The Uncomfortable Entrepreneur

Posted on November 12, 2023 by anentrepreneurswords

It’s a fact of life that there will be times when we must communicate with someone else about something that may make both parties uncomfortable. Yes, we all will have many difficult conversations over the course of our lives – personally and professionally. And while no one looks forward to such conversations, it is important that they not be avoided. I can’t tell you the number of times I’ve seen situations where two people just need to have that hard conversation to get back on the same page. Instead, they avoid each other entirely for a while. Then if by happenstance they are thrown together, there are awkward moments galore. I’ve seen friendships end and business partnerships blow up, simply because two people can’t come to grips with the fact that they need to clear the air and “talk it out.”

Why are these conversations so hard to have in the first place? Often it evolves from one of three places. First, we may perceive the encounter to be one where conflict will be present, and we are highly allergic to conflict. Second, we may have let ourselves be hurt and just can’t stand the thought of interacting with the person who allegedly hurt us. Or third, we may be concerned that our conversation with the other person may be hurtful to them, and we don’t want to be the one to play that role. So, we suffer in silence . . . or maybe not. Rather than addressing the issue with the other person, we may tend to talk to everyone else about the situation – friends, family, colleagues – often wringing our hands in despair and playing the tape(s) over and over for them. Here’s the bottom-line question. Did taking this tack make us feel any better? Probably not. Did it solve the problem? Definitely not. Were others around us unnecessarily drawn into the negativity of the situation. Almost always.

Refraining from having an honest conversation about a difficult matter does a disservice to our relationships. Now assume that we have finally decided to address the issue. Let’s talk about the rules of engagement. Should we have these conversations one-on-one, or should a third party be present? While there are exceptions to the rule, I think we need to have the guts to deal directly with the other person. While it may help our courage to have a wingman, the person with whom we are trying to resolve an issue may not feel comfortable putting all his or her cards on the table. Do we have the conversation in private, or do it in a public place? I’ve witnessed situations where one person wants to meet with the other in a restaurant “to avoid a meltdown.” This could be perceived by the other party as being manipulative and further strains the relationship. I’m always in favor of meeting in private and behind closed doors if possible.

Our body language is critical to the success of the encounter. We should be as open and relaxed as we possibly can. Sitting with our body turned away from the other person and our arms folded doesn’t send the message that we want to resolve anything. Keeping palms open, smiling, and making eye contact will help put the other person at ease. How direct do we want the conversation to be? In my book, directness is fine, but we need to use warm candor instead of brutal honesty. We don’t need to sugarcoat our dialogue, but we must be sensitive to the other person’s feelings. If we’re there to score points and prove that we are right and they are wrong, then by all means, rub their nose in it. But if we really want resolution, we are gentle with our words while still making certain that there is no ambiguity in what we are saying.

I’ve also found that sticking to the facts is good practice. That said, we must remember that the reason the conversation may be difficult in the first place could be due to emotions that ran amuck. Thus, we need to have empathy for the emotional factor but keep the discussion in the logical realm. And sometimes, rehashing the disagreement isn’t necessarily productive – it may be best to just apologize and move on (if an apology is warranted).

Difficult conversations are necessary and will generally be successful by adhering to this simple principle. I will treat the other person the same way I want to be treated.

This blog is being written in tandem with my book, “An Entrepreneur’s Words to Live By,” available on Amazon.com in paperback and Kindle (My Book), as well as being available in all of the other major eBook formats.

The No-Fault Entrepreneur

Posted on November 5, 2023 by anentrepreneurswords

There’s a game we learned how to play as children. Remember this? Parent – “Who tracked this mud into the house?” Children (pointing fingers) – “Freddy did it!” Then there was always that one kid who did this. Tattle-Tale Kid – “Miss Flanders, Jimmy knocked over the globe in the back of the room after recess and broke it.” As we got older and started our careers, how many times did we hear conversations like this? “We lost the Smith account. It was because John Doe didn’t pull his weight and let us down.” Ah yes, we all know about the “blame game.”

Why is it that human nature drives us to deflect blame and make sure everyone knows “I didn’t do it?” Is this a self-confidence thing? Maybe it’s reflective of the fact that none of us want to disappoint others. Whatever the case, the blame game is unproductive in any entrepreneurial environment. And it signals a flaw in an organization’s culture when the game is played regularly. Perhaps those who make mistakes are so severely held accountable that everyone is afraid to be tagged with a flub.

