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ACCOUNTING

From Creation to Evolution

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A rising market paints over inexperience and masks many mistakes, which today's market is starting to reveal. It's not just enough to be young and energetic, because you have to have the skills to lead and work with others. Lone-wolf entrepreneurs are certainly capable of producing a success, but they need to take their own path because it's not likely they're going to have others along for the ride. In my experience, it's very important to roll up your sleeves and listen, work as part of the team and be coachable.

Building companies has been my business and passion for years. From 1988 through 1996, I founded and grew four separate companies under a single umbrella called Business Systems Group (BSG), a custom software and systems-integration company focused on network computing for large companies. Over the course of eight years, BSG grew from a start-up to more than $125 million in revenue, before its operating companies were sold or merged into various other public and private companies.

Currently, I'm the chairman of Powershift Group, a technology venture and development business focused on creating sustainable companies, generally in the IT software and services sector. I also serve as cofounder and chairman of Agillion, a provider of managed Web services designed to bring customer relationships online, and one of the companies created out of Powershift Group. Other companies in which I'm actively involved as either an investor or a board member include Vignette and Perficient.

Qualities of Company Builders

Powershift Group nurtures and catalyzes early-phase companies, primarily by helping assemble the best combination of capital, talent and leadership, and helping to judge timing. I think that's really critical. Our task is to work selectively with other entrepreneurs to help fund and found companies, as well as to invest in them.

The help these companies need varies, and depends on the experience of the entrepreneurs. Sometimes the founders are highly seasoned, having already built several companies. Other times, they have no experience building a company -- instead they bring a particular technology or product expertise to it. My personal preference, especially in today's volatile markets, is to work with seasoned entrepreneurs who have vast experience in the ups and downs of starting something new or who are at least willing to contribute significant time and energy -- either to cofound a business or to serve as an active chairman, board member, or interim CEO.

I've learned from my own experience that when you're building a company, the focus must be kept on the "building" part, whether that company is being "built to flip" or "built to last." There's no way you can predict many of the changes that are going to occur in the economy or in your industry. Therefore, you need to build companies that at any given point in time are at or near their peak performance and highest level of quality -- at whatever stage they've reached -- so you keep your options open all the time. That's the real key. If you keep your options open, then whenever you're faced with alternatives or decisions, you're operating from a position of strength.

Cornerstones of Durable Companies

Planning. A really good company with the highest probability of success should resemble a master-planned community, not a no-zoning growth area. A master plan doesn't mean "control freak," and it doesn't mean planning everything out to the nth degree. It simply means allowing for things that are likely to happen and likely to be dealt with -- such as recruiting and assembling a solid board of directors and advisors, or allowing for an equity plan with room for several highly committed stakeholders. You need to allow for growth in the company's potential financial and equity plan and room to build out your management team over time.

Market. First of all, we look at the dynamics of the market being explored in the business plan. Is it a very large market? A small niche market? Is it an extremely complex market to crack? Does it require technology invention? Or does it require just execution on sales and marketing? Do the people have fire, passion, insight, and commitment? Do they have enough perspective? Do they have the tenacity and ability to work well with others? That's usually the "gotcha!" You must be able and willing to listen. You need to be comfortable with being around others who are equally as or more talented than yourself. And you need to be able to keep your ego in check.

Structure. If the business is very small, there's not much structure to worry about. There are some very fine entrepreneurial companies that, although wonderful, are not likely to grow very large, and their owners are perfectly happy running them as is, forever. When you talk about the "go-go" companies that want to both go and grow, however, then structure is vital -- equity structure, management structure, board structure, advisors, and investment. You have to match the structure to the opportunity.

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