Entrepreneurs have guts.
They create something from nothing. They breathe life into livelihood. And they trade cushy consistency for the unsettling unknown.
So just how do they get those stomachs of steel? BusinessQ asked five local entrepreneurs to share the riskiest thing they’ve ever (or almost ever) done. Find out who used wedding presents as collateral, who almost literally bet the farm and who thinks being an entrepreneur is the least riskiest thing he could ever do.
Plus, a serial entrepreneur from Provo shares seven fool-proof (though not fail-proof) tips for guts and glory.
1. No time like the presents
Taking a risk always feels biggest when you have a lot to lose. One of the biggest and first risks I took in business was in April 1996. I asked my new wife, Heidi, if we could sell our wedding presents and use both of our savings to start a new business. I enjoyed building websites and thought I could make money doing it. But to give myself the best chance at succeeding, I needed a better computer, printer and a scanner. This felt like a huge risk, because at that time we had a few thousand dollars to our name combined. We needed this money to finish our schooling, but I thought I could turn our savings into a successful web development business.
We sold all of our wedding presents, took our savings and bought several thousand dollars of computer hardware. I started a company called JP Graphics, which grew very slowly. But within four months, I had several customers paying me $20 an hour to build websites for them. This small web design business is what eventually turned into JP Interactive, a full online marketing agency, which then grew into MyComputer.com, an online resource for web developers, which then turned into Omniture, a web analytics software company that we took public and eventually sold to Adobe.
I could share story after story of risks, rewards and failures. Lucky for me, Heidi agreed to take that first business risk with me. It worked out, and she didn’t make me get a real job.
Taking risks and doing business go hand in hand. Every day in business we take risks, whether we are investing in marketing that may or may not work, hiring employees that may or may not fit in, or building a product that consumers may or may not buy. Starting any company is a risk, and no matter how calculated we think it may be, that risk doesn’t always reward us in the way we’d hoped. According to Bloomberg, eight out of 10 people who start a business fail. One of the most important things we learn from those failures is to get back up and do better the next time.
2. Directly speaking
There’s a quote: “Ships in a harbor are safe, but that is not what ships are built for.” That describes my departure from where I was a few years ago — a stay-at-home mother of five with a quiet passion for jewelry design — to where I am today, the president of Jewel Kade, an artisan jewelry and décor company. I’ll be the first to admit I could have stayed in that harbor for quite awhile (maybe forever?), but thanks to a series of events, a flash of courage and the help of some incredible people, I dared to set sail.
I had been designing jewelry for a few years (I started handcrafting charms to capture my love for my children). I began selling in boutiques and seasonal shows, eventually holding parties in my own home. Sales were growing, and I came to a crossroad. Do I keep going with retail, or do I venture into direct sales? Direct sales made sense, but it was risky. I would have to walk away from all the retail sales. I was self-funded, so if it didn’t work, I’d lose everything I’d worked for.
But I wanted to share the same success I had found with other women. The home parties were not only fun, but I was also finding newfound confidence in myself. So I gathered direct sales experts around me, trusted my gut and took the leap.
Not long after that first step, the risk got bigger. I found my marriage coming to an end, and I was a newly single mother. I had a decision to make — play it safe and find a job that would provide benefits and a set schedule … or push forward, continue with the company launch and make it work.
Five years later, Jewel Kade is thriving. I’m blessed to work with thousands of stylists across the U.S. and Canada and nearly 100 employees in our Alpine office — not far from my basement where it all started. My kids have benefited from seeing their mom work hard. And I have learned so much about following your passion, about taking risks and about myself. Jewel Kade’s mission is “reminding women everywhere of the power within” — that has definitely been my journey, and it’s been my privilege to watch the same discovery for our stylists.
3. Who’s the man?
The two riskiest things I ever did were two sides of the same coin: working for myself, and working for somebody else … let me explain.
I’ve always been a serial entrepreneur, but in one early company I went out on my own well before I knew how to run a business. I worked with a partner in a computer consulting company, and we bought out the previous owner, only to find my new business partner was not honest. I lost $70,000 — about what a nice graduate degree in business would cost me. I call it my MBA from the school of hard knocks.
Big mistake. I wasn’t ready. I should have learned my strengths and weaknesses on somebody else’s dime. I figured out later that I excel at the strategic side of sales and marketing — not managing business. It’s like when I coached nine years of youth football. Eight of those nine years I coached the defense — my love, my background, my skill. I can count the games we lost on both hands. The year I tried being a head coach, I don’t think I had a winning season.