Entrepreneurial leaders should shun the blame game and adopt a different mindset. It’s a mindset that goes like this – “It may not be my fault, but it is my problem.” And here’s where the real leadership begins. Rather than reacting with “whose fault is this,” the enlightened leader says instead, “Houston, we have a problem. Let’s talk about how we’re going to fix it.” Thus, the first step is identifying the problem and working with the team to find a solution. When we make this the go-to response every single time, the fear of blame among our teammates is dissipated. But solving the problem doesn’t mean that we’re finished with the issue.

Once the smoke clears and the problem has been fixed, it’s critical that we move to the second step. This is where we look at the various facets of the problem and figure out how it can be prevented in the future. It might be that we need to re-design a system or process. Maybe more training would be helpful. It’s also possible that the roles and accountabilities for the team members involved weren’t as clear and precise as necessary. All of this can be accomplished without playing the blame game.

Let’s apply these principles to a real-life scenario.

Old Way – Boss says to his employees, “We were just fired by a customer because the product he ordered wasn’t delivered on time. I want to know who is at fault here, and that person needs to be standing in my office before 4:30 this afternoon.” What happens next? The blame game starts, and someone invariably is singled out to be the sacrificial lamb. They know that there are going to be harsh repercussions, and no one wants to be anywhere close to the boss’s office at 4:30.

Better Way – Entrepreneur says to the team, “We were just fired by a customer because the product he ordered wasn’t delivered on time. I have apologized to him on behalf of our organization and told him that not only is there no charge for his product, but to convince him to give us another chance, we’ll give him a 50% discount on his next order.”

Later in the day the customer agrees to give the company another chance at which point the entrepreneurial leader says to the team, “Congratulations! Our customer has agreed to give us another chance. Let’s meet at 4:30 to talk about how we can make sure that our systems and processes are modified to ensure that our products are always delivered on time.”

The team members at the first company are fearful and aren’t the least bit interested in dealing with the problem. They just want to avoid the wrath of the boss. The team members at the second company are focused on fixing the problem and then figuring out how to keep it from happening again. There is no fear because their leader subscribes to a no-fault, work-the-problem philosophy.

Our entrepreneurial endeavors are much more likely to flourish when our team members can focus on fixing problems that arise as opposed to being on the defensive and looking over their shoulders in fear. The premise is a simple yet powerful one.

The Hard Times/Happy Times Entrepreneur

Posted on October 29, 2023 by anentrepreneurswords

The entrepreneurial experience produces emotions of all sorts, often extending across the positive to negative spectrum and all in the same day! Most entrepreneurs will attest to the fact that there have been hard times at different points in their careers. These hard times may be the result of personal challenges, professional challenges, or both. They run the gamut from aging parent issues, marital strife, divorce, rebellious children, lawsuits, financial pressures, unfair competition, loss of market share/customers, and a multitude of other mole hills and in some cases, mountains – really big mountains. Through it all, there’s a central question that we grapple with. How do we make hard times into happy times? Is it even possible?

Let’s start with the whole notion of happiness. Are you happy overall? Where do you land on the happiness scale? Are you happy some of the time but not always? Are you moderately happy or are you ecstatically happy? When you encounter hard times, are you able to maintain your level of happiness or does it slide down (or off) the scale? Obstacles are a part of life. They’ll always be there. When we sign on to be an entrepreneur, we also understand that we’re signing up for a roller-coaster ride. Our gut check determines if we can be happy while we’re riding the roller-coaster, the bucking bull or whatever metaphor is chosen to represent the challenges we inevitably will face.

Over the course of my nearly 70 years I’ve learned many things about happiness. Allow me to share them with you.

