Subscribe to Inc. magazine
LEAD

Should You Start a Business?

Entrepreneurs discuss making the decision to start a business.
Advertisement

Real entrepreneurs tell how to make the right decision

As honestly as you can, answer the following questions: Were you a high achiever in high school? Do you like team sports? Are you prone to optimism?

If your answers to the above questions amount to a resounding "who cares?" you may indeed have what it takes to start a business. Because the hard truth is that no quick quiz can answer the tough questions you have to ask yourself before setting off on your own. And even if a test confirms you have the traits of a risk taker, that still says nothing about those other prominent predictors of entrepreneurial survival: your skills, your idea, your financing, your motivation.

Those are just some of the difficult issues you need to contemplate before you make any moves. Contemplate? The very word probably contradicts most of what you already believe about entrepreneurship: that it's a spontaneous act fired by a blazing urgency. You start a company because you have to do it. You succeed because you know you will.

If only it really happened that way.

Truthfully, there are few people for whom starting a business is an inescapable destiny. For most, creating a company comes not through a self-fueling fire in the belly and an instantly recognizable brilliant idea, but as a slow revelation.

No one is suggesting that to start a company, you should think every ramification through to its potentially paralyzing conclusion. But the clearer your reasons for being in business, the better you'll feel about navigating the inevitable storms -- a vaporizing client, the defection of a key manager, a softening economy. "We almost lost our pulse," recalls Ken Dychtwald, whose consulting firm nearly fell victim to the recession last spring. "I questioned all my basic assumptions: Do I really care about this? Do I want to do it? That's what gets you into business, and that's what keeps you in it. You have to go deep inside and find out what matters to you and how much."

The closer you are to your values, the more in control you'll feel of your company's destiny. "However it is going to turn out," says Paul Hawken, cofounder and chief executive of Smith & Hawken, a $70-million direct-marketing firm, "the seeds are in the beginning."

These days, it seems, more and more people are thinking about entrepreneurship, from middle managers ousted from large corporations to graying baby boomers. With that in mind, here are some of the broad questions many company founders thought through -- or wish they had -- before they set down the first syllable of their business plans:

* * *

Is my idea good enough? Few entrepreneurs would dispute the role a spellbinding idea plays in getting a company off the ground: none whatsoever.

Maybe every generation or so, there's a revolutionary breakthrough -- the computer chip, for example, or the automatic garage-door opener -- that turns a tinkerer into a billionaire.

More typically, though, an entrepreneur simply follows a long-held fascination to the point of trying to make it useful and exciting to others. "Inside of me I had a feeling for 20 years about building an enterprise with this theme," says Dychtwald, cofounder and chief executive of Age Wave Inc., a marketing and training firm that focuses on researching consumers over 50. "If you believe in something, and you feel inside yourself that your belief is strong and rich, it will carry you forward." It's not as if all obstacles will bow before your devotion, but your commitment will enable you to derive tremendous satisfaction from solving those problems.

That's not to say, however, that you should follow your heart to the exclusion of thinking about whether there are any customers out there. Philip Crosby, the quality expert who founded, built, and sold Philip Crosby Associates Inc. (PCA), reduces his criteria for going into business to one neat question: Will anyone plunk down actual money for what you're planning to offer? "It doesn't matter if the product is great or inefficient," he says. "I knew I didn't want to start a company where I had to beg for business." Before leaving his job as corporate vice-president of quality at ITT Corp., Crosby spent weekends and nights tapping out a book on a portable typewriter. Published in 1979, Crosby's Quality Is Free is written in ninth-grade English and targeted at the country's top executives. When it garnered flattering reviews from the likes of Business Week, and phone calls from giants like IBM Corp., he plowed his savings into PCA. "I knew these people were out there," says Crosby, who built an $80-million public enterprise. "But I didn't quit ITT until the book was a hit."

Of course, the best-seller list is not the most logical place to test a business idea. (Crosby did so, he says, because "it's amazing, the credibility that writing a book gives you. People respond to books, even though they don't really read them.") Mo Siegel was barely 21 and almost flat broke in 1970, when he started Celestial Seasonings Inc., a maker of herbal tea.

