Our Irrational Fear of Numbers
No, you didn't start a company because you wanted to learn accounting. But you had better learn some – pronto – if you want to really understand your business.
Mark Hartman
PARTY GIRLS Anne Frey-Mott, Beckie Jankiewicz, and Elizabeth Busch, founders of The Event Studio, came to Norm for advice on building their new business.
Norm Brodsky is a veteran entrepreneur.
January is a good month for fresh starts, and so we've chosen this issue to begin the next phase in the evolution of Street Smarts. In the coming months, we're going to follow a handful of businesses as they grapple with the challenges of starting up, growing, or simply surviving in the worst economy we've seen in a very long time. The companies involved are those I have been, or will be, mentoring. Regular readers of this column are familiar with a few of them -- Brian Kelly's City Beans and Mike Baicher's West End Express, to name two. Others you haven't met yet, as I've begun working with them only recently. And three of the businesses will be owned and operated by readers of this column. Yours could be one of them.
Let me explain. We began thinking about changing the focus of Street Smarts more than a year ago, as I was getting ready to sell a majority stake in my three principal businesses. I knew I'd be doing more pro bono mentoring of entrepreneurs, and I figured we'd want to write more about the challenges they were facing. I also thought it would be fun to offer readers the opportunity to participate. You may recall the note we ran in several issues inviting people to contact me if they were interested in receiving my advice. We expected to hear from a couple dozen readers. In fact, we got hundreds of responses, which was gratifying but also put us in a quandary. How were we going to decide which companies I should take on, and how would we manage the logistics of building long-distance relationships?
As it happened, my co-author, Bo Burlingham, and I were just then finishing our book, The Knack: How Street-Smart Entrepreneurs Learn to Handle Whatever Comes Up. We wanted a website to go with the book, and as I was talking to our website designer, I had an idea: Why don't we hold a contest? The winners would get an all-expenses-paid trip to New York City, where they would spend a day with me. I'd help them with whatever business challenges they were facing, and we'd lay the groundwork for an ongoing relationship, with the possibility of regular updates on their progress in the pages of Inc.
The contest is now up and running at our website, at theknack.info. There you will find a 10-question quiz on general business topics. To qualify for the next round, you have to get all of the answers right, but you can take the quiz as many times as you like. Once you pass Level One, you become eligible for Level Two, a quiz based on the concepts we've written about both in these columns and in the book. Those who pass the Level Two quiz will be asked to fill out a brief questionnaire, and we'll choose the winners from that group.
Let me say a few words here about how I choose the people I mentor. I usually start by interviewing them in my Brooklyn office for an hour or so. By the end of the discussion, I know whether or not I have any knowledge or experience that could be helpful to them and whether they are willing to listen to me. Notice I said "listen to me." I didn't say "take my advice." I never tell people what to do. Indeed, if they have a strong gut feeling that is different from mine, I encourage them to go with it. But I want them to be open to looking at their situation in a way different from how they've been looking at it before. Otherwise, I will be wasting my time.
One of the first steps always is to look at the numbers. Consider, for example, a business whose founders I met through my participation in Inc.'s annual Inc. 500 conference. The founders had all been involved in staging the conferences, either as employees of Inc. or as independent contractors. It's almost impossible to spend time around successful entrepreneurs without thinking about becoming one of them, and that prospect had proved irresistible for three of the conference producers: Elizabeth Busch, Anne Frey-Mott, and Beckie Jankiewicz.
Two of the women, Anne and Elizabeth, already had their own businesses. Anne's company, Conference Solutions, had been around for 11 years and specialized in selecting sites, negotiating contracts, and managing relationships with hotels and conference centers. Elizabeth, who had launched her business in 2005, focused more on the design and marketing of events. Beckie was director of events for Inc. and its sister publication, Fast Company, and had experience in handling the logistical challenges of developing several projects simultaneously. Although the three of them had no formal link, they often partnered on conferences. Inevitably, they began thinking about starting a business together. The closer they looked at the possibility, the more convinced they became that they could work more efficiently, market more effectively, create more value, and produce better results overall if they were part of the same company -- a full-service events business. Last February, Beckie left her job at Mansueto Ventures (Inc.'s parent company), and in April she, Anne, and Elizabeth formed The Event Studio, with each as an equal partner. The plan was for Elizabeth to phase out her company as its current projects were completed, but Anne would keep Conference Solutions alive for the sake of customers that did not need the other services offered by The Event Studio.
They were still in the formative stage of their new business when they first came to me for advice in December 2007. Unlike most companies I work with, theirs was essentially a start-up. Then again, I was already familiar with, and had a high opinion of, their work, and I thought their logic for joining forces made sense. But I could also see that, while they had a clear vision of where they wanted to wind up, they didn't understand the steps they had to take to get there. Having taken those steps many times myself, I offered to be their guide. They readily accepted.
As the offspring of two existing businesses, The Event Studio began with a significant advantage not enjoyed by most brand-new ventures: revenue. Anne's business and Elizabeth's business both had ongoing, unfinished projects of the sort their new company would be signing up in the future. Anne and Elizabeth could hire The Event Studio to do the remaining work on those projects. When the old companies got paid by their customers, they could pay The Event Studio, thereby generating the cash flow the new company needed to get off the ground.
