Entrepreneurship

30 Nov 2015
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Johnny Cash and the Necessity of Holistic Operational Design

Sticky Post By On November 30, 2015 With No Comments

Entrepreneurs are often fortunate to effectively deal with the recurring issues immediately in front of them. The exercises of forethought and long-term planning are luxuries in most cases. The problem comes when this condition persists for a meaningful period of time. Without taking the time to try and create a 10,000 foot view of their business, many entrepreneurs end up implementing processes meant only to serve a single purpose or solve an immediate problem. This condition is usually not intentional and it likely evolved into its current state because of one or more of the following.

  1. Business processes were built on top of each other. Like Lego pieces, the leadership kept piling up business rules, tech and resources. This happens many times as a firm starts to grow faster or the product lines become broader than originally anticipated. As these new processes and systems are added, the old ones are not dismantled or modified and this creates confusion as the old rules and new rules often contradict each other.
  2. People are added to fill narrow responsibilities- not compliment the whole. New tasks and responsibilities are regularly created in a growing company and when all the current roles are considered “maxed out,” the go-to response for many companies is to hire more people.The problem here is that we fail to look at how existing positions or responsibilities should change to create a more efficient team. Instead, the new position is assigned one core task with several ancillary low value activities to create a complete position. Repeating this cycle a few times creates a bloated and under-utilized workforce.
  3. Organizations kill their effectiveness by creating a “Strategy Du Jour.” I love working with entrepreneurial clients because they are, by their very nature, dreamers and strive to chase new opportunities every day. Unfortunately, this phenomenon may be the most value-destroying thing an owner or C-Suite leader can do. You have seen it (or done it yourself) before. Owner/ CEO/ Senior Leader calls a meeting and lays out a half-baked thought on the latest (fill in the blank) opportunity. Very little detail is communicated about how this will be implemented, what will be de-prioritized as a result or how resources should be utilized. Conversely, expectations for flawless execution are clearly conveyed. In a matter of minutes, everyone in the room now has multiple top priorities with almost no idea of how to actually pull off this new ask. It is tough to commit to a shared, all-encompassing and durable strategy but when you are constantly asking the majority of available resources to chase the latest whim, you create incredible conflict between the various priorities.

Before you realize it, the whole operation is being held together by a series of systems and processes that may have nothing to do with each other. If you think this is nuts, consider your own organization:

  • Could you ask three different people to map out how your product moves from creation through customer delivery and have all three maps resemble each other?
  • Can you point to the specific business case for each of your processes?
  • Do have at least a handful of processes that contradict each other?

Chances are, your organization experiences one or more of these every day.

One of my favorite Johnny Cash songs is “One Piece at a Time” where he describes stealing individual parts from a Cadillac assembly line over several years in order to build a whole car. Once he has all the pieces needed, he starts to put the car together.

“Now, up to now my plan went all right
‘Til we tried to put it all together one night
And that’s when we noticed that something was definitely wrong.

The transmission was a fifty three
And the motor turned out to be a seventy three
And when we tried to put in the bolts all the holes were gone.

The back end looked kinda funny too
But we put it together and when we got through
Well, that’s when we noticed that we only had one tail-fin…”

“One Piece at a Time”- Johnny Cash

Notwithstanding the obvious value of quoting Johnny Cash in any form, the song illustrates what happens when we only consider individual pieces and not the “whole” of the organization. In Johnny’s case, he got a really ugly Cadillac. In your case, you may have ended up with a really ugly operational model.

18 Nov 2015
Sticky Post By Posted in Entrepreneurship, Redhawk, Start-ups Permalink

Solvency in Year One: Our First Anniversary!

Sticky Post By On November 18, 2015

I’d like to take the opportunity to reflect on surviving my first year as a new business. True, 80% of businesses survive the first year, but I’m proud that I didn’t have to dip into savings, borrow money from family, or suffer irreparable damage to my marriage. (That last item is one I’m especially proud of.) Most important, we got to partner with truly great companies and work with them to accomplish some great things.

Passing this milestone has made me contemplative. Rather than craft a bunch of high-minded platitudes, I thought I’d write a brief list of what I learned and the hypotheses confirmed in the first year of operating Redhawk.

