A look at how various entrepreneurs who have left large companies are coping with life as small-business people.
A look at how various entrepreneurs who have left large companies are coping with life as small-business people.
There are two ways to replicate the professional pluses of working in a large company. The first is to hire 10,000 people. Here's the other
Last February, Bill Macon walked into a St. LouisÑarea boardroom, loaded with charts and graphs and fully prepared to present his laboriously crafted five-year strategic plan. He felt a familiar twinge of anxiety and excitement. Had he underestimated his company's return on capital? Were his profitability projections overoptimistic? Was his growth forecast simply too aggressive? Hardly being a newcomer to the process, he knew enough to anticipate a highly charged atmosphere that was both "confrontational and thought provoking at the same time," as he puts it. When he had done such presentations in the past, the chairman was only too prepared to poke holes in them.
Thankfully, there wouldn't be any chairman at this meeting. Nor would there be any savage superiors, for that matter, or even irritable investors. No, the crowd he would be facing consisted solely of fellow entrepreneurs. But he knew they were going to be brutally tough on him. In fact, he would be disappointed if they weren't. After all, that was why he had brought them together in the first place.
Unusual as such a situation may sound -- one entrepreneur drafting a group of others to knock the stuffing out of his plans -- it's actually part of an increasingly common phenomenon. Like many entrepreneurs who have exited big organizations, Macon was working hard to re-create one of the beloved benefits he'd left behind: the rigorous system of strategic planning he had learned at Emerson Electric, a $10-billion manufacturer of electrical products . By tutoring a group of his peers in Emerson's planning methods, he hoped to revive for himself the part of the process he missed most since he'd bought his own company, Macon Electric Coil , three years earlier: the challenging exchange of ideas and, perhaps most important, the security that comes with knowing that if your plan is half-baked, someone will convincingly call you on it. It didn't work that way inside his own $2-million business. "I have 35 employees," says Macon, "and I've never had a bad idea when I've made a presentation to them."
Naturally, not every entrepreneur who leaves a big organization yearns for the kind of drubbing -- constructive, of course -- he or she received regularly from squads of superiors. But most of those entrepreneurs, whether they left voluntarily or otherwise, will admit to missing something. Not that they can always be specific about the trade-off they've made. Ask them and they'll invariably lump it all under the rubric of "resources," which encompasses everything from gourmet coffee to awesome Internet access. But scrutinize the businesses they build and a simple truth pops out: you never know how much big organizations have to offer until you leave one.
Which is why Macon and other corporate refugees like him are finding innovative ways to replicate both the tangible and the intangible benefits they had learned to take for granted in their previous posts: the access to experts and colleagues, the prestige of being associated with a household name or industry leader, the loftier sense of mission that can get lost in the day-to-day duties of company building. In doing so, those company builders are reshaping their businesses, forming new kinds of alliances -- both inside and outside their companies -- and reaping the kinds of rewards that they feared they had left behind with the cushy salaries and fancy benefits packages. How? Here's a sampling:
Access to expertise: the Circuit Board. Shortly after he started an executive outplacement firm, 10 years ago, David Corbett was commiserating with a friend who owned a 12-employee printing-distribution business. "We had lost the networks and the expertise afforded by large companies," says Corbett, whose $3-million -plus company, New Directions Inc., is based in Boston. "We both felt we needed peers representing different areas of business expertise to share ideas with." With that utterance, Corbett planted the seed for the Circuit Board, a group of five CEOs in the Boston area, all of whom run companies with fewer than 20 employees and all but one of whom are from corporate backgrounds. Robert Schmidt, a drapery manufacturer, offered expertise in operations, and George Bixby, a manufacturer's rep, contributed advice in dealing with international suppliers. Corbett brought marketing finesse, while Don Aikman, whose company manufactures putty, specialized in distributor relationships. Dale Lattanzio, a print distributor, rounded out the group with his aptitude for sales.
