What A Billionaire Taught Me About Great Businesses

[Ties [r.i.p.]]

Hoi mede-HLers,

 

Ben (passief) lid van een forum genaamd Global Capital Access Group, onderdeel van Ecademy.com waarop ik onderstaand artikel vond. Uiterst waardevolle lessen, plezierig geschreven door ervaren ondernemer Richard Banfield:

 

Education: What A Billionaire Taught Me About Great Businesses

 

[ Richard Banfield ] [ 24-Mar-05 3:16pm ]

 

If you are lucky you will have mentors that have done well in their own business and can help you navigate the path to success. If you are really lucky these people will be in your industry and will add more than just anecdotal support for your decisions. Then there are the extraordinarily lucky few who will have a mentor that will change the way they think about business forever. Several years ago I came across such a mentor. In a series of chance connections I came face-to-face with a billionaire that was ready to share his wealth of experience. In less than 2 hours this person was able to change almost everything I knew about business. Even the most fundamental ideas about how I thought businesses work would be set on their head.

 

My partner and I had been working together in an online ad sales company that was over capitalized and growing mostly because of the hype surrounding the Internet. He was my boss and I was selling ad space. We quickly realized that we would be having more fun and making loads more cash if we were running our own business outside of the corporate clutches we were in. Once we made the decision to leave, our education began. In a frenzied period of deal making and late nights over our laptops we were able to attract the attention of a very wealthy investor. He invited us to meet him and some of his lieutenants in his hotel suite with instructions to “leave behind any business plans and bring just your heads”.

 

Although the first meeting was no more than a couple of hours the time seemed to accelerate past us. The meeting was basically a series of well-considered questions aimed at my partner and me. What was surprising though was that these questions were very simple and quite basic in nature. We had been expecting some tough questions about corporate financing and international arbitrage; instead we were answering questions about who we were and what we thought we did to help the company better. Over the next few months the relationship became financial and we struck a deal with this investor. The deal was done but the questions kept coming.

 

The most interesting and benign question was asked of us almost once a week on the phone and at every face-to-face meeting. Without fail I would get a call from our new investor that would start with the question “What do you do?” At first I thought this was a joke and played along by describing the company and what we did for our clients. As time drew on it occurred to me that the question was a loaded one and that my answers were not getting to the heart of the matter. Eventually I came around and asked our billionaire investor “You keep asking that question and I know you are not stupid so it can’t be that you don’t know the answer. What’s the point of asking the question?” He chuckled as he explained, “I ask it all the time because it’s the best question to get a sense of how focused people in the business are.” My silence prompted him to continue, “You see, if someone can’t answer that question confidently and in fewer than ten words they probably don’t understand what the real value of their service or product is.”

 

To test how true this might be try asking yourself that question and giving the answer in ten words or less. Do you feel clear about your response or do you feel confused? The next time you get the opportunity to ask the question of someone else watch carefully how he or she answers the question. Do you need to sit down and take a break after their long-winded explanation or do you get it immediately? It’s obvious to me now that if you need a whiteboard, a PowerPoint presentation and forty-five minutes to sell your product you’re in deep trouble.

 

Over the period that we were in contact there were many more questions. Each question has the ability to cut directly to the problem and make sense of complex situations. Here is a list of the questions that kept on coming up.

 

 

1. Who will be involved? What are the reputations, integrity and potential of the people involved? Will these people set the company up for success or failure? The key here is to make sure that you not only get bright people with lots of energy and passion but also be sure to get a group that together is ten times the sum of its parts. You might have the smartest people on your team but if there is no chemistry between them nothing will get done correctly.

 

2. Is this a people thing or an idea thing? If you run into problems evaluate whether they are caused by people or by the idea that they are working towards. Good people can turn a bad idea into a good idea but bad people almost never change bad ideas into good ideas. Even the most well considered business ideas might turn out to be flawed but it’s easier to manage the obstacles when you have good people.