  • Confirmed: Making money is hard.
  • Learned: Your first customer will always be your favorite and the most valuable.
  • Confirmed: There are no more “normal hours of operation.”
  • Learned: I am even more frugal than I thought.
  • Confirmed: Operating in a small market is all about networking.
  • Learned: Mental exhaustion is very real.
  • Confirmed: A supportive family and understanding wife are the cornerstones of any success.
  • Learned: Time seems to compress at rates previously believed to be physically impossible.
  • Confirmed: Fortune favors the bold (ok—so one platitude).
  • Learned: I became a better person after starting my own business. I’m trying harder now to be a good dad, husband and friend.
  • Confirmed: If you do great work, the rest starts to take care of itself.
  • Learned: What we do is important. The work we get to do improves the balance sheet AND the quality of life for clients. Hearing a near-neurotic client tell you they slept for 6 consecutive hours for the first time in 9 months is pretty throat-lump-inducing stuff.

The list could be longer and more inclusive but, at some point, it becomes completely self-serving and no one wants to read that. It would be a mistake not to acknowledge all the support and love from my friends, family, clients and colleagues. I only hope I can repay their kindness over time.

12 Oct 2015
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How Start-ups Sabotage their Success

Sticky Post By On October 12, 2015 With No Comments

I recently met with a couple of guys starting a new business and they flattered me by asking what advice I would offer them as they start their new venture. They both came from technical backgrounds and are very smart but have almost no business experience. The question was in two parts.

  • What self-inflicted issues do I see in start-ups?
  • What should founders, with limited business experience, do to help flatten that learning curve?

Needless to say, those questions are both savvy and very complex. I cautioned them that they should gather several viewpoints. We had an excellent conversation and, as readers of my ramblings on LinkedIn, they suggested I share it as a brief checklist. If you don’t like it, it’s their fault.

Self-Inflicted Issues

Here are some common head-scratchers I keep running into:

  1. Attempting to generate revenue exclusively through social media
  2. No actual salespeople or sales process
  3. Making crucial business decisions based on securing another round of funding
  4. No strategy to generate scale/growth
  5. Profitability considerations completely absent from strategic discussions
  6. Image being prioritized over substance
  7. B2C marketing in an obvious B2B model
  8. No company-wide goals
  9. No strategic planning horizons longer than 90 days
  10. Poor or absent talent management practices

Flattening the Learning Curve

Things to consider

  1. Be open to outside input. No one is calling your baby ugly and if you constantly resist feedback and criticism, you may never realize your full potential.
  2. Be flexible. You will make mistakes and learn from them but the more basic and flexible your strategy, the better. The ideas you started with will probably be blown up within 30 days so prepare to pivot.
  3. If you take funding money, make sure you place a premium on arrangements where the investors provide a structure to actively support, advise and promote your start-up. The money is great but agreements that go beyond financial help are the ones with the highest value.
  4. Explore incubators or accelerators with successful “graduates.” If you watch the HBO show “Silicon Valley,” they satirically illustrate that starting an incubator is not a very high hurdle to clear. Graduates are what you are looking for—not ping pong tables and craft beer Thursdays.
  5. Dilution of equity is not the end of the world. A fully diluted ownership stake of 51% on a $10 million company is far better than 100% of a $100k company. If there are more slices of pie being cut but the pie is now 100 times larger because of the partnerships and growth that dilution created, you are winning.
  6. Except for highly technical positions, hire based on attributes—not experience. What attributes will make someone successful in the role for which you are hiring? Fit between the candidate and the position on that level is a far better predictor of success than a resume with the right titles on it.

This is not a complete list and opinions will vary but in the limited scope of this conversation, I do think these hold higher value than the dozen other considerations I would suggest for pre-funded companies.

It was apparent to me that I would not be the last person from whom they sought feedback. I highly doubt I was the first.

17 Sep 2015
Sticky Post By Posted in Business Headlines, Entrepreneurship, Strategy With No Comments Permalink

Ever Been Punched in the Face?