Corbett wasn't looking just for the kind of casual coffeepot camaraderie he had found in the corridors of such previous employers as Johnson & Johnson and Korn/Ferry International. Like most entrepreneurs, early on Corbett had joined a number of local groups, in which he "met people who led me to clients," he says. But with the Circuit Board, he sought more than an occasional night of trading business cards. What he wanted to re-create, he says, was the feeling of having an army of specialists whose smarts he could tap. "We had experts for packaging, pricing, advertising," he says of his big-company employers. "We even had finance people that specialized in advising product managers. There was a whole team of people around to help." But at New Directions, he was supposed to have all the answers, and there was little room for error. "In a big company you can make a lot of mistakes and it really doesn't have an effect," he says. "In your own business, if you make a few mistakes, you might not make payroll."
The way Corbett and his fellow entrepreneurs envisioned it , the Circuit Board would serve as an informal advisory board for each of its members, meeting every two months to focus on one business and wrapping up the evening with dinner. As the name implied, members would go "out on the circuit," visiting the companies, meeting employees and managers, and observing operations in full swing. "It was important for us to live it, not just talk about it," explains Corbett. Moreover, members would impose upon themselves the disciplines they had learned in the corporate world. "Each of us had to come to the Circuit Board meetings with a plan," says Corbett. "We had to set goals and objectives and measure our performance against those goals. We wanted accountability."
Having four experts scrutinize and advise their businesses has paid off for each member. Bixby asked the Circuit Board to interview his son-in-law to help him determine his qualifications for coming into the business. Aikman was coached to raise his prices and saw his revenues increase significantly without, as he had feared, losing customers. The group also suggested that Schmidt consider acquiring a cash-generating business in his industry to increase his cash flow. For his part, Corbett received sound advice on negotiating with landlords and suppliers, which helped him get a tighter grip on overhead expenses. "In some areas I was probably able to save 10% to 15%," he says. "There is a great deal of satisfaction in knowing that we've succeeded because we're all invested in one another -- it's a business and a social alliance."
The bigger picture: things go better with focus. When Mark Kaplan thinks back to his days as a brand manager at Coca-Cola Co., he most relishes the intense focus of his job. "I ate, slept, and breathed Sprite," says Kaplan, who also presumably drank the stuff. "I learned to shut out every element other than those I needed to have vision for Sprite." That vision was to "beat 7-Up over the head" and make Sprite the number one lemon-lime soft drink -- a goal he had achieved by the time he and his colleague Bob Solomon decided to strike out on their own, seven years ago.
Kaplan and Solomon were accustomed to strategizing and competing on an enormous playing field where products did more than just find and serve a customer base; they were marketed with an almost missionary zeal, and a lofty vision reigned supreme . The two weren't willing to leave that towering sense of purpose behind. "We had been with a company that was more than just a business proposition," he says. "Coke was the master of its product category."
Little did they realize how hard that would be to replicate at a small enterprise, where the big picture often gets blurred in the struggle for hour-to-hour survival. And the company they chose to buy -- a small Atlanta-based chain of ice-cream stores called Gorin's Homemade -- wasn't an obvious vehicle for worldwide domination. Although the company was just barely breaking even, Kaplan and Solomon were captivated by its tremendous name recognition . Through their own grassroots market research, they discovered that while 75% of their "man on the street" survey sample were aware of Gorin's, fewer than 10% had ever been to a Gorin's store. "And there was something that people loved about it, whether they had been there or not," notes Kaplan. "I was very used to that kind of positive imagery at Coke. It made me excited, and I knew what to do with it." When he had embraced image-based marketing with Sprite, portraying the brand's devotees as young, energetic, and upbeat -- is there any other kind of consumer? -- the drink's popularity soared. Gorin's, he calculated, just needed some fizz; it already had the kind of image that many companies spend years trying to create, but it wasn't selling the right products. "What the corporation taught me to do was to look beyond the day-to-day details and figure out how a concept would fit into people's lives," says Kaplan. "I really enjoy taking a brand that has strong awareness and making sure that it's exactly what the customer wants at that place and at that time." And that's what he and Solomon did. Ice-cream parlors, they concluded, were quickly facing meltdown. At Gorin's, they would capitalize on consumers' growing discontent with McFood by expanding the chain's small line of high-quality sandwiches and positioning the chain to fill the gap between fast food and full-service restaurants. Homemade ice cream would still be part of the mix, although it would no longer be as central to the company, now renamed Gorin's Homemade Cafe & Grill.