 

3. Are they the same people that will ultimately run the company? Starting a business and running a business for the long-term can be compared to sprinters and long-distance runners. Not everybody can be an entrepreneur and a long haul expert. If you start a company be prepared to step down or move positions when the time is right. It’s common knowledge amongst venture capitalists that most start-ups never mature beyond the first few years because the original leadership gets in their own way.

 

4. How much money will you need before you make a profit? Oh, and you can cut the forecast bull****. If you plan to finance your company with other peoples money you had better be very honest with them. Expectation management is the key to all successful relationships and its never more true than between a business owner and the investors they bring on board. Forecasts are nothing more than a really good guesses so be cautious when you present your plans to the people who will finance your company. Whatever you think it will cost, double that and you might just make it before the money runs out.

 

5. Do you really need a chief financial officer or can you get away with a good accountant? Generally, the biggest expense in a new company is the payroll. In the beginning do you really need to have the big guns doing basic work? If you can outsource non-strategic roles until there is enough justification and cash to do so you will save yourself good money.

 

6. Can you raise your capital from somewhere other than venture capitalists? Investors are important to get going but you need them like a hole in the head. This might be a paradoxical question coming from an investor but our billionaire was sensitive to the difficulties that these relationships cause. Their desire to get returns from their investment and their blindness to subtleties can cause great tension in the company. In his words, “Investors are driven by one thing and one thing only. Don’t ever convince yourself otherwise.” If you can raise the money from friends or family, or better yet from yourself, you will avoid having to deal with venture capitalists.

 

7. How can this business be scaled? This is my favorite question because I’m inherently lazy. Businesses that require me to work more as they get bigger scare me. I’m excited when I can see a company grow without having to increase the amount of resources needed to run it. I’ve heard it said that the best measure of a companies success is it’s ability to grow regardless of your day-to-day presence. E-Bay is probably the best model of a scalable business in the marketplace today. More customers and more transactions do not necessarily mean increasing staff or infrastructure.

 

8. What’s the difference between a hobby and a business? The answer is simple, “A business should have more money at the end of each month than it had at the beginning but with a hobby it’s just the opposite”. If you are doing something just because you like doing it even if it’s a terrible business then eventually it’ll make you miserable. The best case is to find something you are passionate about then make sure it’s a good business model too.

 

9. Are you wetting your bed and or are you facing facts? Business leaders and entrepreneurs have to make tough decisions. In one instance, after a particularly bad month we had to come to terms with the fact we had too many people and not enough work to justify their presence. Even though we had delayed the decision for months we would have to let some people go. “Ignoring these tough decisions is the same as wetting your bed and not telling anyone” our investor said. Our delay nearly cost us the company.

10. Do you have an exit strategy? Have you given enough thought as to how you will ultimately profit from your venture. Businesses make the best returns when they are sold or go public but there are other ways to create liquidity events. Remember too that in this day and age it’s rare for a founder or company leader to hold their lofty positions for more than a decade. Give some consideration for yourself and for the company.

 

 

Richard Banfield

Fresh Tilled Soil

Advanced eBusiness Development

blog: http://freshtilledsoil.typepad.com/

 

Met vriendelijke groet,

 

Ties

 

 

 

[Gast Jacobien]

Wat een goed stuk! !

Ik houd erg van artikelen waarin de kern van de zaak besproken wordt. Er zijn al veel te veel stukken vol met theoretisch gewauwel of vage business modellen.

[Jeroen Bakker]

Maar wat is nu hét punt waarover in het begin gerept wordt? Focus hebben en houden?

[Ewout Wolff]

Ties, dank je voor het opwaarderen van deze Gemeenschap met dit gave artikel. Getverdemme, wat heerlijk dat de meeste dingen toch simpel blijven ! Heb het artikel in mijn PC bewaard onder "Goudklompjes".