Sticky Post By On September 17, 2015 With No Comments

I have only been in one real fight in my life and if YouTube had been around, I’m sure my scuffle would have received a critique similar to the famous Star Wars Kid video. I don’t remember much about my fight because everything kind of went blurry in the moment. I can only imagine there were a lot of flailing arms in an unflattering display of failed pugilism.

One thing I will always remember is getting punched square in the face. There is something so incredibly jarring and absolute about getting hit in the head. It was something I decided, in that split second, wasn’t for me.

Mike Tyson famously said, “Everyone has a plan until they get punched in the mouth.” Recently, that quote started to seem increasingly relevant to Redhawk and the work we were doing with clients.

Our firm works primarily with entrepreneurs and owner-operated companies. More specifically, we work with companies that are in some kind of transitional phase. This is represented both in periods of growth and recession. The realization of this transition happens when the current business structure or model can no longer operate as it has and continue to grow successfully.

Sometimes this happens slowly over time and creeps up on our clients. In some cases, this point of inflection is immediate, explosive and violent. A key supplier folds, an important employee quits or a major customer leaves and the business has been fundamentally changed overnight.

They got (figuratively) punched in the mouth.

This is where one of three things happen and is best captured in a quote my friend Ted Alling posted to LinkedIn recently:

“Bad companies are destroyed by crisis. Good companies survive them. Great companies are improved by them.” —Andy Grove, former CEO of Intel

Company leadership that is focused on surviving immediately concentrates their efforts on damage control and minimizing the impact as much as possible.

  • They offer significant discounts to win major customers back.
  • They publicly fire a key employee to signal the problem has been corrected.
  • They re-brand themselves in an attempt to create distance between their image and their failure.

In the aftermath of this business “assault,” we see if an organization will rise to the challenge and merely survive or come out of the crisis prepared to THRIVE. Great companies are not only ready for this kind of challenge but relish the opportunity it presents to push forward and get even better.

How well can you take a punch? Here is an abbreviated list of questions to consider:

  1. How many customers do you have?
  2. What is the average revenue per customer? Any customers who represent more than 20% of your annual revenue? What happens if they go away?
  3. What redundancy do you have in your supply chain? Are you tied to a single source for any major production requirements?
  4. Do you have a succession plan for key employees? What happens if they win the lottery and never come back to work? Are you prepared to deal with that?
  5. Do you have clear organizational goals? Does everyone know what they are? Is progress toward those goals regularly shared with everyone?
  6. Do have your business rules and operating procedures documented? Are they kept up to date and relevant?
  7. What is your Current Ratio? Can you survive a downturn in your revenue?

This is a very basic list but if you find you are missing any of these, take the steps now to correct them.

Good companies are prepared to take a punch. The best companies are ready to make the puncher miss.

27 Aug 2015
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Founders: your peer group may just be a Taco Fan Club

Sticky Post By On August 27, 2015 With No Comments

The learning curve for any start-up is steep and immediate. For successful founders, that learning happens exponentially and early mistakes turn into valuable guideposts for future decision-making. As these founders figure out how to simultaneously be the CFO, CEO, CMO, CSO and Director of Custodial Services, they are forced to do all the things needed to lead their company.

It is lonely at the top, and founders are used to making most, if not all, decisions of consequence. This creates an incredible growth experience for them as professionals but the stress and doubt created in the responsibility of concentrated authority can be overwhelming.

One of the ways many founders cope with this is to form or join a peer group. These groups come in many flavors and range from completely informal to highly structured. Some start-up companies even use these in lieu of advisory boards. Unfortunately, some of these return questionable value because they serve more as mutual admiration clubs than members who push each other to overcome business obstacles.

Talking to some tech founders about their own peer groups at a networking event recently, I asked some questions about the groups they had created and how they operated, one theme seemed to repeat itself. These founders sought out people that were just like them. They wanted peer groups made up exclusively of members in their exact same business, market and technology space. After asking a series of follow-up questions, it was obvious they wanted validation more than they wanted to be challenged to adopt new strategies. They wanted to commiserate with their peer groups about topics like customer expectations, overseas pricing competition and the challenges of finding the best taco in town.