With the patience for process that large corporations teach so well, Kaplan and Solomon spent seven years transforming Gorin's, growing the company from 12 to 39 franchisees and quadrupling sales to $10 million last year. Along the way, the two have survived surly landlords, broken freezers, a flooded factory, and franchisees who were more interested in following directions than in contributing ideas. But what keeps the partners going -- and sane -- is that they've held fast to their vision of making Gorin's the premier restaurant in its category. "The corporate world taught me to maintain that focus," says Kaplan, "and every time I've forgotten that, I've suffered."
Developing new skills: a volunteer, please. The winding career path at a big organization -- and, yes, it still exists -- often demands stints in different functional areas, giving managers the chance to broaden their skills. But in the face of harsh competition, most entrepreneurs find that they have little choice but to focus as tightly as they can on their company's competitive edge. For many founders, that may mean doing little but selling. Any experimentation may be hazardous to a growing company's financial health.
When Steve Arbitman of Glenside, Pa., started his computer consulting firm, initially called the PC Person, four years ago, he knew he had to spend most of his time marketing himself in areas where he already had a strong track record: designing databases, setting up PC systems, and teaching technology skills. But still, as a former computer programmer and database manager for the National Wildlife Federation and for Science Management Corp., a large consulting firm, 48-year-old Arbitman says, "The thing I missed most was the technical complexity and the creative challenge of brand-new projects with brand-new things to learn."
Last fall Arbitman decided that he needed to try his hand at creating Internet Web sites and wished he had the room to experiment that a large organization might have offered . Searching for a substitute, he contacted a Philadelphia group called LibertyNet, which places nonprofit organizations on the Internet for a flat fee of $30. Arbitman volunteered to design a site but made sure that the organization with which he was matched would give him the freedom to incorporate all the Web-site elements he'd need to market himself in the future. LibertyNet paired him with the Bach Festival -- a project that took about 80 hours but resulted in a Web page with order forms, electronic-mail capability, a creative combination of graphic styles, and a sound file. "It was everything I needed to prove that I could do it," he says. Arbitman also volunteered to teach a course to other LibertyNet participants in how to create and maintain a Web site. Since a significant amount of his revenue comes from teaching formal classes, he saw the course as "an opportunity to teach something for which I had not prepared a curriculum." LibertyNet provided him with a course outline, which he modified and now uses to train his own clients.
Working with the Bach Festival was Arbitman's practice run -- a way for him to learn something new without the pressure of profit margins or the risk of disappointing a paying client . Now he uses that Web site and the festival's recommendation to land paying customers. Volunteering, Arbitman says, ultimately gave him the experience he needed to shift the focus of his business, now named Internet Marketing Associates. "The technical aspects of setting up the Web site came easy to me," he says, "but getting the artistic elements right -- making the site look pretty -- was something I really had to learn by doing. It gave me confidence, but it also taught me that I have a lot to learn."
The same might be said of Bill Macon and his faith in the strategic-planning process. If Macon could teach Emerson's strategic-planning methods to his peers, he would re-create for himself the safety net he'd had at that company: they would give him praise when he deserved it, but they would also tell him when he was screwing up, because he would teach them how.
