistakes had caught up with me. The business sunk lower and lower and with it my confidence and my enthusiasm for the great game of business.