I didn’t make that taco thing up. One founder actually told me he had spent the better part of an afternoon discussing the best taco place with his peer group on Slack.

Setting aside the obvious value of locating the best tacos, I did find this self-inflicted tunnel vision fascinating.

At one point I challenged one of those founders stating, despite what he thought, “All problems weren’t created in a SAAS company and they haven’t all been solved by a SAAS company.”

This isn’t to pick on him, start-up founders or SAAS companies. I’ve met many people who create these cocoons of group think and herd together in like-minded groups who have more interest in propping each other up than challenging each other to get better.

It’s very important to have people around you that support, love and encourage you unconditionally. It is equally important to have a cohort that challenges you and holds you accountable. Ideally, you have both. Everyone can benefit from a mentor or group of people that is dissimilar and creates some friction of thought or mindset. If everyone around you is exactly like you, your chances to learn and grow diminish exponentially.

Having a peer group that only disagrees about whether hot or mild salsa is best for a taco probably won’t create the discourse required to grow and develop your business.

03 Jul 2015
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Founders: If you can’t do this one thing, quit

Sticky Post By On July 3, 2015 With No Comments

The first time I sit down with company founders to start a project, I ask a lot of questions. Most of the questions are about their business, products, people, structure and goals. But there is one “fill in the blank” type question I usually ask them to answer that generates a lot of value:

“If I can’t do this, I’m not interested in the business continuing: __________”

This question serves multiple purposes but it cuts directly to the core of WHY.

Asking this question, I can start to understand why they work all the hours they do, why they haven’t taken a vacation in 3 years, why they are taking Ambien to fall asleep at least three night a week, why they are willing to constantly fight the battle waging between their professional success and they personal happiness.

Something really interesting happens right after I ask this question. I either get an almost instant response that comes from a sacred and principled place inside that founder or… a blank stare.

Not surprisingly, those who provide that concise and guttural answer have a strong compass to reference as they strive to build something great. They are also, not coincidently, the founders who are killing it.

Those with the blank stare look like someone just stole their lunch money.

If you are a founder, you probably have this answer in some stage of resolution- it may be iron clad, it may me a bit fuzzy or it doesn’t exist at all. If your answer is something less than resolute, you need to fill in that blank sooner than later.

Founders often start companies with a whole series of goals, hypotheses and intended outcomes. Those usually get trashed within the first 30 days. That’s what is supposed to happen but having this core question answered helps navigate the near constant uncertainty that creeps into your business every day.

If there is truly no answer for this question, quit. Quit and start something else. It really is that core to who you are as a founder and, by extension, the motivating principle of your business.

I love what I do. For so many reasons, starting my own company was the best thing I could do to grow as a professional and as a person. After 15 years of working for others, I found a way to take the pieces and parts of what really motivated me and turn it into my own business. I decided, pretty early on, that I would have some “rules” which is the genesis of me asking others the question above.

My answer to this question is simple: If I can’t build a company that delivers significant value and is considered best-of-breed, I will shut it down.

I also vowed I wouldn’t work with a-holes. But hey, that’s just me…

08 Jun 2015
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Paychecks are for Pansies

Sticky Post By On June 8, 2015 With No Comments

I recently received an email from a former colleague who I respect very much—praising me for being brave enough to leave my job and start Redhawk Consulting. It was very nice to get that recognition from someone like Jeff who struck out on his own about 8 months before I did. Reading that note made me think about the last 6 months and how the enterprise has progressed.

Running your own business is tough and there are a lot of sleepless nights and pains in the pit of your stomach as you sweat every detail, every client and every dollar. About three months into this journey, I needed a battle cry—something internal and not necessarily shared on any website, business card or marketing collateral.

“Paychecks are for pansies.”

Granted, that is the PG version of what I actually say to myself but I want to demonstrate some decorum. In my firm, there is very limited recurring revenue. We get paid when we work directly for a client.

After spending 15 years with some kind of guaranteed income, it was up to me to generate 100% of the revenue. With a wife and two young kids, I was not just making a decision for me but for the people that mean everything to me.

As a competitive person, I’m very much inspired by those who endeavor to struggle, grind and win. In those moments when you are being tested and you could easily second guess your decision to go it alone, it is important to have a battle cry—whatever that is.