Happiness is a choice. First and foremost, I’ve come to understand that my happiness is 100% my choice. Where I land on the happiness scale is totally my choice. This concept may not be easy to grasp when we’re in the throes of a crisis. But I’ll be darned if I’m going to let what is happening around me determine whether or to what degree I’m going to be happy. Some may say that this sounds like a Pollyanna type of response – after all the world is crumbling around us and we’re going to choose to be happy? Yes, that’s exactly what I’m saying. It may not be as easy to dial up happiness when we’re getting punched in the gut . . . but it definitely is a choice that we make.
Go to bed with a clear conscience. My wife is constantly shaking her head. When my head hits the pillow at night, I’m fast asleep within 30 seconds or so. One of the reasons is the fact that I go to bed every night with a clear conscience. I know that my integrity is intact, and I haven’t intentionally stepped on anyone’s toes. A sure-fire way to unhappiness is breaching the trust of others. There may be other problems that crop up along life’s road, but this isn’t going to be one of them.
Be grateful. Gratitude is one of the keys to happiness. I find that when I am grateful to someone and express it, I feel an endorphin rush. And because it feels so good to express gratitude, I try to do it every single day. I have found that being grateful helps to create a balance in my life that pushes up the happiness meter.
Serve others. Years ago, I discovered that getting out of myself was a major factor in being a perpetually happy person. Rather than dwelling on my own inadequacies, mistakes, and failures, I found that serving others produced those same endorphins I felt when I was in gratitude. When I could make others happy it became infectious and made me happy as well. I volunteered at a children’s hospital; have served as a mentor to aspiring entrepreneurs; created a scholarship program for young people studying to be teachers, and many other examples.
Turn the tables. Look, I said it before. Hard times are inevitable. But we can use them to learn and grow. We can use them to stimulate creativity and innovation. I have come to thrive on complexity and challenges that some might find would push them over the edge. Instead, I say, “bring on the tough stuff!” I’m not about to be defeated by hard times because they present an opportunity to excel and move to even higher levels of performance. And that’s just as applicable in my personal life as it is in my business.

Hard times and happy times can coexist. We need to recognize that happiness is a choice, and it can be realized when we operate in integrity, express gratitude, serve others and use our challenges as opportunities for growth.

The Successful Sacrificing Entrepreneur

Posted on October 22, 2023 by anentrepreneurswords

Much has been made about “work/life balance” over the past several years. This discussion is a somewhat backhanded slap at past generations where high achievers sometimes (maybe often) spent a great deal of time and effort clawing their way to the top. Today’s meme is that there is a better and smarter way to reach the pinnacle of success. And it involves much less of something we old-timers know as “sacrifice.” I submit that there is a fundamental misunderstanding about both these notions – work/life balance and sacrifice.

Entrepreneurship is more competitive than ever. Competition pushes us to innovate and find better ways of doing things that result in winning. Believe me when I say that the entrepreneurial environment doesn’t care about work/life balance. This is a full-throttle pull-out-all-the-stops world in which we compete. Then, does this mean that we can’t achieve work/life balance AND achieve high levels of success? The answer is . . . yes and no.

The yes and no answers are a sliding scale. At one end of the scale, we have a healthy work/life balance and some level of success. At the other end of the scale, we are making considerable sacrifices and achieving some other level of success. The wild card is the level of success we really want to attain. Some entrepreneurs can operate a business that is successful enough to provide a very comfortable lifestyle. And they can do so without giving up much to do so. There are other entrepreneurs that are driven to the point that they become single-minded in their focus to the exclusion of all else – and achieve unimaginable success. The key to understanding what we must sacrifice is to understand exactly what level of success we want and what it will take to achieve it.

Many of us who entered business in the 1970s and 1980s know what it was like to “pay our dues.” We started at the bottom of the corporate ladder, learned our business, and perfected our craft. While we were always chomping at the bit to get ahead, we also knew that we were going to have to prove that we were worthy. Sometimes that meant 100-hour weeks and toiling in the salt mines for what seemed like an eternity. There was much frustration, anguish, and a healthy dose of fear. We ultimately prevailed through a formula that was one-part smart enough, one-part hard work, and a secret ingredient called pure passion.

While passion drove me when I was young and still drives me today, I was able to prioritize in such a way as to never miss an event involving my daughters; never miss taking a vacation with my wife, and never endangering my health. My work and my personal life became intertwined to the point of being inseparable. I’m not sure how a big vision can be reached without this sort of work/life relationship.

There are many young entrepreneurs brimming with confidence and vowing to do things differently than their parents and grandparents. That’s fine and I wish them well. What they will need to eventually determine is what level of success they want to achieve and what will be required to achieve it. It’s an extremely rare individual who can dream a big idea, implement it, and create a moonshot while coasting on a cloud and exerting minimal effort. Most of the time, moonshots require incredible amounts of blood, sweat and tears. Entrepreneurs who are too impatient or are unwilling to make certain sacrifices are going to see their dream fizzle and fall into the sea. There’s no question that young entrepreneurs can and should learn from the mistakes made by previous generations. This will help smooth the path to success. But what can’t be ignored are the benefits of business experience, life experience and the notion of eating, sleeping, and breathing entrepreneurial vision. And there’s no way around it . . . there will be sacrifices.

