Business # 2 – Out of the Ashes

Posted by on Jan 31, 2013 in Blog, Featured | 1 comment

My first business about killed me.  I took a year to lick my wounds and look at other options like insurance, multi-level marketing and solar, but did not feel, with my limited capital, I could create cash flow fast enough.  I was sure I did not want to be part of the sign industry.  However, that was the business I knew.  Those were the contacts I had made.  I had a little family with mouths to feed.  What was I to do?

I did the unthinkable.  I started another sign business.  This time I did it in a very different way.  No big factory, no fancy office, no salesmen, no union employees.  Just me, a truck and a helper.   A true shoe string operation.  I learned to do everything myself including sales, estimation, installation, and service.  While the old business was 65/15/10/5 , the new business was 22/0/5/73 on installation and 55/0/5/40 on retail projects.

Cost of Signs / Labor Sales Overhead Net Profit
Sign Business #1 65% 15% 10% 5%
Sign Business #2: Wholesale 22% 0% 5% 73%
Sign Business #2: Retail 55% 0% 5% 45%

 

Don’t get me wrong, it was still hard, but there was a tangible reward for my efforts.  I soon realized that the sign industry was a physically demanding trade, but I was young and strong.  Going up and down ladders all day even helped me improve at my favorite stress reliever, basketball.  I found that some kind of outlet was essential to keeping a mental balance.

I found a niche!  In addition to the resurrecting a few retail accounts, I placed ads in trade magazines and started permitting, installation, and warranty service for national sign companies.  Sales were now coming in without much effort or time.  I started to treat the major sign company installation coordinators as my top priority.  I provided them great service and strove to make their job easier.  I never tried to compete with them or steal their customers.  The payoff was that I no longer had to find jobs, jobs found me.

marriot_sign1

The capacity of the pickup was often tested.

The home business is truly a mixed bag.  I really had no other choice; I could not afford to pay for a shop.  The commute was short though, down the hall and through the family room.  I would start and end the day in my home office and work in the field most of the day.  Sometimes it was hard on the family to not interrupt me and I am sure my wife did not love the housekeeping tips. It was also clear that neighbors did not appreciate our cluttered driveway and all the large delivery trucks that blocked the street. At one point a policemen even came to the door because he saw a large Taco Bell sign looming over the fence.  We showed him evidence we were going to install the signs and the officer eventually believed us.   All in all, the home office did work for me and my small business.

pairie_creek_camp

The work truck doubled as a recreational vehicle.

My mentor beamed with pride of my accomplishments and offered to help any way he could.  I didn’t need much help though, things were looking up.  I continued to build up that business and hired another billable employee.  I was able to be part of the family again and even started vacationing with my family.  As busy as I was, I still pursued my hobby of searching for new business opportunities.  Though I had found some success, I knew this was not the end goal.

Keys to Success

  • Shoe string businesses can work
  • Make everyone billable…wife, kids, dog
  • “Strategy” is largely about choosing what you will NOT do. By not getting into manufacturing I was able to work with national sign companies leary of local competition
  • Mentor quote, “Generating first $100,000 investment capital is the hardest, 100,000 to 1,000,000 is much easier.”  I certainly hoped he was right.
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My First Business – From Dream to Nightmare

Posted by on Jan 24, 2013 in Blog, Featured | 2 comments

Business #1 was in the exciting, creative, highly visible sign industry and seemed like it would be a perfect fit for my young, entrepreneurial spirit. Little did I know that creative really meant hard-to-manage.  The sign industry was inherently flawed with companies scrambling to understand the right business model.  On top of this, the economy was working against me.

My mentor entered the sign business because of the lucrative opportunity to lease signs to business owners with very profitable terms. Sign companies would build up a sizable portfolio of leases which provided excellent long-term income streams. To our disappointment, many big financial players entered the leasing game with better terms than we were offering.  This greatly diminished the financial incentive of being in the sign business. Understanding the changing climate, my mentor was willing to sell me the equipment and some national accounts for what seemed like a very low price.  I started the business under a new name, eager to continue the battle.  A battle it was.  Competition and low margins continued to be the norm.  The influx of new competitors came from the lack of significant barriers to entry—for less than $10,000 someone can buy a metal brake and a band saw and start making signs.

By the numbers, this was a 65/15/10/5 company: 65% cost to build the product, 15% to sell the product, 10% general operating expenses, and 5% net profit if everything goes right. When you are undercapitalized in a custom business, 5% net is not going to get it. For 5 years I was a slave to this business. Trying to manage a business with low margins and keep money in the bank was a near-impossible task.

I aged fast as a 22-year-old father trying to keep my first business afloat. I worked for the business; the business never worked for me.  After many quarters of disappointing sales, the salesmen proposed entry into the strip club/casino sign business. While that did represent an opportunity, the head designer and I could not use our creative energy and talents to deal with the seedy side of the business.  If I didn’t have enough problems, one of my employees was murdered and I had to go identify the body. Another employee was a suspect. It was a scary time. I learned at a young age exactly what I don’t want a business to look like.

