Beginning Strategies for a Successful Start-Up
From the desk of Dennis Siggins
More than forty years ago, the housing department at my college randomly selected Andy and me as likely roommates. My four-year college roommate and I have remained friends ever since. After thirty-plus years in the corporate world, Andy suggested that we might want to start a business together. I have been a business owner since my teenage years and have started and sold several companies in my adult life. So began the process of starting yet another business, but this time I had a partner and we were each in our mid-fifties…
Corporate lifers and lifelong entrepreneurs see things differently, and with Andy coming into my world, I was called upon early in the process to set the path. In the early stages, I laid out six key points that would bolster our foundation, points I feel that many start-ups could benefit from.
I- Development & construction of a well-researched business plan.
The development of the original business plan is far more important than most small business owners believe. Prior to launching our new company, Andy and I spent five months (days, nights, weekends) developing our new idea; company name, logos, color combinations, tag lines, marketing strategies… I remember Andy once asked me if all companies start out this way, and I said I think that very few of them do, but that we want to be one-percenters.
It is during this initial phase that mission statements are created, company philosophies are developed, website decisions are made, and other critical long-term seeds are planted. Because many small business start-ups tend to skip right over this part, by focusing heavily on this phase, Andy and I are creating what will become our first competitive advantage.
I recommend that future franchisees, like all business owners, invest more time and money into this phase than he/she may think is needed; it will allow for dynamic future results. Choose the greatest brandable name; develop the coolest logo; intelligently select your ideal target market… If you are not sure how to navigate this process, talk with your franchisor; we are here to assist you.
II- Remove all distractions.
If there is one thing that has always sustained me in my business life, it is my ability to single-mindedly focus on the task at hand by removing all unnecessary distractions. During Andy’s corporate life, he was a true sports junkie; men’s softball, over 30 (then 40 and later 50) soccer, winter basketball, and golf. Prior to launching the Cape Cod Gutter Monkeys, I had sold my previous company when I was 50, so I was living the dream as well. When Andy and I began our new journey, as part of our pact, we agreed to eliminate all unnecessary distractions. He gave up all his sports. I sold the boat and the Harley, put my fishing gear away, and discarded the few other outside interests I loved. We had, thus, effectively removed all unnecessary distractions.
With most of my previous start-ups, I had some other distractions, like family trips, high school track meets, wrestling matches, school musicals, and other parental responsibilities. These are called necessary distractions. Now, with my all kids grown and married with kids of their own, I was free of my day-to-day parental responsibilities. I will always recommend to the neophyte business owner to determine the difference between necessary distractions and the unnecessary ones… and eliminate the latter.
III- Limit the owners financial demand on the start-up company.
One of the key factors that contributes to new business failure is a high financial demand on the company by the ownership. A large owner salary will draw money that a fledgling company may not be able to support. If the new owner has disciplined himself to a small salary, he is able to turn a higher percentage of revenue back into the company. And if the owner has set forth intelligent strike points that must be attained before a salary increase, then he will be incentivized to hit those points, thus driving sales.
Upon launching our new venture in September of 2014, Andy and I agreed to a salary of $500 per week. (Andy left a six-figure job as VP of a large company.) At six months, only after certain goals had been met, we each took moderate raises. And periodically since then, we have taken raises. But we are still, after six years, taking salaries that are 35% of what most other owners/CEOs in our positions are taking.
Because of our commitment to keep our company lean and light, we have built a regional industry-leading company that has never had debt. We have been able to add trucks, as needed, to our fleet without the need for debt. As the company has grown, we have purchased several buildings without the need for bank financing, thus remaining lean and light.
Andy and I do not take salaries that reflect our value to the company. Rather, we take salaries that reflect our commitment to the company. Instead of padding our personal financial portfolios, where we may earn 8% – 11% in the market, we keep our salaries small and turn as much possible revenue back into the company, which continues to grow at 25% – 30% annually.
IV- Remove as much debt as possible.
As stated earlier, high financial demand placed on the upstart company by the ownership can and will contribute to financial strain on the company, especially early in the company’s life. So, in addition to the owner being dedicated to taking a small salary, he/she may want to contribute to the process by eliminating unnecessary personal debt. (Sell the boat and the Harley, sell the extra car, cancel the country club membership.) A company that operates lean and light will create significant competitive advantages that can carry well into the future.
There are three financial implications to getting lean by eliminating ownership personal debt. First, selling unnecessary personal items will create an immediate influx of cash, cash that can be infused into the new company as working capital, which is the lifeblood of a start-up business. Second, any loans that were held against these items will be paid off, thus eliminating the recurring monthly payments. And third, the regular financial strain of keeping these items (insurance, registration, fuel, maintenance…) is removed. The new owner has now turned personal liabilities into business assets.