We’ve all heard about some of the legends of enterprise. Steve Jobs worked non-stop, calling close associates late into the evening to bounce around ideas. Mark Cuban didn’t take a vacation for seven years during the time he was launching his initial business venture. Marissa Mayer worked 130-hour weeks when she was at Google and sometimes slept under her desk. Elon Musk said in an interview with Vator News, “You just have to put in 80-to-100-hour weeks every week. If other people are putting in 40-hour work weeks and you’re putting in 100-hour work weeks, then, even if you’re doing the same thing, you know that you will achieve in four months what it takes them a year to achieve.”

Achieving extraordinary levels of success still requires sacrifice. Entrepreneurs need to decide for themselves what level of success they desire and understand what it will take to achieve it.

The Grateful Entrepreneur

Posted on October 15, 2023 by anentrepreneurswords

When I was a young lad in my formative years there was a hard and fast rule set for my sister and me. As soon as the Christmas or birthday wrapping paper was discarded, we went to our respective rooms and began writing thank-you notes. It didn’t matter how insignificant the gift (or whether it was something we wanted) a thank-you note was written. And writing something like, “Dear Grandmother – thank you for the sweater you sent for Christmas,” was wholly insufficient. Mom expected something more in the order of, “Dear Grandmother – thank you for the lovely sweater you sent me for Christmas. I can’t wait to wear it at my upcoming band concert. I’ll send you a picture of me wearing the sweater after the concert. We miss you and wish we could see you more often.” And by golly, I wore that sweater at the band concert and sent a follow-up note with the photo.

Our daughters were subjected to the same practice when they were young though I’m not sure that our grandchildren have adopted the ritual . . . which is unfortunate. It sometimes seems that expressing gratitude is becoming a lost art. I’ve written before about how living in gratitude makes our lives so much richer and rewarding. It opens the flow of positive energy that allows us to thrive in any situation. I’ve advocated for keeping a gratitude journal in which we write daily, making note of the various people and things for which we are grateful each day. I know that when I hit a rough spot in my life, focusing on that for which I am grateful always centers me and puts me back on track.

Here’s the thing. Entrepreneurs have endless reasons to be grateful. Who among us hasn’t been encouraged by someone along the way? Who among us hasn’t received a helping hand from a kind soul who selflessly made our way smoother? Who hasn’t been the beneficiary of opportunities that were created by someone else? Do we truly feel grateful for these actions, or do we take them for granted? Perhaps we have even rationalized a sense of entitlement . . . which would be unfortunate. “I know my company has assigned me some terrific projects that have been very helpful to my career, but I work long hours to make these projects successful.” What is not said (but maybe thought) is, “I don’t need to express gratitude to anyone because I go above and beyond to do my job.”

What is the proper way to express gratitude to others? First and foremost, it needs to be heartfelt. Simply going through the motions (like I did with my sweater letter) is not true gratitude. We need to think specifically about what others have done for us. This is where a gratitude journal can be helpful. It establishes a practice whereby we focus on our bounty – material or otherwise – and identify the source that facilitated it. This doesn’t take anything away from our own accomplishments. It simply completes the circle of gratitude. We acknowledge that source as well as being proud of what we ultimately accomplished.

When our gratitude is coherent with our head and our heart, we can offer an outward expression of it. Perhaps it takes the form of looking someone in the eye and telling them how much their support has meant and how appreciative we are. Maybe it’s a handwritten note of thanks. Possibly it takes the form of a gift of some sort. Regardless of the method, intentionality is the key and will be felt by the recipient.

Learning how to be grateful and expressing gratitude to others is a practice that is critical to living an amazing entrepreneurial life. And I want to say thank you to my mom in heaven for instilling in me the foundational elements of gratitude.

This blog is being written in tandem with my book, “An Entrepreneur’s Words to Live By,” available on Amazon.com in paperback and Kindle (My Book), as well as being available in all of the other major eBook formats.

The Supremely Confident Entrepreneur

Posted on October 8, 2023 by anentrepreneurswords

There is at least one must-have trait for successful entrepreneurs. Without confidence the road is very steep and rocky. College basketball is one of the most interesting demonstrations of how confidence or a lack thereof can impact outcomes. I’ve watched many games where the players on a team are tentative. They lack energy and they are missing their shots. Often, they are out of position and cannot rebound or chase down loose balls. A few days later the same team plays another game. This time there is fluidity in their motion. They are passing the ball crisply; players are getting nice elevation when they shoot, and the ball is going in the hole. The night-and-day difference between the two contests is that of confidence.