Find your strengths and bet on them.
My second big mistake was working for somebody else too long. I started the original inside sales department at Franklin International Institute. I built a massive organization for them and didn’t have enough ownership equity to buy a car. I risked all of my hard work for very little. To me, the biggest risk is to have somebody else in charge of your future.
My dear friend Oliver DeMille reminds me that a hundred years ago, 90 percent of Americans owned their own farm, shop or business. They were entrepreneurs. Now, 90 percent of Americans work for owners and entrepreneurs and control very little. They are employees. To me that is very risky.
The next opportunity came and I co-founded what is now inContact. I gained enough equity to launch my future, and I was in a position to control the variables that put that future at risk. After that, Dave Elkington and I founded InsideSales.com. I learned to join forces with a brilliant business partner who was world-class great at the things I was not, while I was able to bring my strengths into focus and excel. When you know what you are doing, being an owner has very little risk.
And having a little help from upstairs is the least risk of all.
4. Friendly advice
I’ve heard my entire life that partnering with friends and family usually creates your worst business enemies. When my husband and I started Creating Keepsakes (scrapbook magazine) 18 years ago, two family friends were the obvious choices for partners. However, before we approached them, we thought long and hard about these questions: 1. Does each person bring knowledge, skills and energy that will complement our business vision? 2. If we don’t agree, can we remember why we partnered in the first place to avoid feelings of resentment? 3. Can we voice our opinions in a nonthreatening environment? Do we feel safe with one another?
Our answer to every question was a resounding “yes,” and thus we partnered with our friends (writing everything up legally — this is a must!). Looking back, this was the best decision we ever made. We already knew each other’s personalities and work ethic going into the partnership, so this made the communication easier through the challenging times.
Some of our secrets to a successful “friend” partnership? 1. We hired an organization development consultant, Orem resident Kathy Gowans, who put positive cultural processes in place. 2. A reputable firm conducted a nationwide search on appropriate salaries for each person’s job description and skill set. No — each partner didn’t receive the same salary, but all felt it was fair since an outside source determined what each salary would be. 3. We remembered to have fun and give back to our employees.
Five years after starting Creating Keepsakes, we harvested the company. I’ll never forget when we signed on the dotted line. Tears were in our eyes. We had no regrets with the financial gain each of us received. We had truly built a company where we were “all for one and one for all.” Plus, my husband and I keep saying we’d build a company again with the same partners. Yes — the big risk was worth it.
5. Shouldn’t, couldn’t, wouldn’t
A year into my first startup, GearTrade.com, we were quickly running out of capital and looking for how we could keep the company alive. We’d raised about $220,000 from family, friends and a couple of angels. And like most entrepreneurs, especially first-time ones, we’d over-scaled the company to chase our opportunity.
One option was to pursue an SBA loan; but I had no assets to guarantee it. However, my dad did: our family farm in Idaho. It took him years of very conservative living to own that farm outright. My drive to succeed at all costs looped him into our additional funding conversation. I explained this was a for-sure deal — that if we just had another $100,000 or so, the company would be off to the races. Ah … naïveté.
7 risky tips, courtesy Rich Christiansen — author of ‘Bootstrap Business’ and ‘The Zig Zag Principle’
1. Have a financial buffer
3. Vigilantly manage cash flow
4. Don’t go to Vegas and bet it all on black
5. Put Guardrails in Place
6. Can you live with it?
7. Fail Safe
He agreed to cosign on the loan and provide the farm as collateral. He’d already been to the cooperating bank in Idaho and signed the paperwork. I was literally getting up from my desk to go sign everything when my co-founder, Chris Knudsen, walked into my office and said, “Jeremy, what are we/you doing?! I couldn’t sleep at all last night. Dude, you can’t let your dad risk his farm. That’s a line we can’t cross.”
I had been sleeping fine. My blind ambition was running strong, and the alternative was likely having to let our 13 employees go and fail. But in that moment, it hit me like a ton of bricks. We called it all off.
We did end up laying off all our employees. A couple of us were able to hang on for another year, sell the assets of GearTrade, and then found Doba, which has now led to my current startup, DropShip Commerce. In hindsight, the likelihood of losing my dad’s farm would have been 100 percent, because having another $100,000 wasn’t the real inflection between success or failure.
My lesson: Check yourself before you wreck yourself (or others). The best way to accomplish this is to have co-founders, coworkers, friends, advisers or mentors that have just a little bit more distance and perspective.