In Defense of the Entrepreneur
A few words on behalf of 'bad managers'
I plead guilty to being a living, breathing, crusty, and -- oh, yes -- successful entrepreneur. Four times I put my money where my ideas were, and four times those businesses grew to adulthood. Today more than 230 people are gainfully employed as a result of the success of companies I nurtured. I do not, however, feel an overwhelming rush of pride when I make that statement. For 20 years I sat in my crisis-strewed offices, acting out the Entrepreneur's List of 1,001 Basic Business Errors, making the same needless, redundant, energy-draining mistakes.
I have now sold my last company and, at age 54, am perched comfortably here in Southern California, the land of everlasting golf. The professional managers who bought the company have put me out to pasture. I have no quarrel with that. I was fairly compensated for my efforts. Yet I am troubled by one aspect of what happened, namely, my failure to make the transition from entrepreneur to manager. In that I suspect I am not alone.
I'd guess most entrepreneurs lack the skills and temperament required to manage their companies to maturity. We try to overcome this deficiency with elbow grease and adrenaline, but sooner or later we are forced to turn over the keys to professional managers better equipped to handle the job. That's tough enough. What makes it worse is that many of those managers seem to take pleasure in trumpeting our failings to the world.
A case in point is Steve Bostic, a PepsiCo graduate who took his American Photo Group to the top of the 1987 Inc. 500 list by buying a handful of companies and applying his skills as a professional manager. "Frankly, I detest the word entrepreneur," he said in an interview with Inc. ("Thriving on Order," December 1989, [Article link]). "I prefer to think of myself as an enterprising individual.? Enterprising individuals are?resourceful and disciplined? They've usually been educated in the corporate environment? In my mind, an entrepreneur is someone who doesn't care much about information or facts. He operates on instinct? He's liable to pull out both guns at any moment and start blazing away. Those guys?create havoc with everybody around them. They're always rolling the dice."
Bostic notes that entrepreneurs have a nasty habit of falling in love with their businesses. Enterprising individuals, in contrast, create businesses in order to sell them. "I think the worst thing you can do is to fall in love with a business and lose your objectivity? Business is a way to build equity and value."
I give Bostic his due. He sounds like the classic professional manager, detached and oh-so-focused. I just wonder if his employees share his coldly objective goals. And by the way, has he been tapping my phones? Sadly, most of the entrepreneurial shortcomings he points out are mine.
Unlike Bostic, I did not get a corporate education before setting out on my own. I became an entrepreneur for the same reason Truman became president: I didn't know any better at the time. I stumbled into my calling. I had no training, no significant business experience -- nothing but a need to provide for my family and an overpowering urge to do it my way.
I had discovered that urge in my initial entrepreneurial venture, undertaken in 1968 while I was still employed by the St. Regis Paper Co. That year three friends and I opened the first racquetball club in the country -- The King's Court, in Edina, Minn. It was an immediate success, and we soon opened a second club. Though I spent barely 10 hours a week in the business, I found the experience both energizing and fulfilling. I had never known you could have fun and make money at the same time. It was my first taste of being an owner rather than an employee. From then on, I couldn't be satisfied with anything less. In 1970 I left St. Regis and went entrepreneuring full-time.
For the next 20 years I was just the sort of entrepreneur Bostic has in mind. I operated on instinct. I fell in love with my business. I shot from the hip. I rolled the dice. Not that I am a gambler by nature. Most of the time I was too intent on the dream to recognize the risks. Even if I had, I lacked the experience and the resources to protect myself. So I took the risks, made the mistakes, and paid the price, and somehow a successful business emerged.
In retrospect it seems to have emerged almost by accident. After scraping together about $100,000, I bought a tiny neighborhood sporting-goods store that had fallen on hard times. The business, General Sports Corp., had a wholesale side, selling uniforms to schools and athletic associations. In 1972 we were having trouble with the screen printing of the uniforms. So I persuaded someone I knew to start a little screen-printing operation in his house. Shortly thereafter I bought the business from him and moved it into a space of its own.
In the next few years the store did well, but the screen-printing company did better. We started similar operations in a half dozen other cities, providing screen-printing services to local sporting-goods stores that had wholesale businesses on the side. In 1978 I sold my stake in The King's Court to raise additional capital for National Screenprint Inc., as the company was now called. I also became a minority partner in a start-up that made and sold weight-training equipment.
