January 20, 2004 - The Errant
Entrepreneur
by
Bill Snow
Version 1.0 of the Errant
Entrepreneur: The bad day
This happened to me last
week, and I’m sure we’ve all had days like these. I was standing on the North
and Damen El platform, making my way to my swank Loop office. While in the
process of returning my CTA fair card to my pocket, the darn thing flipped out
of my hand and fell onto the El tracks. It still had over sixteen dollars of
credit.
Once downtown, I bought a cup
of coffee to soothe my lightened wallet. Upon entering said swank Loop office,
I promptly dumped 16 ounces of black coffee on my desk, resulting in 20 minutes
of mopping…with Kleenex.
Some of the coffee got into
the cradle for my PDA, which prevented my Palm Pilot and my computer’s Outlook
from synchronizing. I periodically fiddled with the cradle, finally getting it
to synchronize a few hours later. When I checked my Palm Pilot for a contact, I
discovered that my entire contact list was gone.
That’s over 1700 names, email
addresses, and phone numbers. Gone.
This is merely a bad day, and
it can happen to anyone. And, yes, I had a back up for my contacts.
Version 2.0 of the Errant
Entrepreneur: I’m a Moron and Don’t Know It
The above story is only a
retelling of a few bad things that happened to me one day. In the grand scheme
of things, my little mishaps were simply that: little mishaps. My bad day pales
by comparison to the bad days had by many entrepreneurs, because at least I knew
I was having a bad day. Too many entrepreneurs have bad days, weeks, years, or
careers, but because of the civil society we live in, no one tells them
otherwise.
Here are few traits of the
Errant Entrepreneur.
Mine, mine mine!
This is also known as, “Not
playing nice-nice with other kids.” This is like playing cards with my
sister…when she was four. My sister would deal out a bunch of cards, look at
her cards, and based on what she saw in her hand, make up the rules of the
game.
“Jacks are good! If you have
a Jack, you win. Do you have any Jacks?”
“No.”
“I win! Let’s play again!”
While this was cute kid
stuff, playing this game as an adult is a recipe for disaster. I’ve worked for
and with entrepreneurs who were constantly shuffling and reshuffling the deck.
I recall cautioning one entrepreneur, who was in the process of recapping the
company (by issuing himself more shares in exchange for some dubious algorithms
he had written) that he was going to alienate the old investors, and these were
people he was going to need because the company was almost out of cash. I tried
the classic, “would you rather have part of something, or all of nothing?”
Unfortunately, he chose the
latter. I left shortly after that exchange, and the last I heard the police
evicted him from the office by putting all the furniture and equipment on the
sidewalk. This happens when you change the game as it’s being played. You
alienate your investors and they cut you off. Say hello to your basement!
SLAP
To my many loyal readers of
VC101, SLAP means “Solution Looking for A Problem.”
I can’t lay claim to inventing the concept, but I’m pretty certain the acronym
is mine. Another way of defining the SLAP is to realize the “greatest
mousetrap” theory is flawed. The world will not beat a path to your door if you
are trying to sell the “world’s greatest mousetrap” to a target market that
lacks a pestilence problem.
To understand the SLAP, let’s
look at the motivation of the buyer. If you do not have a headache, will you be
willing to pay $10 for the world’s greatest headache cure? Of course not, you
don’t have a headache, why would you need a cure?
Digging down deeper into the
world of the SLAP, we have the case of the entrepreneur offering a product that
he personally likes and would buy. While the concept of “following your bliss”
may often be a good idea, it can too often lead to ruin, too. Instead of
spending some time (and money) doing research to determine if there’s a market
for the product, the entrepreneur plows ahead, the torpedoes be damned, and
plunges headfirst into a world of guesswork and gut feelings. An empty
pocketbook is the typical end of this road.
Pricing
Many entrepreneurs get into a
business selling a product that they one bought. While this is often a good
thing (having industry experience is usually helpful), too many entrepreneurs
make the mistake of pricing the product as if they are the buyer, not the
seller. As a result, they often talk about offering the product at a below
market price. They don’t realize the value of their product because they can’t
get themselves out of the mindset of a buyer looking for deal. When you’re the
seller, you should be looking for a deal for yourself. And in our capitalist
system, that means high prices! If people are willing to pay, charge them the
full price. Make Milton Friedman proud.
