What is the key to starting a business successfully?

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1 Thank you for requesting more information on starting a business from Dr. Dobson s Family Talks programs entitled: (please fill in the name of the programs here). I enjoyed spending the two days on the radio with Dr. Dobson and LuAnne Crane and hope it was helpful to you. I have been in the business of starting companies most of my career. These companies have been big and small. I have had the privilege to watch a number of them become public companies. Some have remained small but successful businesses. Whether big or small, there are some good rules that I have discovered over the years that will make a difference in the chances of success or failure. Along the way, I have experienced some failures which also helped me to modify my rules. While what I give you here are good rules to use, there are no guarantees for success But they should increase your chances of success. As I mentioned on the broadcast, many really successful companies, large and small were started during recessions. Examples include, Hilton, Hewlett- Packard, Fed Ex, The Footlocker and IHOP and one of my own, INMAC to name just a couple. If you did any research in this area you would be surprised at the number of successes. There are some really good reasons why companies are successful starting during a recession: One, during a recession, pressure is on every one to find better solutions to problems which before in good times were not so apparent but during a recession they really show up. If you think about it when a river is high, no one worries about the rocks on the bottom, when the river gets low; the rocks become a serious concern. Two, people are more open to change; i.e., trying new solutions when the pressure is on to solve a problem which before may not have been a big deal. Three, when people get desperate, they get more creative. Some people decide the only to get a job is to create their own. Out of serious recessions have come many new businesses started by average people who had an idea and decided to try building a business. Most people may not be aware of the fact that there are some 25 million or so small businesses in the U.S. started by ordinary people who often times found themselves without a job and found it necessary to start one. I am one of those people. I am sure you have heard about the dreadful statistics associated with starting businesses. The key to these failures resides in the inability or unwillingness to assess the risk or understand how to improve the odds of success by doing so really important ground work.

2 There are some things you need to do before you start. I would first suggest you read my book entitled, The Integrated Life. It does not contain the points I want to give you today but it does provide the basic background to understanding business and its relation to faith which can be immensely helpful to you as you start in a new direction in life. I encourage you to read it. What is the key to starting a business successfully? Some years ago, Ink Magazine did an article on what venture capitalist were looking for when they look for business investments. The article was many pages long. The writer interviewed venture capitalists to get the secret of their success and what they were looking for in making an investment. At the start of the article, there was a graphic of a puzzle in pieces. As the article progress, the pieces of the puzzle were put together. By the time the article was completed the puzzle was finished and it said these words, Sure Thing Incorporated. Venture Capitalist only wanted to invest in sure things. What is a "sure thing? The key to starting a successful business is not so much a sure thing as it is reducing the risk one takes in starting something. The concept of reducing risk of failure all along the way is a primary factor in starting and building a successful business. Who does not, before starting to build anything, first figure out the costs; and, what are the dangers or risks in doing it? Yet when it comes to business, so often, people will go into a business or activity because it really looks exciting. Excitement is not enough. They think about all the good things that can happen. But rarely do they take the time to consider all the negatives. Alfred Sloan was the CEO of General Motors. He was considering a major investment. He went around the board room and asked the members to opine on his suggested program. One by one, each thought the program was a great idea. As the last man spoke, he dropped the gavel on the table and said; "Not one of you has discussed any negatives on the subject matter at hand. We will table the project until the next board meeting when you have had time to think about this program in more depth." When the board convened again a couple of months later, the discussion was very different. The program they were about to approve some 60 days earlier was found to be unacceptable to the board, the matter was dropped. Later they were very thankful they had taken the time to think it through. I suggest that the