A travel lover, Siegel had trekked to Europe to collect as much information about tea consumption as he could. Then he tested his flavored brews by serving them to customers in the health-food store he owned. "A person who goes out there and blindly attempts something is really making a mistake," warns Siegel, whose company now sells nearly $50 million worth of tea annually. "The world is sophisticated and tough, and it's ruthless. If I had a passion for a cup of tea that only I was going to like, then I should have made just one tea bag."

Siegel's advice, appropriately boiled-down: do as much market research as you can afford.

* * *

Do I have the management skills I'll need? The average entrepreneur usually lists among his or her distinctive skills the following management disciplines: every single one of them. And it's true that in the early days, entrepreneurs have to serve as a jack-of-most-trades. But they don't have to do everything equally well. "Often, people aren't complete," says Hawken. "It's important to know your limitations."

Most entrepreneurs possess an odd grab bag of skills, including some specific to their industries and others common to all business endeavors. You may, for instance, be great at coming up with ideas but have no head for numbers. Or maybe you have marketing, operations, and finance down cold, but you don't know the key variables to success in your chosen industry. Before launching Executive Temporaries Inc., in 1984, Suzanne Clifton sought out other entrepreneurs in her industry -- in regions far away from her home base of Raleigh, N.C. -- to find out "what it takes to operate this kind of business," she says. Keep a keen eye on cash flow, they warned her, because this is a payroll-intensive business. "A mentor can help you survive those first tough years," says Clifton, whose company now posts sales of $4 million.

Ask yourself, What am I good at? Then ask some people who know you how your own assessment stacks up against their observations. Every entrepreneur needs to have some sales skills, if only just enough to sell potential employees or financiers on the idea.

The better your assessment, the more likely it is that you'll surround yourself with people -- be they partners or advisers -- who can round out your skills and help you succeed. Doug Cavanaugh, president of the Ruby Restaurant Group, knew precisely what kind of ambience he wanted his first diner in Southern California to have. But, he freely admits, "I knew nothing about finance." So when he started, in 1982, he recruited former junior-high chum (and supreme number-cruncher) Ralph Kosmides as vice-president of the company, which now owns 10 restaurants with average sales of nearly $2 million apiece.

Even before Steve Bostic started American Photo Group Corp., a nationwide chain of film processors, in 1981, he had assembled a board of advisers. "You need advisers to help you look at the situation objectively," says Bostic, whose previous industry experience included a three-year stint as president of a giant company's photo-processing division. "You are emotional, and you want to do it, and I've seen people like that get into business and find themselves up to their butts in alligators."

* * *

How important is money to me? Everybody who goes into business wants to make money -- perhaps no one more so than Vince Rossi.

Rossi, a former stockbroker and commodities trader, took himself out of the pit right around the stock-market crash of October 1987. He and his wife, Barbara, packed up their infant daughter and abandoned Chicago for sunny Phoenix. The 31-year-old's plan: take the $450,000 he had saved over the previous five years and pour it into a business that he could then sell in another five years. After that, he might retire. With that as his goal, and with media companies selling out at obscene multiples, Rossi pinpointed his new calling.

Thus was born Visuelle Corp., publisher of Parents Pages, an annual resource guide that lists activities and programs for children in the Phoenix region. Rossi had gotten the idea from a similar guide he had spied in San Francisco. Returning home, he convened a group of experts -- one in education, another in child care, and so on -- for two weeks to help him flesh out the concept. He then spent roughly 12 months, and $75,000, designing a mock-up, which he carted around to more than 100 organizations, such as school boards. By the fall of 1988, "I was excited about the response I was getting," recalls Rossi. "This was something that was going to be not only rewarding financially but socially redeeming. That was absent from anything I'd ever done."

Well, he was right on one count. Now in its third edition, Parents Pages registers yearly revenues of about $200,000. So far, the company has not reported any profits, and Rossi has plowed nearly all his savings into keeping it going. "Basically," he says, "I live very frugally off the cash flow." He does, however, expect to eke out some profit this year and believes Parents Pages could be expanded into other cities. Though he adds, "I don't think I'm the person to take it there."

