Businesses builders find inspiration in interesting places. In business school, no one gave us a playbook for building and growing businesses, and most successful CEOs who have guided their companies through start-up and into the growth phase learn the craft through real-time experience. So, we are always looking for lessons that we can take away from other company experiences.
We recently saw the documentary, "The Queen of Versailles," about David Siegel, CEO of Westgate Resorts, and his wife Jackie. At the beginning of the movie, the couple was building what would be the largest mansion in the U.S., in Windermere, Florida. By the end of the movie, the company was in financial ruin and the partially built house was in foreclosure.
While the movie is a gripping personal story of two extreme personalities, we found it interesting from a business perspective. Here is a classic entrepreneur who built a timeshare empire from an orange grove in Florida, became a billionaire, and took a huge financial hit in the financial crisis. While the business wasn't the main focus of the movie, we got some clear takeaways from the movie, and some learnings from David himself, about how to build a business.
At one point toward the end of the movie, David talked about what he would have done differently. "I would have had 15 resorts instead of 28," he said, implying that the bigger business didn't necessarily make him more money in the end and that he could have done the same thing with fewer properties. The movie suggested, in fact, that his last property, the Planet Hollywood Westgate in Las Vegas, contributed most to the company's downfall; had he not taken on that debt, the company and his personal fortune would have been salvageable.
To us, this says a lot about how to build a business. Entrepreneurs get in the mindset of growth and infer that bigger must be better. But growth is inherently volatile, often driven by market factors that are outside of the company's control. The best companies grow slower than they are able to and take advantage of time to stage investment decisions. Had David slowed the pace of building resorts, he may have been able to ride out the financial crisis. Building 15 resorts probably would have resulted in selling only to customers with higher-quality credit rather than dipping into segments of customers who ultimately were unable to pay their bills.
In an e-mail we received from David, he told us that the business and his personal financials are on the upswing. He said that last year was the most profitable year in the company’s 43-year history and that the house has been paid off. He also calls the film "a fictional movie that has the nerve to call itself a documentary."
The movie, fictional or not, was a fascinating story about building a business. David claims that his success story should be taught in every business school. We agree that entrepreneurs can learn a lot from the story, but there are lessons here on both successes and failures.
This story was updated on April 5, 2013 to reflect a statement from David Siegel.
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