What is the secret to gaining and maintaining confidence? There are several elements that are required. The first is that of “mastery.” Mastery is achieved through constant practice and the repetitive patterning that occurs as our experience builds. This is particularly important for millennials to understand. Fair or not, many millennials are tagged with the stereotype that they have an incredibly high sense of urgency. They don’t want to wait for results and can be impatient at times. However, I’ve seen millennials and people of all ages try something a couple of times and believe they have mastered it. Then I watch as they try it again and bomb badly. With confidence shaken they are humbled and may become afraid to jump in the water again. All of this could have been avoided had real mastery been achieved. One of the biggest fears in society today is that of public speaking. And the only way to resolve this fear once and for all, is to practice speaking over and over and over. The fear doesn’t suddenly evaporate after a handful of gigs. It took me 50 or 60 times to reach the point that I began to feel comfortable in front of a group.

The second element is that of achieving a history of desired outcomes. It’s one thing to repeat a process enough times to master something. That helps to build confidence. But achieving the results we want is the validation necessary for us to know that we’re on the right track with our mastery. Let’s use our basketball example again. A team may be executing the basics and fundamentals properly; it may be playing strong defense, and the players are running the plays as designed. But if the scoreboard isn’t showing a W for the team on a regular basis, it’s hard to build confidence. I’ve never heard anyone profess that losing all the time builds confidence . . . but winning does. As entrepreneurs we must tweak our approach until we begin to win consistently. For example, if our sales approach isn’t working and we keep doing it the same way, it’s time to start experimenting to learn what it takes to win. After all, there’s no point in “mastering” losing!

The third aspect of building confidence is to always maintain a positive attitude – no matter what. We must believe that eventually we’ll get it right; eventually we will win. I’ve said many times that what we think in mind produces in the outer after its kind. When we believe at our core that we are going to win, eventually we will win. If we have doubts or know in our bones that we’re going to lose, eventually we will lose. I have never seen anyone become more self-confident by having a negative attitude. Attitude is critical to the success of individuals and to the team. If one member of the team is positive and the rest are negative, the confidence of the team will be adversely affected. As entrepreneurial leaders it is incumbent upon us to make sure that our team is unanimous with a positive attitude.

Developing mastery, achieving success and being eternally optimistic are the rocket fuel that will propel us to a perpetual state of self-confidence. This patterning also inoculates us from having our self-confidence shaken when from time-to-time we might stumble. We’ve been there before. We know what we must do, and we are able to re-calibrate and get back on track with ease and grace. There is no panic or desperation – we simply remember to follow the formula that has worked so well in the past.

Building self-confidence is a process much like riding a bicycle. Once learned, we may fall off on rare occasions; but when we do we get up, dust ourselves off and start riding the bike again like it never happened.

The Toxic Entrepreneur

Posted on October 1, 2023 by anentrepreneurswords

Tyler is mad at Gilbert. Mad may not be an adequate description. Tyler is so livid that he doesn’t trust himself to talk to Gilbert about “the incident” for fear that he might end up in handcuffs after the encounter. I think you get the picture. Here’s the rest of the story. Tyler is an entrepreneur who has built a small but rapidly growing company that buys fledgling software projects and fully develops them into commercial products. Gilbert is a software engineer who has a terrific idea that he began to develop and talked extensively with Tyler about taking it to the next step. The two hit it off very well and a very close relationship grew over time. Negotiations had progressed to the point that documents were prepared, and a signing date was set. Then it happened. Tyler received a phone call late one afternoon from an industry analyst informing him that Gilbert had just signed an agreement with Tyler’s closest competitor, to develop the software. Tyler called Gilbert and got his voicemail. He texted and e-mailed – radio silence. Naturally Tyler feels totally betrayed, blindsided and embarrassed. Betrayed because Gilbert had committed the deal to him; blindsided because Gilbert hadn’t had the decency to call him first, and embarrassed because he heard about it from someone else.

You probably know the rest of the story. Tyler finally reaches Gilbert and confronts him about the situation. Gilbert says, “Tyler, it’s only business. I made a decision that I felt was best for me.” This only adds fuel to the fire raging inside Tyler and a long-term grudge ensues with ongoing thoughts of revenge and payback. And, at the end of the day this is the classic Entrepreneur’s Poison.