Rossi figures he overspent in just about every major and minor area: from his contract with the publisher, to payroll, to expensive office space and new equipment, to erratic pricing, to initially publishing with only 10% advertising pages. These days Parents Pages boasts 35% to 40% advertising pages, and Rossi has cut back on color photos, scaled back on salespeople, and begun charging for longer descriptive listings. For his part, Rossi -- who no longer harbors dreams of retiring anytime soon -- would like to sell the company and move on to a new career, perhaps in politics. "This has been a very trying period of my life," he admits. "I'm proud of the product I created, but this has not been an enjoyable experience." Having gone through a divorce, he admits, "I don't know that I would do this again. At least I'm young enough to recover."

It's crucial to sort out just exactly how important money is to you. As Rossi discovered, it's not easy to sustain yourself during the inevitable 80-hour weeks when the notion of making money -- rather than spending it wildly -- seems to grow further and further away. "If your only passion in life is money, then maybe you should be in the arbitrage business," says Mo Siegel. "I love making good tea. And if I do that, people will pay me for it."

There's something that Rossi and others like him probably don't understand at the outset, aside from what he describes as "the incredible amount of commitment and focus it takes" to start a company. Often a company's prospects come down to its founder's values and if investors, suppliers, and employees can identify with them. Some people are so consumed with money that the last thing anyone wants to do is give them any. Besides, something has to get you through the time -- it's always twice as long as you think it will be -- when there is none. It helps to have a goal -- be it proving something to yourself or satisfying a creative impulse -- to guide you day to day.

Financial questions extend beyond how much you want to make money. You also have to think about what you'd be willing to do to get the financing you'll need along the way. If you treasure your independence, for instance, you probably shouldn't waste any time appealing to venture capitalists. And if you're planning to keep the business in the family, then you can probably justify taking more money out of it.

Such considerations depend on your exit strategy, which you should consider from the start. If you ultimately see yourself building a public company or grooming it for acquisition, that will affect everything from your compensation strategy to making sure you have board meetings with legitimate minutes. Crosby, for instance, knew he wanted to take his consulting firm public -- a rare feat. When he set up his Quality College, he says, he "transferred my credibility" by training other people to teach, instead of teaching all the courses himself. He also created products in the form of cassettes, videotapes, books, and -- less successfully -- software. Taking PCA public in 1985, he boasts, "made a lot of people rich around here. That was something I felt I needed to do."

Similarly, Bostic knew from the get-go that he would eventually sell American Photo Group to a major photographic company. In 1987 Eastman Kodak fulfilled his prophecy. "If it isn't worth anything to anybody else, why put your time into it?" reasons Bostic. "The real freedom and security come from cashing in your equity."

* * *

Can I live with the risk? The decision to start a company is more fragile, and more gradual, than it looks. Don't read too much into your own hesitation; there's no obvious correlation between your fears and the likelihood of your company's success. "You always have doubts," assures Bostic. Hawken takes it a step further: "The best entrepreneurs are risk avoiders. They identify the risk, and then they take actions to minimize the effects of it."

Indeed, often people who start companies do so not because they thrive on risk, as the stereotypes would have it, but because they see starting their own business as the lesser of risks. "Risk today is working at a big company and getting on the treadmill and waiting until somebody pulls the plug and says, 'Hop off,' " claims Bostic, who was fired as second-in-command at two public companies. "I'm not cut out for that."

Brad Stribling, too, felt like a misfit. As the youngest account executive at a large Dallas ad agency, at age 24 he had a future that looked positively radiant. But feeling that his own ideas were being smothered, he jumped to a smaller firm. Even more disillusioned, he began to think -- and think again -- about starting his own business. "I struggled with the idea of leaving," says Stribling, now 36. "I wondered whether I was smart enough to pull it off; I worried about how much I was going to worry. I knew people who were in business for themselves, and they seemed possessed. I didn't feel that way. I did not have an overwhelming, driving desire." Stribling, then 29, canvassed some of the entrepreneurs he knew -- a time-consuming 75 of them, in fact -- to get their reading on whether he had the right stuff. "They were all very positive about what a good idea it was," he recalls.

Stribling's first venture, from 1985 to 1987, ultimately fizzled out. But he knew by then any stint working for somebody else would be short-lived. "Even if you have a bad experience, you want to go back and prove you can do it," he says. In 1988 Stribling founded the Marketing Group, now a $4-million Dallas marketing firm.