3 good things will take care of themselves; you need to look for what I call the knock- out factor first. What is the knock-out factor What is the knock- out factor? The knock- out factor can be anything that might cause the business idea to fail. Let s say you have an idea for a new product. Everyone loves it. There appears to be one small problem. The product will require some sort of government approval. That approval might indeed be the knock- out factor. In that instance, it is really important to figure out what is involved and take the concept to the powers that be and figure out if the problem can be resolved. On one occasion, I was considering a business that appeared to be quite successful. It depended on the availability of paraffin, or common wax. I decided the ingredient was a key to the future. Would that be a problem? As I did research I found that paraffin was about to be in short supply for a number of years. Because of the short supply, the product would be too expensive if the material could even be purchased. I decided I could not overcome this problem and walked away from the business. It did fail over the next couple of years as this "knock- out factor" actually sunk the business. So, does that mean you need to approach everything with an attitude that the cup is half empty? Not at all. It means you must be realistic about what is involved and research the risks so that you know the level of risk and get rid of the high risk factors that might cause the business to fail. The probability of success goes up as you solve problems that might appear to be knock- out factors. If you are able to solve what might be the "knock- out factors" then you have a good chance of succeeding. If you come to a point where the problem is truly a knock- out factor then, it is best to move on. For a long time I would get an idea and work for weeks trying to figure out if I could overcome the problem so I could start that business idea. After all, I fell in love with the idea. After months of getting nowhere on an idea I had to sadly abandon it, not knowing what to do next. Sometimes we hold on to ideas for a business because it is our hope and we have nothing else. (Our hope is not in business but in Jesus, none the less we tend to be human in these things.)

4 One in the hand is not worth two in the bush. We subscribe to the old adage: one in the hand is worth two in the bush. I am here to tell you that adage is wrong. You need to throw away the bird which is of no value so you can catch the one that is. I cannot tell you how many ideas I went through. The key to making sure it is not a wasted exercise is to keep a record of issues you ran into that would make an idea not work out as a business. As you write these down, it will help you narrow your scope and increase your chances of being success. Many of the points on the list I have provided below came from those learning experiences. Discarding a bad idea quickly allows you to find a new idea sooner. Too many people hate to let go of an idea because they are afraid they will not get another one. You need to trust God on his ability to give you just the right idea. He did for me and the idea lead to $400 million business. Failure is the opportunity to learn. If you take a failure with a defeatist attitude you will soon give- up altogether. If Thomas Edison had given up we might not have the light bulb he invented. He did countless experiments with one failure after another in his laboratory. But as he failed he claimed that it put him that much closer to the right answers. Sure enough, his pursuit, failure after failure, lead to the creation of a whole new industry, not just a business. But more importantly he did what people thought was impossible. In his case, the bad ideas were those that did not make the light bulb work. The sooner he discovered the failure, the quicker he was able to focus on what might work. Expect people to question your judgment. Many people laughed at Edison. They wondered if he was crazy. They thought it would not work. The same was said about the automobile. New things get in the way of tradition. People don t make changes easily and often there is some jealousy in the comments people will make. Ever seen crabs in a bucket? It appears that they are all trying to get out. But if you watch closely, if one begins to look like it is about to break out, the others grab hold of it and pull it right back in the bucket. Don t be surprised if someone tells you the idea is really stupid. It may only be stupid because they did not think of it or have the same vision as you

5 do. Fred Smith, founder of Fed Ex, wrote his graduate school business thesis on a concept for a new business: Fed Ex. His professor apparently gave him a poor grade saying the idea did not make any sense. The professor was wrong. The rest is history. When my partner and I laid out our plan for a company to sell computer products by direct mail, we spent months thinking through the concept: Three full months in all. We finally decided that the concept had enough merit to risk some more time and money. We signed an agreement between us one afternoon in my home office, pen in one hand and my three- week- old youngest son in the other. I was babysitting him as my wife took care of the other two youngsters. We had a young family and I was out of work. That night Roberta, my wife, and I went to dinner with 2 couples, friends for many years. All very bright people! That night these 2 couples attempted to convince me that the idea was really crazy and would not work. I had a young family and they thought I was taking quite a risk. I asked them why. They were not able to provide me with really good reasons. I came away at first discouraged but when I analyzed what they said, against our plans for the business; I saw that they had not raised any significant issues that I could not answer. It is really important to get feedback from friends. There is always the possibility that you have missed something but don t let them turn you from your plans simply because they cannot see your vision of the future. So, what next? There is no magic here. The next step is to read the next two sections I have prepared for you and get started. But you must make the decision to pursue your plans just as diligently as if you were being paid by some employer. And you are. That employer is you and you should expect a full day from yourself. Whether I was looking for a job or trying to start a business, I was at my desk at 8am in the morning: Up, showered, exercised and prayed up for the day. You need to be your own task master. Set some objectives, realistic ones, as to what you expect to accomplish in what period of time. Take a few breaks during the day but get right

6 back at it. This is your job. If you take your job seriously, you will be amazed at what you will get done. Begin by answering the questions in the next section. It will help to point you in the right direction. Then, start building your list of characteristics that will help you describe the right business. Don't be afraid to fail.