The Women Entrepreneurs Blog @ Simon

Bootstrapping Builds a Strong Financial Culture

by Suzanne Clarridge

It has been nine years since I sat down at my computer to create the business plan that has ultimately become My Brands. I started working on it July 1, 2000. At that time, the world of e-commerce business was in its honeymoon, and the initial boom of the e-commerce was still hot. Everyday there were stories in the news of new e-business companies obtaining funding through Angel Investors and Venture Capitalists. I just knew that with my fabulous idea I would successfully be able to raise the money to start My Brands. 

The first step in the process was to write the business plan and the Private Placement Memorandum (PPM). (A PPM is the legal document required by law to raise private capital). I spent about 6 months writing and preparing my business plan, and I finally published my PPM in December of 2000.  

I built a model that would be up and running on $1 million dollars. As luck would have it, my timing couldn’t have been worse because by December 2000 we were in the midst the e-commerce crash. The bottom had arrived and there wasn’t a nickel of VC money out there for any e-commerce start-up. In fact, potential investors to whom I pitched actually left my presentations -- laughing! After several discouraging months of failed attempts to raise money, I was faced with a decision: Did I believe in my vision enough to try to make a go of it by bootstrapping the operation? 

I went back to my computer and began reworking my plan so that I could launch the company on a fraction of the cost of initial model. Armed with this revised model, I teamed up with two other women who were willing to join my start-up and work for a few months with no pay in exchange for a minority equity stake in the company.

Next, I set out to sell the business concept to prospective customers and found two Packaged Goods companies to contract with. We had two customers before we even had a building or any systems in place!

 I signed a short-term lease for 600 square feet of what seemed to be the roughest warehouse and office space anywhere. Let me tell you, this was rudimentary space. It adjoined a fruit & vegetable distributing facility, and in the summer, it always smelled of rotting produce. Our warehouse was on the second floor, and delivery trucks came to the bottom floor. We unloaded the trucks by hand and carried the inventory to the second floor. It was a workplace and gym in one!

Finally, on June 1, 2001 we shipped our first case of Hefty Baggies out the door. I personally financed everything from software and telephone systems to post-it notes and packing tape. By this time, it had been over a year since I had any personal income, and my bank balance was getting pretty low! I arranged a small line of credit from M&T Bank (with my personal guarantee), and Monroe County loaned us some money for equipment. I also managed to persuade some family and friends to invest in My Brands. All of this gave us a little more cash, but I still had no income of my own. As it turned out, I didn’t receive one cent of personal income until the fall of 2005! (My Brands wouldn’t exist today if I hadn’t married my understanding and supportive husband, Tom, in April 2001.) I still don’t earn anywhere near as much as I did in my last job.

Looking back, I would tell you that bootstrapping My Brands was one of the toughest challenges that I have ever handled. It was and remains stressful and scary, but it was the only way this company could have came to be at that point in history.

For all of the pain, there are endless benefits that have come to our organization as a result. For example, we have a culture that reflects the experience of bootstrapping. Our employees are grateful to be part of our company and are serious about conserving cash. Each person takes ownership in and feels the ups and downs of our daily business. New employees who join us either adopt the culture or are never accepted by the team. Everyone is conscious of the struggle it has been for us to get to where we are today.

In the current economic downturn, many businesses have taken big hits, but our company has remained lean and focused. We couldn’t have been better equipped to handle softness in demand. 

It would be fun and certainly less draining to start a company with capital provided. However, with that financial breathing room, it may be near impossible to build a financial culture as resilient and tough as that of My Brands’.

Tip of the Week: It's Just an Idea

by Suzanne Clarridge

While an idea is the premise of a business, actually starting a venture takes more than imagination.

An idea is intangible and has little value standing alone.

Bringing an idea to life requires hard work and commitment. It is execution, persistence, evolution, and adaptation that ultimately determines a company's success and survival.

Great business ideas are far easier to come by than great businesses.

Get Your Ego Out of the Way and Listen to Your Critics!

In July of 2000 I decided to give entrepreneurship a serious try. I had been considering the idea of starting a company for many years, knowing that I always wanted to follow in my father’s footsteps to be an entrepreneur. In fact, I had planned my career expressly so that I would develop the skills and knowledge that would equip me to someday run my own business. 

Following the advice I got from Bill Stolze's book, Start-Up, I had been mindful all throughout my working career to being open to ideas for business opportunities. Finally, the idea that ultimately became the core concept for my company, My Brands®, came to me while working in marketing for Hefty brand products.

Through my experience at Hefty, I had found an idea and even gathered some good empirical data that supported the need for what My Brands does today. Even with that, I knew that I needed more advice.

Web tip of the week - Pick-up the Phone, Get Out of Your Chair and Talk!

"The reason that we have two ears and one mouth is that we may listen more and talk less."
-Zeno Greek philosopher

This is an important concept pertaining to business communication. It is at the core of what is wrong with our growing over reliance on one-dimensional digital communication tools such as email, texts, IMs, Tweets, blogs, etc.  Yes, I believe these are valuable tools to enhance communication. My concern is that they only flow one way; they are open to misinterpretation and they make it easy to avoid creative or difficult face-to-face discussions.  In short, they are not replacements for good old fashioned conversation or dialogue.

The best managers are all great communicators. A strong interpersonal relationship with your employees, suppliers and customers will make you better at your job. Today, the best ideas, the best products and the best companies are the direct outgrowth of collaboration and teamwork that comes from communication.

The next time you start to email the person sitting next to you, get out of your chair and start a conversation instead. There is nothing like it!

