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."
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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."