Consider the out-of-pocket cost of the boat or the bike, membership at country clubs, or that extra car payment in the driveway. And consider the opportunity cost that these liabilities create each time the owner is using them. (How can I be focused on my start-up company when I’m out on the golf course?) Eliminating these extras will have a dynamic impact on one’s personal financial needs, turning liabilities into assets, and adding revenue while easing the financial burden on the company. And in removing these liabilities, the new owners will be removing what we call unnecessary distractions.
V- Build the brand, not your bank account
Andy and I do not take salaries that reflect our value to the company. Rather, we take salaries that reflect our commitment to the company. In choosing to follow this path, we have made a strong bet that the brand is more valuable than the paycheck. When the brand is the focus, then things like marketing, team building, co-worker satisfaction, employee safety, and customer service create the synergy that is the brand, and this brand is far more valuable that the owners salaries. I constantly encourage my teams to point toward long term success, develop the company, and don’t contaminate the brand.
During the winter 2014 – 2015, when our company was just a few months old, we were hit with some terrible weather that became a blessing to many companies in the Northeast. Chance favors the prepared, and our infant company had been spending some serious money marketing our new concept while growing our small team. We saw that many companies in our region were not prepared for this sudden economic boost and could not take advantage of it. One company that seemed to be rivaling our production early on couldn’t seem to stay in the game long enough, as their team was put together as a last minute reaction to the weather, and they faded. By spring of that year, we had banked a significant sum of unexpected revenue and added nicely to our regional reputation. As owners, we did not take that additional revenue from the company; we used that money to grow the company by one new truck, add two new employees, and increase our monthly advertising budget. I still look back to that as a critical point in our growth as a company.
Another thing I stress is to resist the temptation of early revenue sources that may contaminate the brand. I have owned companies in the roofing, new home construction, food service, cleaning, home services, and real-estate industries, but I left these skills and services out of my marketing program of the Cape Cod Gutter Monkeys, even early on when our company could have used a shot of revenue, because we wanted to be known for what we do, our brand. I’ve seen start-up businesses limit their long-range growth by wandering too far out of their area of expertise in the start-up phase. Play in your own sandbox. It’s hard to build a multimillion-dollar brand if your target market is not exactly sure of your product or service.
As the success of the company grows, so does the brand, and so does the company’s value.
VI- Build out your team
Behind every successful business owner is his/her team. Team building is as important as any component of a new business. There are many levels of team building that will be necessary, but the two most important are likely to be the employees and the inner circle.
When building the employee team, remember that the business owner is building a group of co-workers. Every co-worker brings two things to the table; skill set and personality. Skills can be taught, and skills can be learned, but personality is highly unlikely to change. For this reason, when hiring, Andy and I focus more on personality and less on current skill set. Our company has 18 employees working out of our corporate office and a dozen or so in our other two locations. Only two of the team members in the corporate office had any prior hands-on experience in our field. We have, for example, found that chain restaurant managers have a personality type that fits our team model, and we can teach the rest. If you are the manager at a Bertucci’s Italian restaurant, and your last name is not Bertucci, you have probably worked your way from the bottom up, waited tables, run a small team in the kitchen, battled through a busy Christmas season at the mall, dealt with a grumpy customer or two, worked the register, and you are unlikely to be the type of person who calls in sick very often. You are probably my kind of guy! Remember, skills can be taught, but personality cannot. My web guy had never run a web site, let alone built one, prior to my hiring him, but I knew his personality type. Over the past five years, he has built, and currently manages, many web sites for us, and as we continue to grow, he is excited about being a part of this team.
The other team that needs to be built is the inner circle, the team of professionals just outside the company. The new business owner should not wait until he is involved in a legal dispute before enlisting the help of an attorney. Every small business owner who wants to be an industry leader needs an attorney, an accountant, a banker, a financial planner, a tech person, and a few business consultants. I recommend that the new business owner be on a first-name basis with the members of his/her inner circle long before he/she needs them.
As a small business owner, you need to recognize that you are the average the five people closest to you, and you need to surround yourself with a quality team. From co-workers to your inner circle, always surround yourself with the best talent available. Successful business owners know that sevens and eights hire nines and tens, and they know why. The low level business operator does not know that fours and fives hire twos and threes, and even if he did, he would not know why. As the owner, you want to be that little squirrel under the hood; you want to be the hub that is surrounded by a circle of eights, nines, and tens.
The author, Dennis Siggins, is a founder of the American Gutter Monkey franchise system as well as a founder of the flagship business Cape Cod Gutter Monkeys. See how his business model works at www.AmericanGutterMonkeys.com.
For more information about our franchising system… Call AGM at (508) 477-9100 or email us at Info@AmericanGutterMonkeys.com