Macon started the learning process with three of his peers on that night last February , using his own company's numbers on three charts that broke down sales, profit and loss, and return on capital. By the end of the evening, he knew he was onto something. "Together, we all noticed that my forecast showed the company growing aggressively in years one and two, and then in years three, four, and five, we were just milking it," recalls Macon. "The forecast was based on the business that was in the pipeline, but we hadn't added any significant business. That opened my eyes to the fact that it's not too early to start thinking about the next step." As a result, Macon is now deciding whether to expand his core business or to consider an acquisition -- both strategies that will keep the company growing. True, he eventually would have recognized the plan's flaws on his own, but he came away from that meeting with a lot more than just solid business advice. "It was the first time since I'd left Emerson that I was able to use that skill with people who really appreciated the significance of it," Macon says. "And it felt great."* * *
Research assistance for this article was provided by Mary Furash. Management editor Donna Fenn can be reached at firstname.lastname@example.org
The Missing Links
" What, miss this dump?" So you sneered on your last day of work at that massive organization. Then, maybe later -- after you had finished unloading the last of the purloined office supplies into your second bedroom -- a spasm of regret caught you by surprise. Now take a look at the company you started, and you'll be surprised at how many big-company attributes you've scrambled to re-create. Such as? Well, take a look at the following:
A Larger Framework
Entrepreneurs often complain that running their own companies results in severe myopia -- they're so consumed by details that they lose perspective on the world. John Hexter, a former government employee who owns a Cleveland printing distributor, broadens his frame of reference through his involvement in four boards, one of which is the prestigious Mt. Sinai Medical Center. "It puts me in the middle of one of the hottest issues -- health care -- in our country today," he says.
Energy from Smart Peers
Mark Kaplan once worked for Nabisco and recalls that he "could gather a group of intensely bright people and ask them to book two hours to discuss Baby Ruth. It was a Baby Ruth brain trust." It doesn't work that way at his own $13-million company. To compensate, Kaplan is developing a relationship with Emory University, where he occasionally speaks to M.B.A.'s and schmoozes with professors.
Prestige by Association
Cris Goldsmith, managing partner of Boston-based Creative Realities and a veteran of Procter & Gamble and NestlÈ, says he misses "being associated with things that are a household name." The remedy? His company, which helps large corporations create and market new products, has entered a strategic alliance with Yankelovich Partners Inc., a market-research company whose reputation rivals that of Goldsmith's former employers. Goldsmith has several more such alliances in the works.
Growing New Skills
"With each project there were brand-new things to learn," recalls Steve Arbitman as he thinks back on the time he spent working for big employers. When Arbitman decided to go it alone as a computer consultant, he found it difficult to branch out of his areas of expertise -- without risking his company's finances. So he volunteered to design a Web site for a nonprofit group. Now he's selling that skill.
The Chance to Mentor
Tore Steen, a big-company refugee who just started his own business in Portland, Oreg., finds that working in a much smaller organization can be isolating. A formal mentoring arrangement with a younger entrepreneur keeps him in touch with someone who's on a different spot on the learning curve. "There are things I've forgotten that may not have come up, had I not been challenged to help him sort out some problems," Steen says.
Instant Availability of Expertise
Rarely can entrepreneurs afford anywhere near the cadre of specialists that are on staff at large companies. To fill that void, entrepreneur David Corbett assembled a group of small-business owners from noncompeting industries who excel in different disciplines. The group is "a quasi board of directors that digs into every aspect of our businesses," says Corbett.
Challenging one's Assumptions
What Bill Macon (see main story) remembers most fondly about giant Emerson Electric is that company's rigorous method of strategic planning -- a process he found difficult to use at his own company. So he taught it to a group of peers. "In a small company, you spend a lot of time dealing with mundane tasks," says Macon. "But this is a complex process that makes me and the others think at a higher level than we do 90% of the time."
DONNA FENN is the author of Upstarts! How Gen Y Entrepreneurs are Rocking the World of Business and 8 Ways You Can Profit From Their Success (McGraw-Hill, 2009), about ways Gen Y is changing the entrepreneurial landscape.