It’s understandable that Tyler is upset about Gilbert’s actions. But Tyler faces a fork-in-the-road choice at this point. He can hold a grudge for a long period of time and plot ways to get back at Gilbert, drinking the Entrepreneur’s Poison in the process. Or he can learn from the experience and move on. I emphasize the fact that this is a choice that Tyler will make. He’s in control – not Gilbert. As entrepreneurs we will likely face similar circumstances at some point in our careers – maybe we already have. Do we drink the Entrepreneur’s Poison or not?

On December 13, 1977, during an NBA game between the Los Angeles Lakers and the Houston Rockets, Lakers forward Kermit Washington threw a punch that shattered the face of Houston player, Rudy Tomjanovich. The blow was so devastating that spinal fluid was leaking out of the wound as Tomjanovich was rushed to the hospital. His injuries were life threatening and it took several surgeries to repair the damage. Jonathan Feigen’s 2018 book “100 Things Rockets Fans Should Know and Do Before They Die,” details how Tomjanovich felt the need to forgive Washington who had apologized to him in 1987. Feigen states, “Washington could not have known that Tomjanovich had come to believe that holding resentment is ‘a poison’ people ingest needlessly. ‘If I keep those other things, self-destructive things, a part of who I am, I’m missing a good life,’ Tomjanovich said.”

Here’s the thing. When we feel that we’ve been wronged by someone else, harboring feelings of resentment and plotting revenge takes a lot of energy – and worse, it’s negative energy. This same energy could be used in positive ways that benefit ourselves and others. Someone I know was recently betrayed by a long-time friend. She wonders how she’ll ever be able to trust this individual again. My response was to ask if deciding in absolute terms that trust is broken forever is the best perspective. She asked what I would say to this friend, and I responded, “The trust has been broken and it will take a while to earn it back.” Then we move on and live our lives without holding a grudge or resentment. It becomes the choice of the transgressor to rebuild the trust or not. Dwelling on the situation and replaying it over and over does nothing to undo what happened.

In our entrepreneurial world it’s extremely important that we operate in a positive sphere. No one can harm us unless we allow them to do so. Forgiveness is the key even though it may take time for relationships to be repaired. Taking this approach allows us to avoid drinking the Entrepreneur’s Poison.

The Tale of Two Entrepreneurs

Posted on September 24, 2023 by anentrepreneurswords

This is a true story about two entrepreneurs – one who is doing it right, and the other who is not. Allow me to set the stage. One of our business units is in the venture capital space. We invest in early-stage companies that operate in agriculture, animal health, and human health verticals. Some might call us seed-stage or angel investors. Often, we are making investments in companies that are pre-revenue or are just starting to generate revenue from their product or service. So, evaluating such opportunities has a lot to do with our assessment of the founder(s) and whether they are competent and have a strong moral compass.

Two companies in our portfolio offer a terrific contrast in competency and integrity. The first company – we’ll call it Company A – is doing all the right things. The founders have a novel idea in the agriculture space that they turned into a real company that is achieving real traction. It is on track to breakeven within the next 12 to 18 months and should become quite profitable as it continues to scale. The team is focused on keeping operating expenses in line and has lowered the cost of producing the product it sells. One thing we are especially pleased with is the level of transparency that the founders exhibit. They communicate regularly with the investors and what they report is substantive and meaningful. If they have experienced a hiccup, they say so. If they achieve a milestone, they celebrate. They are receptive to our suggestions and practice good corporate governance operating with a real board of directors.

Unfortunately, Company B is at the other end of the spectrum. The founder talked a good game when we did our due diligence – and we believed this person. But things unfolded much differently than we anticipated. Shortly after we made our investment, the founder pivoted away from the initial thesis which had attracted us in the first place. The enterprise approach that convinced us to invest was abandoned and the team began focusing on a different one-off kind of model that produced a fraction of the revenue. We have board observer rights, which means that we are entitled to attend all board of directors’ meetings so that we can see firsthand the decisions that are being made. Much to our surprise some decisions that should have been made in a formal board meeting were handled by a board teleconference that we didn’t even know about. And the board of directors, in our opinion, wasn’t a “real” board with independent directors that were performing their fiduciary duties.

Company B’s founder increased his/her salary to a level that is outrageous for a company at this stage. In fact, the Annual Recurring Revenue (ARR) for this company at the time I write this is equal to one month of its cash burn! Most founders at this early stage would be reducing their salary rather than increasing it. Meanwhile, we get weekly e-mails from the founder bragging about how many new customers they added or onboarded during the past week. But this communication is all fluff and B.S. because each customer hardly moves the needle in terms of revenue.