Sensible entrepreneurs are bound to feel doubts, even if they can't always acknowledge them. But the growing number of middle managers out of work lately may produce entrepreneurs who feel forced into starting their own companies. "I was a reluctant entrepreneur," confesses 52-year-old Andy Morrow, whose company sells detergent to commercial launderers. Morrow had spent 21 years at consumer-products giant Procter & Gamble when the division he ran was sold, back in 1982. He and 26 out of 28 of his colleagues followed the subsidiary to its new home at a huge holding company. Morrow was president of the subsidiary and as early as 1985 began lobbying for a profit-based compensation system. "I worked extremely hard to put the company on its feet," he complains.

His pleas were ignored -- "that got my dander up," he says. Eventually, his frustration over the holding company's unresponsiveness led him to resign in February 1989; the division was sold 10 months later. Even before stepping down, he had talked to his wife, his brother-in-law, and various business acquaintances about starting a competing company.

One question loomed: "Was I willing to risk all the money it took me 27 years to accumulate? It was a big deal."

Unable to answer and armed with $1 million in savings, Morrow figured he could spend as long as a year "debating it in my mind." But the week he resigned, he recalls, "a number of people called me and said, 'If you do anything on your own, we want to come with you.' That accelerated my thinking." Six weeks later he filed the incorporation papers for Washing Systems Inc.

A noncompete agreement prevented Morrow from selling to his former employer's accounts until May 1990. The day it expired, he recalls, "I was like a boxer climbing through the ropes and into the ring." In 1989 Washing Systems had less than $200,000 in revenues; by 1991 the company was posting sales of several million dollars. "I've gone through a lot of heartache and a lot of anxiety," Morrow says. "But I never regretted it. Still, if my employer had been willing to discuss remuneration and had not gotten involved in a possible sale, I probably wouldn't have thought of leaving."

Just as men like Morrow start companies -- and more and more of them will do so in the coming years -- because they no longer feel welcome in the big-company environment, so do increasing numbers of women who find it impossible to crack the so-called glass ceiling. Barbara Lambesis says, "I had never imagined I would want to operate my own business," but grew more and more dissatisfied "that I was not able to call my own shots. My advice was not requested and not heeded." In 1986, when her son earned a football scholarship, she suddenly found herself with $20,000 in savings. "I wasn't really ready to leave the corporate or institutional world, but the money gave me a very interesting opportunity," says the president of Marketing Methods, a Phoenix firm that provides services to entrepreneurs. "I'm finally working for someone I respect." Lambesis, who spent only $7,500 starting up, expects sales of more than $200,000 in fiscal 1992.

Of course, some entrepreneurs have more on the line financially than others do. The former owner of a four-passenger plane, a 37-foot yacht, and three country-club memberships, Morrow had stashed away some $500,000 that he and his wife agreed he would never touch. Few company founders can soften their risks with such padding. But going into ventures, a surprising number do follow the advice most parents dole out to their artsy kids: have a fallback plan. The reason goes beyond alleviating the stress. You can't make the boldest moves with your business if you feel you can't afford to be wrong.

Dychtwald, for instance, knew he could always return to giving speeches and writing books. From the start, he decided he would never put everything he owned on the line; if survival came down to that, he would sell off pieces of the company. True to his word, he sold a quarter of the business in 1990, reducing his ownership to 50%. "I didn't think my family ought to be penniless because of my mistake," he says, "but it still stings when it happens. It really stings."

* * *

What do I tell my family? This one is easy: don't tell your family anything.

Instead, sit down and talk with them about what's likely to happen if you start your own business. Warn them that you won't be around as much as you have been, and that they may have to ingest a little more spaghetti than they would want. Reassure them, though, that you won't let them end up on the street or love them any less.

Whether it succeeds or fails, a start-up venture provides plenty of opportunity for guilt. The entrepreneur, for example, often feels bad about missing family events; the family, for their part, starts to believe the business has usurped their role.

"You go in early in the morning, and your business gets the best of you," says Hawken. "When you get home, you need to be replenished, but people expect more of what you were giving all day. If you haven't got it, they will notice."