Always Operate in the Black

As Wall Street goes through its most chaotic period since the Great Depression many small businesses are concerned about cash flow and credit. The next few years will certainly be no walk in the park for small business owners but instead of worrying, now is the time for small businesses to become more strategic in how they manage their operations.

At My Brands, our CFO and I have one rule that we follow religiously - always operate in the black. Your company can stay in business for a very long time – through economic crisis and more – if you focus on this as an objective.

As a brand new company, especially before you have any sales, this can be tough or even impossible to do.  Strive for this objective, sacrifice to achieve it.  Our company operated for 18 months without making a profit.  Since that time, we have done everything we can to keep our focus on not over extending ourselves. 

Ask the Entrepreneurs: What Would Warren Buffet Say?

[Note: Students in the Entrepreneurship program at Simon have submitted a number of questions and we encourage you to ask yours via the form on our Home/About page. We'll have one or more of our bloggers offer their takes — which should provide starting points for your thinking and more discussion.]

Question: What do you think are the 3 most critical skills a new business owner must have and why?

1. We are back to another Warren Buffet quote (as in my earlier Q&A post) on this one:

   "It's better to hang out with people better than you. Pick out associates whose behavior is better than yours and you'll drift in that direction."

   I think that one of my best business skills is recognizing the areas in which I am weak and hiring people to compensate for my weaknesses. I do what I do well and find other people to do what I am poor at doing.

 

2. And more from Mr. Buffet:

   "The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective."

   It comes down to patience, problem-solving and common sense. If these are not qualities that you have developed, you should.

 

3. Although this one may appear to conflict with Mr. Buffet’s comment about business schools above, I believe you should get an MBA and/or have many years of business experience.

Shakespeare didn't have to deal with software suppliers!

[Note: Students in the Entrepreneurship program at Simon have submitted a number of questions and we encourage you to ask yours via the form on our Home/About page. We'll have one or more of our bloggers offer their takes — which should provide starting points for your thinking and more discussion.]

Question: What's a mistake you made while starting your business and what have you learned from it?

Maybe I can get Cindy Hirschberg and her lawyer friends off the hook! (See her post on the value of finding a good business lawyer.)

I seem to be terrible at selecting software infrastructure suppliers. With only one exception, every supplier that we have used has been months to years late delivering their product. Their inadequate performance has threatened the very existence of our company and cost us tens of thousands more than I could have ever anticipated.

I am not sure if I have learned my lesson — other than to beware. I haven’t figured out how to prevent this from happening again. It seems to a universally horrible experience for everyone. Does anyone know the secret to picking software vendors? Or is just a fact of business life that all "go-lives" are painful, late and expensive?

Ask the Entrepreneurs: Beating the Business "Divorce Rate"

[Note: Students in the Entrepreneurship program at Simon have submitted a number of questions and we encourage you to ask yours via the form on our Home/About page. We'll have one or more of our bloggers offer their takes — which should provide starting points for your thinking and more discussion.]

Question: Name two or three important characteristics that you seek in a partner that provides a substantial amount of capital for your business.

There are so many things to consider in partners that invest capital in your business. Partnerships in business are critical for any company’s success, but can be just as difficult as any marriage. I could argue, in fact, that business partnerships are more difficult than marriage because most marriages begin with a strong emotional and idealistic commitment. Business partnerships are usually based on simple economics so the fundamental basis of the commitment isn’t as strong. I wonder what the five-year failure rate of business partnerships is? I bet business partnerships fail at a higher than do marriages!

Ask the Entrepreneurs: Overlooking the "Mousetrap Fallacy"

[Note: Students in the Entrepreneurship program at Simon have submitted a number of questions and we encourage you to ask yours via the form on our Home/About page. We'll have one or more of our bloggers offer their takes — which should provide starting points for your thinking and more discussion.]

Question: Having successfully run a business for several years, what are one or two difficulties in starting a business that many budding entrepreneurs overlook or fail to consider?

"If a man can write a better book, preach a better sermon, or make a better mousetrap, than his neighbor, though he build his house in the woods, the world will make a beaten path to his door."

—Ralph Waldo Emerson

To me, it is this famous “mousetrap fallacy” that leads to the doom of thousands of start-ups every year. It seems to be particularly common among the aspiring “high tech” entrepreneurs. Some engineer or scientist develops some new widget that does this really cool thing but they have no idea whether or not there is any potential need or demand for the product.

My Favorite Book on Getting Started

I am the daughter and also the granddaughter of entrepreneurs. My brother is also an entrepreneur. It would seem that entrepreneurship runs in our family's blood. Or maybe, as my father says, none of us could work for anyone else so we had to start our own businesses!

Whatever ... I knew many years before I founded My Brands that I wanted to build my own business. Apparently this is common among entrepeneurs.

A dear friend of mine,William J. Stolze, who passed away a few years ago, wrote my favorite book on the topic of entrepreneurship: Start Up: An Entrepreneur's Guide to Launching and Managing a New Business (1999). Bill was one of the founders of RF Communications here in Rochester. In Bill's book he observes that many entrepreneurs know that they want to start a business, but they don't necessarily know exactly what business they want to be in. That was definately true with me!

I highly recommend this book. It is an easy read full of common sense and great advice. I followed Bill's advice that an entrepreneur should develop good business skills and keep their eyes and ears open to potential opportunites for new businesses. That is exactly the path that I took that led me to the idea for My Brands. I suggest that if you are thinking of becoming an entrepreneur this is the easiest first step that you can take.

You can view a couple of good excerpts from his book here.