The Numbers Game
I recently had breakfast with
Jeff Coney from the
Evanston ITEC. Since Jeff is an actual CPA (unlike me, I only play one on
TV), it didn’t surprise me to hear Jeff say, “Numbers are a statement of who an
entrepreneur is.”
Jeff has seen far too many
plans where, in his words, the entrepreneur is asking for money using a set of
financials that do not support the story. Financial projections are
often/always an area where entrepreneurs can use assistance. If you don’t
understand accounting, make sure you get someone on your team who does. If you
don’t have solid numbers that make sense, people who understand these things
will simply conclude that you are doing nothing more than trying to hoist some
flimflam on unsuspecting investors.
Listening Skills
Another Jeff Coney pet peeve
is entrepreneurs who do not listen. As Jeff told me, “having listening skills
means you’re coachable.” So many entrepreneurs shoot themselves in the foot
because they don’t listen to people who know more than they do. I have seen
this at numerous MEF meetings, among other events.
A few months ago, after
seeing an MEF presenter make the all to frequent entrepreneurial mistake of
claiming his company only needed a $500,000 investment to grow into a $100
million a year business in five years, I asked Jerry Mitchell if he coached the
presenters and told them not to say stupid things like that. It was a
rhetorical question, because I am certainly aware that Jerry knows companies do
not grow that fast with that little investment. He simply shook his head and
groaned. With an exasperated look, he essentially told me, “I tell them! They
nod their heads and agree with me. They make the changes to their
presentation. But when they get on stage in front of an audience, they go back
to their old bad habits.”
If a potential investor
doesn’t believe you’re coachable and doesn’t believe you’ll listen to his sage
advice, guess what? You’re not getting an investment.
Quitters never win…and losers with bad ideas who
never quit are morons
The development of
entrepreneurship as an academic discipline has resulted in too many people
believing the adage that “quitters never win and winners never quit” actually
applies to entrepreneurship. But guess what kiddies?
THERE IS A TIME TO QUIT!
There is a time to realize
that your idea is a stinker, no one likes it, no one will pay for it, and the
more you try to sell it, the more you’re burning bridges with people who are in
positions to help you.
In my
early 20’s, I spent a few years working for a world famous theater company. Let
me tell you about the theater business. Outside of buying a lottery ticket,
pursuing a career in acting is about as long of a shot as you can take. I have
incredible admiration for those who make it as actors, because the odds are
against you.
Per
union rules, the theater had to host open casting calls twice a year, and let me
tell you, did the people line up! Hundreds of people lining up for the chance
to recite some overwrought passage from some overwrought
Chekhov play.
And
there wasn’t even a part in the offing. They were going through the trouble
with no tangle goal in site. I always found this rather sad.
I recall
talking with the casting director, who told me she would see the same sad sack
actors year after year after year. There was part of her who wanted to tell
these losers to give it up, that they didn’t have a chance of ever making a
career from acting. She wanted to tell certain people that they were awful, to
move on.
Instead
of being brutally honest, she simply smiled and told them, “thank you.” She did
this for a reason: In the event some sad actor made it big, she didn’t want to
be known as the person who told that actor that he “had no chance in hell.”
As a
result of her civility and desire to protect her name, hundreds, if not
thousands of actors went about their business hoping against hope that their big
day will come.
In
Chicago, we don’t have open casting calls for entrepreneurs, because,
thankfully, we don’t have a union for entrepreneurs. But we often have the same
entrepreneurs trying to sell the same stuff to same group of people who aren’t
buying, and because of civility, we are not telling our sad sack entrepreneurs
that they don’t have a chance in hell.
Brutal,
I know. But I think all entrepreneurs need to look in mirror from time to time,
and be brutally honest with themselves because no one else is.
Has your company been profiled by Bill Snow? Send
an email to introduce your company:
bill@billsnow.com
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