Recently, I added two more consultants to the firm and they are both personifications of this mantra. Josh started his own law firm because he wasn’t going to grow as fast he was capable of working for other partners. Paul was underutilized and his skill sets are too valuable to keep hidden deep in the bowels of an accounting department. Both have joined Redhawk and have accepted, with some degree of personalization, paychecks are for pansies.

This isn’t to posit that anyone who receives a paycheck is actually a pansy. This is for me. It’s how I push myself to put forth the best effort when no one is looking and anytime I have a fleeting moment of “holy crap, what did I do?”

I believe to truly grow, you need challenges- you need to struggle. To build meaningful wealth and success, you do it for yourself or you are left hoping someone else does it for you.

Push. Strive. Struggle. Win.

18 Feb 2015
Sticky Post By Posted in Entrepreneurship, Funding, Start-ups With No Comments Permalink

5 Things Startup Competitions Get Wrong

Sticky Post By On February 18, 2015 With No Comments

Every city seems to be hosting startup contests where founders pitch their companies to a dais of “experts” live on stage in an effort to win some funding. Sometimes these competitions are massive and worth millions but many are much smaller; awarding $5k to $20k. It’s within these newer and smaller competitions that I have noticed a recurring series of mistakes.

1. The judges are not experts in entrepreneurial businesses

You see this when sponsors become the judges or the panel includes commercial bankers who are really not business-builders. I love bankers and many of my friends are a part of that industry but they are institutionally bad at valuating and understanding start-up businesses. They tend to judge a business idea in terms of if they would give them a loan and for how much.

2. Contestants are often post-funded companies that have been in business for a year or more

When you are awarding $10k to a company that already has employees and overhead, you have given them 6 weeks of operating costs. That $10k could have launched a prefunded company’s business plan and allowed them to get a credible pitch together to secure additional funds. Instead, you have floated an established company’s payroll for a few weeks. You’ve created almost zero value. If the contest is awarding $100k or more, that’s a different story but when you are giving away small amounts of prize money, focus on those for whom it has the greatest impact.

3. The best idea almost never wins

Based on the sponsors, the event’s host, the constituency of the audience and other non-business-related factors, the least deserving of companies often win these events. There are always ulterior motives at play and when those are allowed to propagate, you see some truly awful business models walking away with money that would have served a greater purpose being set on fire in the parking lot. Nobody wants to admit this happens- but it does.

4. The event tries to be “like” Shark Tank

As soon as one of these competitions invokes the Shark Tank name in its promotional materials, it immediately loses credibility with me. Mark Cuban is not coming to your event. It is a TV show that is 50% substance and 50% manufactured drama. The best contests hold non-public and lengthy discovery sessions between the companies and the judges. Financial details are poured over and every assumption is challenged. By the end of that process, a business plan has been credibly reviewed and vetted. When those judges name a winner- it’s a very carefully considered verdict. The contestants come away with invaluable insight and advice from experts that will benefit them in perpetuity.

5. There’s fine print about the award money

More needs to be done to explain to contestants any requirements that will be imposed on claiming the prize money after it is “awarded.” This includes details around benchmarking or timing thresholds required before the money will be made available. What tax implications exist and was that explained to them? One competition I watched closely actually had a very short window where the winners could claim their award and it required hours of drafting financial reports and updating the business plan. At one point, the 2nd place winner decided the $6k they won wasn’t worth the effort and forfeited the money.

It’s truly outstanding that more of these competitions are popping up all over the country. These events can be future-altering opportunities for start-up businesses or they can be thinly-disguised advertising events for the paying sponsors.

As with most innovative ideas, the shift toward commercialization happens at some point and the original altruistic motivations are supplanted by the attraction to revenue and marketability. We’ve seen this shift happen with the best events. If you think that AOL purchasing TechCrunch won’t turn Disrupt into an event where sponsors look to sticker-up everything that moves like a NASCAR, you may be sincerely disappointed.

If organizers can focus on creating the best possible value for their sponsors while maintaining the worth of the experience for contestants, these competitions can help launch the next big idea.

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