Company B’s founder somehow continues to find ways to convince new investors to throw more money into the pot to keep the company alive. We do not understand what these investors see in this company’s business (or its founder) that shows a clear path to success. At some point the music will stop and Company B will cease to exist, but its founder will have profited handsomely with an exorbitant salary.

Here are the lessons learned for entrepreneurs. Smooth talk may work for a while (Company B), but eventually solid performance and strong results (Company A) must prevail. Communication is a virtue but only if it provides full transparency sans fluff and B.S. Investors value good ideas and great entrepreneurs. A great entrepreneur has the integrity to always do the right thing even in the face of adversity.

We hope that the founders in Company A eventually have a successful exit where they and their investors (including us!) make a lot of money. And then we hope these founders will start another company. We’ll stand in line to invest in them again.

The Extinct Entrepreneur

Posted on September 17, 2023 by anentrepreneurswords

By now, everyone knows that tens of thousands of retail stores have closed across the country over the past several years. One industry source predicts another 50,000 stores could close by 2027. Covid certainly had an impact while public access was locked down for an extended time. But the trend started well before Covid. This year, Bed, Bath & Beyond is just one of the latest chains to close the doors. At its peak, Bed, Bath had 1,552 locations. Sears at its peak had 3,500 stores and Kmart had 2,300 locations. Now both Sears and Kmart have a combined 23 stores remaining in the U.S. Bricks and mortar retailers are fighting for their collective lives. They are up against the likes of Amazon and Walmart, to name two of their biggest competitors. Amazon is open 24/7 and Walmart stores seem to be open most of the hours people are awake.

This data has gotten me to think about how some businesses simply fail to change with the times. This isn’t anything new. But by now one would think that the ability to adapt would be case study Numero Uno in the school of entrepreneurship. Let’s look at another example – this one is in the educational sector. For years, we’ve seen tuition spiking at public universities and colleges. According to Education Data.org, tuition has increased approximately 136.5% from 2000 – 2021, an annual rate of 6.8%. Meanwhile inflation has averaged 2.55% per year for the same timeframe. Why has this happened? Government-insured student loans have been a major contributor to the upward movement of tuition. Universities have known that they could just keep pushing tuition because students could borrow cheap money to finance the cost. There’s only one problem. The student loan bubble is bursting as millions of young people are questioning why they should take on debt of as much as $100,000 or more to earn a college degree. Public funding for higher education has been under pressure for years. Meanwhile, colleges and universities blithely continue to build new buildings and act like the good times will roll forever. There’s scant evidence that leadership is plotting how to adapt to what could become a very scary situation.

The landscape is littered with the carcasses of companies that failed to adapt. Besides Bed, Bath & Beyond, Sears, and Kmart, we’ve seen store closings and/or bankruptcies at Mattress Firm, Brookstone, David’s Bridal, Tuesday Morning, Party City, Serta Simmons Bedding, Rockport, Nine West, Claire’s, Toys R Us, iHeartMedia, Gibson’s (the guitar maker) and Bon-Ton to name a few. Many of these companies had accumulated too much debt. Others grew too quickly and saturated the market with stores (Mattress Firm comes to mind). Others clearly kept plodding along with a business strategy that no longer worked.

The Netflix vs. Blockbuster Video story is common knowledge. Blockbuster never came to grips with the fact that streaming services were going to be king of the mountain, pushing the business of renting videocassettes into the abyss. Eastman Kodak failed to understand that digital photography was the future – not film and photographic paper. Yahoo blew it when Google was offering everything for free; yet Yahoo thought it could charge for e-mail and file sharing.

When we as entrepreneurs become comfortable and believe that we have the best idea, we’re probably headed for a fall. Because there’s absolutely no doubt that someone else is already working on the next best idea and may roll it out as early as tomorrow. Dr. Ichak Adizes, CEO of the Adizes Institute and one of the world’s leading management experts has developed a concept he calls the Corporate Lifecycle. He identifies a “Mature” organization as one that is about to experience “The Fall.” He goes on to say, “The leaders of The Fall companies are starting to feel content and somewhat complacent. This attitude has been developing for some time. The company is strong, but it is starting to lose flexibility. It is at the top of its lifecycle curve, but it has expended nearly all the “developmental momentum” it amassed during its growing stages. The rocket is slowing down and starting to change direction and head down the lifecycle curve. The organization suffers from an attitude that says, ‘If it ain’t broke, don’t fix it.’ The company is losing the spirit of creativity, innovation, and the desire to change that brought it to Prime (the ultimate phase of the corporate lifecycle). It has sown the seeds of mediocrity.”