 

Decorum : volgens mij was "het" : kort en snel kunnen uitleggen aan anderen wat je doet. Dat zegt iets over je focus. A la de elevator pitch : heb je veel "en ook doen we..." etcetera en veel tijd nodig om uit te leggen wat je doet, dan is voor jezelf blijkbaar nog niet duidelijk wat jouw toegevoegde waarde is.

[Gast Jacobien]

Ties, dank je voor het opwaarderen van deze Gemeenschap met dit gave artikel.

 

Ha, dat denk ik dan ook, maar zou het niet zo snel zeggen. ;)

Maar wat me eerlijk gezegd opvalt aan Hl is de grote verschillen in ervaring en kennis van de bezoek(st)ers. Dat vind ik enerzijds leuk en anderzijds wel eens ' vermoeiend '.

[R.I.P. - Fred Wiersma]

Decorum : volgens mij was "het" : kort en snel kunnen uitleggen aan anderen wat je doet. Dat zegt iets over je focus. A la de elevator pitch : heb je veel "en ook doen we..." etcetera en veel tijd nodig om uit te leggen wat je doet, dan is voor jezelf blijkbaar nog niet duidelijk wat jouw toegevoegde waarde is.

 

Ja dat zit er ook in. Mijn eerste idee was iets anders: wat doe je? Ofwel: ben je NU, OP DIT MOMENT, bezig met je bedrijf? Of ben je met (voor je bedrijf) niet-relevante flauwekul bezig? Busy work, zoals onze Amerikaanse vrienden zeggen?

 

Er zitten voor verschillende mensen verschillende boodschappen in ;D

 

Fraai, back to the basics artikel, bedankt Ties.

[perry]

Met alle respect voor het artikel, je kunt dit soort vragen niet vaak genoeg om je oren krijgen, maar het zijn toch ook gewoon de standaard vragen die iedere keer weer terug komen, zelfs als je tegen over je schoonmoeder staat, of je tante op een verjaardag vraagt "wat doe jij eigenlijk voor werk?"

 

Ik krijg nog steeds regelmatig de volgende vragen om mijn oren. Laatst nog van mijn buurman:

 

- Hoe ga ja klanten vinden? Wie denk je dat het gaan kopen?

- Waarom heb je geld nodig?

- Stel dat je de loterij wint, zou je dat dan in het plan steken en wat ga je er dan mee doen?

- Met wie ga je het doen?

- Wat moet je die investeerder...(die zogenaamde man die samen met je wil doen) straks terug betalen?

- Als je nou drie jaar verder ben, wat voor rol zou je dan in het bedrijf willen spelen? Kun je het bedrijf dan verkopen?

- Waarom wil je het gaan doen?

- Als het nou niet lukt, wat ga je dan doen?

 

Als je van je tante hoort: "Nou jochie je hebt dus echt van je hobby je werk gemaakt, is het niet?" en als je dat volmondig met ja kunt beantwoorden, ben je goed op weg. Daar hoef je geen biljonair voor te zijn:-) Maar nogmaals, je moet die vragen wel stellen en ook beantwoorden, en dat is nou net wat volgens mij nog steeds te weinig gebeurd

 

Perry

 

 

 

 

[Ewout Wolff]

@Perry: Ja, vragen is een kunst. Daarom stellen goeroes alleen vragen.

 

@Jacobien : tuurlijk zijn er verschillen in kennis/ervaring. En tuurlijk is dat wel eens lastig : jonkies die naar de bekende weg naar Google vragen.

Maar dat is de lust en de last van een tribe als HigherLevel : de deur staat en blijft wagenwijd open, zodat iedereen zich thuis kan voelen. Het is aan de leden (en de admin) om mensen die van deze gastvrijheid teveel gebruik maken, terecht te wijzen.

 

(Maar : jonkies stellen wel weer heel essentiele vragen :D )

[perry]

<< @Perry: Ja, vragen is een kunst. Daarom stellen goeroes alleen vragen. >>

 

Zal zeggen dat mijn schoonmoeder, tante en buurman goeroes zijn:-)

 

Perry