Women going into business often feel neglectful. "If your family really resents your not providing the comforts of a home life because you are doing your business, they can make you feel pretty crummy about it," says Lambesis. "That can undermine your ability to focus on the business."

With those kinds of dynamics at work, it's easy for an entrepreneur's spouse to grow distant and unsupportive -- and ultimately even to leave the relationship. To reduce that possibility, it's probably a good idea to meet with other entrepreneurs and their spouses before you go into business. What's the best way to deal with wildly swinging moods? Should your spouse respond honestly to ideas? "Had my wife and I talked to other entrepreneurs and their spouses, it would have made us more sober going into it," says Ken Dychtwald. "We may not have done it."

Keep in mind that Dychtwald, who is five and a half years into his business, has kept his marriage intact. In doing so, he represents an anecdotal -- if not statistical -- oddity.

Barbara Rossi's story is, sadly, more familiar. "Parents Pages did not interest me. I was nervous about pouring the money in, and I was jealous, and I was skeptical," admits Vince Rossi's ex-wife. "My husband was a stockbroker; I hadn't seen any advertising side of him at all. And the amount of time that goes into a new business is a rude awakening for all. There's not enough time to concentrate on the relationship." The Rossis' divorce became final last fall.

Many women start out thinking that having their own business will enable them to better balance the demands of home and work. Back in January 1972, Sandra Kurtzig began Ask Computer Systems in her home. "I wanted to do some software design to keep my mind occupied while my kids were sleeping," she says. Her "part-time job" quickly turned into an 18-hour-a-day grind. In 1974 she vowed she would give it only one more year before giving up; by 1976 Ask Computer Systems had moved into separate quarters.

"I would be remiss if I tried to make it sound easy," says the 45-year-old chairman and chief executive. "When you leave home in the morning, and your son or daughter is two or three and the tears are rushing down his or her face, it's still the woman who ends up feeling the most responsibility."

In 1981 Kurtzig took her $13-million company public; the Ask Cos., as the $400-million company is now called, remains the largest public company founded and run by a woman. "It's important to balance, but I've never really figured out how to do it," she admits. "I like to think that it helped my kids develop more independent personalities than they might have had otherwise. That's a good thing. That will help them in life, I think."

* * *

Indeed, that's what it all comes down to in the end: Personality. But it's not a question of figuring out whether you have the right traits to succeed as an entrepreneur. Rest assured, it takes no contemplation at all to know what kinds of emotional resources you'll need: endless persistence, a little naïveté, some healthy self-confidence, an affection for frugality. To start a company, above all, you need coping skills. Most entrepreneurs rely on listening boards that range from therapists, to meditation instructors, to fellow CEOs, to good friends.

Still, there's no telling how you'll feel when you find yourself signing personal guarantees up one side of the hill and down the next; or when the economy takes a not-so-funny bounce; or when your paycheck doesn't even match your light bill. If you're a refugee from the corporate world, you may be shocked into an awareness of how much support you got from, say, the marketing department. And while you may very well handle all the above situations admirably, the road construction out front may go on just long enough to strangle your business anyway.

But the point of thinking through your reasons for going into business doesn't have anything to do with financial success. If you've been true to yourself, you're simply more likely to have a satisfying entrepreneurial experience, to find more opportunities to express yourself and be creative. Asking yourself some tough questions beforehand won't save you from a negative cash-flow situation, but "people who feel they are expressing themselves have more fun. They don't let the business control them," says Paul Hawken.

Which means that every once in a while -- and maybe just when you think you've had enough -- your own impulses will surprise you. On a trip to New York City last fall, Ken Dychtwald was asked by a client if he could stay overnight so they would have more time the next day. Dychtwald was tempted; with revenues shrinking, he really needed the business. But he had also promised he would be back home in California the next day to see his children's Halloween costumes and to take them trick-or-treating. Off to the airport he trudged. The next night he was roving the neighborhood. "I didn't make any money out of that deal," admits Dychtwald with a sigh. "But I got a Snickers bar."




Register on Inc.com today to get full access to:
All articles  |  Magazine archives | Livestream events | Comments
EMAIL
PASSWORD
EMAIL
FIRST NAME
LAST NAME
EMAIL
PASSWORD

Or sign up using: