From such naïveté, however, rose Sponer's clarity about her goals in building a company. "Why do you start a business? It's to make money," she says. That sense of purpose clearly comes across in what she titles "Francie's Criteria for New Ventures," a checklist she employs to analyze each potential endeavor in terms of its profit-making potential. "I don't look at my company as a part of me," she says. "I look at it as a vehicle for me to use to meet my goal of making a profit."
If Sponer's list forces her to remain focused on profits, Nichols's 12 criteria served to remind him of just what he didn't want to get into back in the early 1990s, when he was looking to start a company: a horse-and-buggy operation. That may sound like a metaphor for a slow-growing (or no-growing) company, but in Nichols's case it was more than that. He and his wife, Keersten, actually made a business out of giving tourists carriage rides around downtown Fort Wayne, Ind. "It took five years before it sank in that we were never going to build this thing to be big enough to put our kids through college or anything like that," says Nichols, now 37.
After selling the business, "I really said, 'Let's take our time and do it right this time," recalls Nichols, who had worked nights at a local steel mill while he and his wife ran the buggy business on the side. Many of the criteria he applied -- he wanted a business in a growing market with no geographic restrictions and unlimited growth potential -- sprang from his awareness that "the profit-making potential of one horse, one driver, and one buggy isn't even that much under a perfect scenario."
The criteria you end up applying when launching a start-up, it seems, have as much to do with your previous business as they do with your next business.
If the last venture was a reasonable success, then the reason for the next one is that much clearer: to create wealth (as opposed to just making money) or maybe to leave a lasting mark on an industry (as opposed to just being a boss). These days it's not that uncommon for even first-time entrepreneurs, their heads stuffed with stories about glamorous start-ups, to adopt the yardstick formerly reserved for entrepreneurial veterans: What I'm after, they'll say, is a billion-dollar valuation. And they usually need it to happen before final exams distract them.
So, contradictory as it sounds, such entrepreneurs create paperwork for themselves -- an inventory of criteria that serves as a bulwark between themselves and their dangerous, if natural, inclinations. Given what Broderick had been through, it wasn't at all surprising that he felt the need to draw up, and continually consult, the nearly 40 criteria that he had written down on a piece of blank ledger paper. Before he founded SteelWorks, his most recent venture had served only to underline the stink in gut instinct. "It wasn't as if I had gone out as a success in the previous business," he confesses. "I really didn't want to rely on my intuition anymore."
In 1980, Broderick went into the industry his family had worked in since about 1900: wholesale lumber. The company he founded, Rivendell Forest Products, rose to peak sales of about $135 million before it crashed to the ground in 1991. A victim of declining housing starts and dropping lumber prices, the company ended up on the wrong side of its banking covenants. "We figured we'd better liquidate it before the market sank even lower," says Broderick, who was then 45. "It was horrible. I was determined I was going to bite the bullet and go into a new industry, and one with a better economic model than the stupid one I'd had to work in."
"I don't look at my company as part of me," says business founder Frances Sponer. "I look at it as a vehicle for me to use to meet my goal of making a profit."
The absence of stupidity was far from his sole criterion, of course. With help from members of his CEO peer group, he drew up a checklist. For every business he considered, he placed plus signs or minus signs next to the items. He listed the characteristics under five broad categories. The first one, "Specific Business," encompassed the most items -- 17 -- from location (as a divorced father of three, he wanted to stay in Colorado) to geographic market (he'd learned through experience that "the larger the scope, the more insulated a company is") to customer type ("You don't want to be selling to a lot of mom-and-pops," he says). By the time he decided to start SteelWorks -- a maker of metal shapes sold to do-it-yourselfers through home centers, hardware stores, and lumberyards -- he'd carefully assessed the condition of the two companies whose assets he ended up acquiring. He'd ranked such areas as sources of supply (neutral), existing relationships with customers and vendors (a minus), and price stability of raw materials (a plus). (For a complete list of Broderick's criteria, see "Broderick's List," below.)
Says Joel Nichols, the former buggy driver: "The list is important because it forces you to take the first step. We were more aggressive in saying 'These are our criteria' than we were in looking for a business. Once we had the criteria, it was like walking through the woods and looking for a nice tree. We weren't walking and measuring every tree and comparing it to our criteria." Indeed, Nichols's checklist, a much shorter variation on Broderick's, prodded him to think about how closely the company under consideration matched what he knew he was after.
Granted, Nichols's criteria were more than slightly idiosyncratic. Aside from looking for a venture with low start-up costs (how does $2,500 sound?) and few competitors, he and his wife also wanted to work "relatively normal business hours," Nichols says. If that sounds like an impossibility for any fledgling business owner, rest assured that Nichols usually spends part of Saturday in the office. But it's nothing like the buggy business, where "if there's a family event happening on a Friday or Saturday night, you know you're not going to be there." He also wanted to start a manufacturing business, claiming to "personally enjoy the challenges of manufacturing" -- though, until he started the business, his only related experience had been as a lathe operator in the steel mill. "It takes a more determined and focused person, with a better skill set, to go into manufacturing," he claims. But the product he made couldn't be a commodity, as spelled out in one of his criteria. Maintaining a high-level service component, he says, "creates one more barrier for people who want to compete with me."