There are many lessons to be learned here. As our organizations continue to grow and become rocket ships, it’s critical that we maintain our spirit of creativity, innovation, and the desire to change. Always. Every day. Forever.

An Iconic Entrepreneur

Posted on September 10, 2023 by anentrepreneurswords

Right after he passed away several years ago, I wrote a blog as a tribute to Herb Kelleher. I think it’s worth sharing again.

On January 3, 2019, one of the legendary icons of entrepreneurship stepped on a rainbow. Herb Kelleher died at age 87 after living a storied life. Kelleher famously co-founded Southwest Airlines in the late 1960s. He was practicing law in San Antonio when a client brought him an idea to launch a new airline in 1967. Competing airlines did everything they could to prevent the new airline, originally incorporated as Air Southwest Company, from getting off the ground. Lawsuits were the only thing flying for several years, and at one point the board told Kelleher that the venture needed to be shut down. Kelleher offered to fight the lawsuits and pay the court costs out of his own pocket, at which point the board agreed to stay in business. It took four years and victories at both the Texas and the U.S. Supreme Courts – twice – before Southwest Airlines flew for the first time on June 18, 1971. His resilience and tenaciousness are credited for enabling Southwest to persevere and become the major airline that it is today.

Kelleher was general counsel and served on the board of directors, becoming chairman in 1978. In 1981 he became the full-time CEO and built the airline into a powerhouse because of his vision. At the time, the airline industry was highly regulated and when an airline started losing money, it would petition the Civil Aeronautics Board (CAB) to allow for a fare increase. As a result, it became exceedingly expensive for the public to fly – something that Kelleher saw as the opportunity of a lifetime. Initially Southwest was an intrastate carrier flying within Texas, making flying between Dallas, San Antonio, and Houston affordable through ultra-low fares. Over the years the airline started flying outside the state of Texas but was hamstrung by the Wright Amendment – legislation designed to help the legacy carriers and hurt Southwest. The law required that Southwest could not fly from another state directly into Dallas’ Love Field without first stopping in an immediately adjacent state including Arkansas, Louisiana, Oklahoma, and New Mexico. I can remember flying from Kansas City to Dallas and having to stop in Oklahoma City to change planes because of this requirement. Eventually the Wright Amendment was defeated in Congress and Southwest was able to operate like any other airline in the country.

Kelleher was a marketing genius and employed numerous outrageous stunts that endeared Southwest to its employees and to the public. He never took himself too seriously and is well known for his love of Wild Turkey bourbon and a daily dose of five packs of Marlboro cigarettes. When it came to compensation, Kelleher chose to take less in cash salary and more stock options. This approach helped considerably with the Southwest labor force (where the CEO was not receiving an exorbitant level of pay) and made him a billionaire two-and-a-half times over. He claims to have been a “flamboyant marketer but was fiscally conservative.” His shrewd financial prowess put Southwest on a path to profitability that is unmatched by any other airline – and few public companies in any industry. Since 1973, the company has been profitable every single year.

For decades, the culture at Southwest Airlines has been studied under a microscope by business schools and business leaders. It’s safe to say that Kelleher defined and sustained that culture for the 20 years he was the CEO and even after he retired in 2001 (he remained chairman of the board until 2008). He spent an enormous amount of time talking to employees and gaining understanding of what was working and what needed to be fixed. He loaded baggage onto planes every Thanksgiving Day; met technicians at 2:00 AM in a maintenance hangar; visited operators at reservation centers and spent time as a gate agent. According to Terry Maxon, in a 2015 article for the Dallas News, Kelleher dressed up like Elvis Presley, a woman, the Easter bunny, a leprechaun and a flight attendant to promote Southwest. Maxon went on to explain the corporate culture was that of a 1) scrappy underdog to the public; 2) fierce warrior to its competitors, and 3) warm, supportive, and protective atmosphere for the employees.

Herb Kelleher was a larger-than-life model for us as entrepreneurs to emulate. He had all the requisite entrepreneurial traits – vision, tenacity, resilience, marketing skills, financial acumen, a cultural leader, and a genuine love for people. Above all he had a passion for life. They broke the mold when Herb Kelleher left this planet. R.I.P.

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