A former professor of business starts his own company and learns some new things about "real life" entrepreneurship.
Robert Ronstadt wrote and taught about entrepreneurship for years. You'd think that would have helped him when he started a company of his own
As an academic, Robert Ronstadt developed one of the first college programs in entrepreneurship and even wrote what has been used as the standard textbook -- Entrepreneurship: Text, Cases and Notes. Now, two years after leaving the security of tenure to run a business of his own, Ronstadt has found that real life and his book don't match. What will he write next time? -- J. H.
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W hat does this clown know about running a business?
That's what you want to say as you watch him, so self-assured, philosophizing in the comfort of a classroom about "venture formation" and "cash outflows" and "product life cycles." You can tell by the smooth timbre of his voice that this entrepreneurship professor has never once tumbled down a learning curve, never sat up all night plugging numbers into a pro forma just so a banker could say no the next morning, never faced the sobering reality of meeting payroll. "It's frustrating to watch these academics," Robert Ronstadt says. "I see it, and I want to say something."
Which is odd, because Robert Ronstadt -- that's Robert Ronstadt, doctor of business administration -- spent years teaching courses with such titles as Fundamentals of Entrepreneurship and Starting New Ventures. In 1983 he took a six-month sabbatical from Babson College, in Wellesley, Mass., to write a 770-page textbook, Entrepreneurship: Text, Cases and Notes. Not exactly, if you will, the gritty stuff of true-life experience.
That will certainly not be said, though, about the next version of the book, should Ronstadt find the time to write it. "I've learned plenty of things I could add," he says. In 1976 he and his wife, Rebecca, launched Lord Publishing Inc., "a small lifestyle venture." A decade later they pushed Lord into the software business; Ronstadt resigned from his tenured position to serve as chief executive of what he hopes will grow into a $10-million firm within seven years. "I wanted to learn about fast-growth ventures by doing it myself," he says.
Not the best motivation, perhaps (think about those situations from which you've learned the most). "I don't want to fail," Ronstadt counters. "But whatever eventually happens, I like to think I went in as well prepared as anyone could be."
No argument there. The 47-year-old Ronstadt earned his doctorate at Harvard Business School. When Ronstadt decided to teach at Babson -- a small college that was at one time so devoted to replicating the business world that students punched a clock and had their own secretaries -- he was one of a handful of academics who pushed for developing a program in entrepreneurship. By 1980 undergraduates could major in the field, and graduates could concentrate in it. The college also boasted a $1-million endowed chair in entrepreneurship studies and an annual research conference.
In the meantime the Ronstadts had sidled into the publishing business. In the mid-1970s Ronstadt wrote a 189-page book for his students called The Art of Case Analysis. When publishers rejected it because the market sounded too small, Ronstadt published it with the help of his wife, who was then working as a marketing consultant. Using her grandmother's maiden name, Rebecca Lord, she appealed to college bookstores all over the country. In its first year more than 3,000 copies were sold. In under two years Lord Publishing was selling about 7,000 copies annually, netting some $30,000 per year.
When professors started asking whether Lord Publishing could publish their books and collections of their cases, the Ronstadts gladly obliged. By 1979 the company's sales were up to $100,000.
Next came Ronstadt's textbook, which, despite its scattershot approach, got good notices. One reviewer wrote that the book "included a substantial amount of research-based knowledge . . . and should be useful to both practitioners and academicians." Company sales shot up to $250,000 by 1985. Shortly after Ronstadt's textbook appeared, the Ronstadts acted on a suggestion from readers and spent $5,000 to transfer some data from the case studies in the textbook to a disk. It was difficult to use, though, and not many schools were fully equipped with personal computers in 1985. The Ronstadts just about recouped their costs.
But the project did encourage them to pursue Ronstadt's Financials, the rock on which their corporate ambitions stand. It's a software program that provides small-business executives with a relatively easy-to-use tool for evaluating the effect of different assumptions on cash flow, the income statement, the balance sheet, and all key measures (see Executive Software, "Consultant in a Can," June 1989, [Article link]). Ronstadt figures he has raised more than $2 million since September 1986. In 1988 the company posted sales of about $450,000, nearly 65% of that from the software. Ronstadt had hoped to reach a user base of 5,000 by March of this year; he hit his goal by May. Money problems have forced him to make severe cutbacks. Last September, for example, the company burned through $190,000. By May monthly expenses amounted to just $47,000 -- and it was still bleeding $10,000. "You don't really appreciate what this is like," Ronstadt says, "until you have it all on the line."
Having it on the line has changed him. Ronstadt still makes his points by drawing on the grease board in his Natick, Mass., office, and copies of his textbook are all around the company. But reflecting on the experience, he sounds, at times, frustrated ("Venture capitalists sound like they know what it's all about. But in their hearts, I don't think they do"), defensive ("People have to realize that projections are projections. If everyone had a crystal ball, that would be great, but we don't"), and isolated ("There's an encompassing myth that this country is the quintessentially ideal environment for entrepreneurs. It isn't, in a lot of ways").
In short, he sounds like everyone else who has gone out and started a business.
