The Wall

Gloria, whose hazel eyes are usually lit up with a smile, fought back tears as she confided in Goodman that summer day. She talked about simple needs--wanting to feel healthy again, maybe play a game of tennis now and then. Reflecting on the long hours she had put in at the company, sometimes even staying overnight, she noted, "Growing up on a farm in Canada prepared me well for this. We grew our own food, and I learned to get by on nothing." But her parents, still on the farm, weren't so young anymore, and she desperately wanted to be closer. "I can't even get away to visit them."

Things had worked out to be so different from what she and John had imagined. "In the company's first year," recalled Gloria, "when it seemed we'd be successful, I had dreams for the future." Along the way, those dreams got deferred--along with any semblance of a life outside the company.

John McManus was hurting as much as his wife was, and even more so, because he'd tried so hard to stay strong for both of them. With shock and disbelief, he described how his dream business had morphed into a nightmare. "Running this company," he said slowly, "has become such a grind." And it had happened so quietly. "You're so consumed with the start-up experience, you don't think about business or life plans," says McManus. "In the back of your mind you're thinking about why you're leaving your current job, and you don't go beyond that for a while."

If the McManuses' predicament didn't surprise Goodman, he was moved by the heroic proportions of their sacrifice. By the time they sought out Goodman's guidance, they had grown their catalog to nearly $8 million, fast enough to have made the Inc. 500 two years in a row. (They went on to make the list a third time, later that year.) More to the point, they'd accomplished their speedy growth with no previous catalog-industry experience, and with no management help.

"There are few entrepreneurs whose companies are at $8 million who are still working 80 hours a week," observes Goodman wryly. But that was just the half of it. "What I discovered in the course of those two days is that they were working 80 hours and they were paying themselves one-third the market rate." In other words, they were working the equivalent of four jobs and paying themselves for one. "You're actually distorting your financials," Goodman told them. "Your profits are inflated."

Far worse, though, was the psychic penalty of running the company as they were. "When you work that hard you wake up one day and say, 'What am I doing this for? I'm not making any money, and I'm not enjoying life.'" When you reach that point, Goodman warns, you've entered a danger zone as serious as any competitive threat. Only you don't know it. "Your relationship with the company is at risk. That's when people say, 'I should just sell this thing.'"

Trouble is, the McManuses couldn't. Or at least they couldn't sell for a price remotely reflective of the time and energy they'd invested. As so many entrepreneurs do, they'd built an organization so reliant on themselves that it had little equity apart from them. Plus, says Goodman, there's more than the financial equation to consider. "To lose your relationship with the company--this company of players who've thrown their destinies together for something meaningful--no amount of money can make up for that," says Goodman.

The McManuses talked about what mattered most in their lives--doing work they loved, traveling, giving back to their community. "And one of the most important conclusions we reached," says McManus, "is that our company is absolutely compatible with what we both want." If only they could change the things about Magellan's that were painful.

In one practical exercise, they sketched out an organizational chart that would make their lives easier. Who on staff might be ready to step up? Whom did they still need to hire? Goodman talked up what he calls the "self-managing management team," which makes it possible for owners to step out of the day-to-day running of the company entirely and serve "on a much higher level as coach."

McManus liked the idea of a self-directed team, even if he didn't know exactly what that meant or how he'd get there. The idea of getting others to help him manage the company seemed the way to work through the wall. He was convinced that hiring the right number-two person--maybe more like a "one-A" person--was crucial. Goodman didn't exactly agree--he's not a fan of the idea of hiring a chief operating officer, though he concedes it's the right move for some people. But, really, that was dickering. There are numerous schools of thought on how to effectively share decision making. What Goodman proposes is just one. "There's no room for dogma here," he says firmly. What was significant was that as McManus weighed his options in Albuquerque he knew this: He was ready to share the running of the company. Whatever that looked like. He'd finally reached a turning point.

"They realized they didn't have to sacrifice themselves at the altar of this company," says Goodman. Maybe there was another way through the wall after all. Maybe you just had to learn what it means to own a company without having to be its hero.

Help! (Really, I Mean It)
When McManus returned to Santa Barbara last July, he took some of Goodman's advice. He quietly told some of the staff that the company would put out one catalog fewer in the year ahead so that he and Gloria could cut back their hours. And he called up his old confidant, Bob Manning.

"Hey, Bob," McManus sang out. "How'd you like to be on our board?" McManus had been trying to coax Manning to his company for years. Manning had always gently said no. He had a great job in upstate New York, helping a couple very much like the McManuses to grow their company from $1 million to $10 million; however, now that that company was in the drawn-out process of being sold, Manning, its CEO, was feeling restless. Was Magellan's the right move? Was it ready for someone like him? Manning couldn't say with certainty.

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