My first business left me broke and in debt. In talking to my mentor he reminded me he had both successes and failures.  He assured me this was a good thing.  He told me you always learn more from failures than successes. I closed that business.  I traded my beautiful, silver Mercedes for a used Ford Fiesta and started charting a course to business #2.

Keys to Success

  • Pay attention to industry metrics and know that a 5 to 7% net income in a custom business leaves no margin of error.
  • Understand the competition and position your company appropriately in the marketplace.
  • Be aware of changes on the horizon. Trade magazines could have tipped off my mentor and me of the challenges big financial heavyweights would pose for the leasing arena.  These days, trade magazines, blogs and other social media are great ways to stay on top of future trends.
  • At the end of the day you want to have a business that you are proud, one that represents your morals and values.

 

What was starting your first business like? Leave a comment and let us know.  If you like this post, follow our future posts with the RSS Feed.

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Growing Up In The Biz

Posted by on Jan 17, 2013 in Blog, Featured | 1 comment

Growing Up In The Biz

I like to think of myself as a boy raised by a small business.  My dad was, at the time, the owner and operator of a small electric sign company.  A converted laundry room served as the headquarters of the business.  I recall hanging out there in the mornings before school as 1 or 2 of his employees met to get information about the day’s assignment. My dad worked really hard and often arrived home late, dirty with saw dust and paint on his knit crew shirts.  While he worked a lot, he had a certain amount of flexibility to his schedule that other dads did not.  One day,  my siblings and I arrived home from school to find my dad in the backyard putting the finishing touches on homemade go-cart built from an old, green lawnmower.  We were overwhelmed by the surprise.  My dad’s schedule also made it possible to regularly travel the back roads of California on family trips.  All of these trips however, included some sort of stop for work, whether it was to take pictures of a recently completed job, or to pick up some neon that my dad would tape to the hood of the truck.  Memories like these made me idealize the life of a business owner because of the flexibility and the notion that hard work was directly rewarded.

A Geek Is Born

In that same laundry room office there was also a computer my dad purchased for accounting.  I still remember everything about this computer–16Mhz and a 40Mb hard drive.  It was top-of-the-line and I think it cost about $2,000 (1988 dollars).  You could not keep me away from this computer.  I instantly learned DOS commands and was surprised to find a host of games loaded by the shop that built it.  This was the defining moment of my geek career.  Over the course of the next 10 years I would convince dad buy new computers “for the business” so that I could play the latest games.  Many times we would drive down to San Jose to buy these computers and other parts.  I would see signs for well-known brands of hardware and software and I thought it was so cool to live near where this technology was developed.  In my early teens I decided this is what I wanted to do for a living.  I recall saying that Bill Gates was my hero and I recently found a journal entry from middle school stating that I wanted to major in computers and business.  I guess I am doing what I set out to do, though it is interesting that it does not always happen in the way you imagine.

Risky Business

My career path has since led me through a degree in computer engineering, with a subsequent job at Micron Technology.  While working, I attained an MBA and landed a job at HP.  So far, my career has been rather safe.  I am naturally risk adverse.  I usually go toward the guaranteed, which is why I have worked for large companies.  At the same time though, I still harbor dreams of running my own business and seeing the direct benefit from my own effort.  I often wonder if building up something of my own, where I don’t report to anyone but the customer, would provide the passion that I seek in my work.

As I have worked at these many large corporations–APL, Walmart, Micron and HP–I have come to realize that big companies are just a collection of small businesses.  Most of what I have learned at these places can be applied to any business setting.  I also tend to focus on a more theoretical approach to business, which will contrast nicely with my dad’s practical point of view.  As you follow this blog, please feel free to make comments and ask questions.  Email us with ideas and propose new topics for us to explore.  I will also be inviting other distinguished entrepreneurs to share their stories in this forum, so please stay tuned.  Consider this your sanctuary for getting into the Business State of Mind.

 

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A New Venture

Posted by on Jan 16, 2013 in Blog, Featured | 4 comments

My MBA son has prompted me to venture into the cyber world and share some of my experiences.

Coincidently, my personal story is a “rich dad, poor dad” experience.  My father worked for the State of California, an 8-4:30 job for 40 years.  He was a great example as a father and church leader, but had no interest in business or risk.  My mentor, “rich dad”, was always in business for himself since his college days.  I soon determined that I was not cut out to be a state worker so from age 15 on, I started patterning my business future after my mentor.

I was exposed to many financial transactions in my teens as I grew up in Sacramento.  I went away to college at age 17, got married at 18 and went to work with my mentor at age 20.  My first opportunity to be in business for myself came at age 21 when my mentor grew tired of a business I was helping him run, so I made an offer to purchase.  He generously rewarded my hard work with a favorable deal.

Shortly thereafter, I moved to the SF Bay Area.  My mentor purchased a large company and moved to Southern California.  Though we were hundreds of miles apart, we stayed in touch almost weekly, discussing business, investments, money, and life.  I certainly think a mentor is a key to owning your own business.

Since that first business, I have purchased, owned, and operated 14 small businesses.

In this blog I hope to share my experience, formulas, and ideas about being in business for yourself.  There are ups and downs, sacrifices and benefits, failures and successes, all that could possibly help someone else chart a successful course.

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