Meanwhile, National Screenprint kept growing 10% to 15% a year. By 1982 its annual sales were up to about $8 million, while General Sports was doing about $2.5 million. I decided to sell the latter so I could devote my full attention to National Screenprint, which was getting ready to explode.
Once again the impetus came from an unexpected quarter. Looking for new customers, a couple of our salespeople had hit on the idea of selling imprinted sportswear to bars, restaurants, and other businesses. It was just a sideline, but then one aggressive salesperson landed an account with Dayton's department stores, and we were off and running. We soon found ourselves in a whole different league, dealing with the likes of Bloomingdale's and Filene's. Our sales began to grow 25%, 30%, even 40% a year, as did our work force and our inventory. I struggled to keep up.
You name the mistake, and I made it during those years. I didn't pay enough attention to detail. I wasn't clear about responsibilities. I didn't hold people accountable. I was terrible at hiring. We had three chief financial officers in 10 years. We didn't start tracking cash flow until we were up to about $12 million in sales, and we went all the way to $25 million without developing an inventory system that worked. As a company, we lacked focus. Once I brought in a consultant who asked our eight key people about the company's goals, and everyone gave a different answer. I myself made matters worse by managing from my heart, not my head. I got attached to people, projects, and operations, and stuck with them long after it was clear they were hurting the company.
But my biggest mistake was in failing to recognize early on that I would never make the transition from entrepreneur to manager. For three miserable, frustrating years, I tried to develop the skills Bostic talks about, to become an enterprising individual capable of managing with self-discipline and objectivity, hard information and cold facts. I couldn't do it. Finally, in August 1989 I brought in an experienced manager to be our president, and I became chairman. It was too late. Had I made the move two years earlier, I might still be the CEO of National Screenprint. But by then I was burned out. I put the company on the block, and it was sold the following June.
I have no regrets about selling National Screenprint when I did. I wish I had sold it sooner, if only to spare myself and my employees the pointless agony we endured those last few years. I was incapable of becoming the manager we needed. It was not a matter of adding a few skills. Rather, I would have had to change my whole personality -- something I wouldn't want to do even if I knew how.
While I was learning that lesson, I created some havoc for the people around me -- Bostic is right about that. A certain amount of havoc is inevitable when you're learning on the job. But would the world be a better place if people like me didn't start companies in the first place? Would we all be better off if entrepreneurship were left to the enterprising individuals who've already done their learning in big corporations?
To be sure, the economy would be more orderly, filled with thousands of smooth-running little PepsiCos. We would no longer need Chapter 11 and bank workout departments. Ma and Pa would refer only to relatives, and not to a traditional American business partnership. The Steve Jobses of the world would first get their M.B.A.'s and then do their 10-year stints with Big Blue, and they would never be forced out of their companies. The family garage as laboratory would be a piece of faded U.S. history. And small businesses would be much more efficient and professional.
I suspect, however, that there would be a lot fewer businesses. Entrepreneurship is a messy undertaking, no matter how tidy Bostic would like to make it. Yes, planning and systems are important at a certain stage of a company's development, but so are accidents, intuition, and plain old dumb luck. In my own case, every major turning point came about by accident. When I started I didn't intend to get into the screen-printing business. Once there, I assumed our market was sporting-goods stores. If I had kept my focus, I would have missed the department-store market altogether -- and about $17 million a year in sales.
Accidental entrepreneurs like me have a role to play. In making our mistakes, we often wind up creating the kind of companies that enterprising individuals like Bostic love to buy -- and are too focused, disciplined, and numbers-oriented to create themselves. The truth is, professional managers need us. And though sometimes it's hard to admit, we need them, too.
This is not to deny that there's room for improvement. I, for one, hope we can figure out a way to help future entrepreneurs avoid some of the painful mistakes I made. But entrepreneurs should reserve the right to lose their objectivity and fall madly in love with their companies, their employees, their customers, and their niches.
Who knows? They might even build some equity and value along the way.* * *
Jim Schell lives in Carlsbad, Calif., where he spends his time playing golf, searching for water, and pursuing a second career as a writer.* * *
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