Ideate

1 min. with a Superhero: Richard Hooker, co-author of “Shoestring Venture: The Start-up Bible”

by Yolandi Janse van Rensburg on 25/03/10 at 10:15 am
2 comments

Today we’re chatting with Steve Monas and Richard Hooker, co-authors of a fantastic new resource for start-up entrepreneurs: “Shoestring Venture: The Startup Bible”.

Richard – we really like your book. Nice and practical, and with loads of handy tips for our readers. We notice that you start with objectives, and advise for entrepreneurs to write a business plan. Why is this so important when start-ups so often tend to fluctuate wildly from the original plan, ending up with something 12 months later that looks nothing like you envisaged?

My favorite quote is a recent one from Tim Geithner, the current US Treasury Secretary: “Plan beats no plan every time.” And your question, I think, goes right to the heart of the distinction between a “business plan” and “business planning,” a distinction we whip into the ground in the book.

The same with “business plans” and actual business planning: it’s entirely possible to have a “business plan” without a trace of business planning and equally possible to have “business planning” that looks nothing like a business plan. In fact, they frequently exist in heroic isolation from one another.

Unfortunately, most of the books and tips and Web sites and software that help you write a business plan actually don’t help you with any of the business planning part.

So, returning to the language of your question, “ending up with something 12 months later that looks nothing like you envisaged” is not a failure of the business plan, which is usually free from any substantive business planning, than a failure to actually do any planning in the first place, a failure to account for and come to terms with all the issues, contingencies, and the “what ifs.” Planning, in other words, is precisely about “envisaging” what might happen to your business. This is why, in our second edition, we’ve added to our first chapter a very lengthy appendix that covers business planning tools, especially issue trees, to teach readers how to actually plan a business.

But most small businesses and entrepreneurs go straight to the business plan and skip all that pesky business planning part. Why? First, they can find a million books on “business plans” and nearly none on the actual planning part. Second, business plans are easy because they’re 99% formal. If you can color within the lines, you can write a business plan. But planning is long, difficult, and painful; you have to face issues you’d like to pretend didn’t exist.

That doesn’t mean that your start-up won’t “fluctuate wildly,” it simply means that the “fluctuate wildly” parts will be planned for and everyone will be ready. More often than not, “nothing like you envisaged” is something that kills your business long before you make it to the 12 month milestone. It’s too late to figure out how you’re going to fly when you’ve run off the cliff. But if running off the cliff is a contingency you’ve anticipated – as painful as it may be to deal with that fact – it’s kind of nice to have a hang glider sitting there before you get to the edge.

If terrorists threatened you with your life, and asked you a question that you had to answer on pain of death: “What is the most important aspect of a start-up?” what would your answer be?

Don’t deal with terrorists. I suspected that my Amazon store for terrorists would backfire. Actually, those terrorists asking me the question actually know the answer because most terrorist organizations are actually pretty good at it: organization.

Now, in our first question, we talked about bad planning, which I consider one of the three “start-up killers”: bad planning, bad organization, and bad controls. But bad organization is a more certain business killer.

Consider a business like a game of Russian Roulette. You know, the game where you put a bullet in the chamber of a revolver, spin the chamber, point the gun at your face, and pull the trigger. Your odds of survival increase the fewer bullets you put in the chamber. Bad planning, bad organization, and bad controls are like adding more bullets to the chamber.

And nothing adds bullets to the chamber and stacks the odds against you like bad organization.

“But, wait,” you say, “what about businesses with just one person? Two people? What does “organization” have to do with them?” – Everything.

In fact, I would say that one-, two-, and three-person businesses need good organization far, far more than the big and bloated corporate bruisers.

Don’t think of organization as people or job descriptions. Don’t even think of “organization” as the opposite of “disorganized” – “disorganized” doesn’t always mean “badly organized,” it just means “formally unorganized.” Think of “organization” in terms of the functions and tasks that a business performs. Not all businesses perform the same functions and tasks as other businesses, but every business has tasks that absolutely must be performed, some that are occasionally necessary, some important, some less important. So my definition of “business organization” is:

“Organization” essentially means performing the functions and jobs necessary for your business at a performance level necessary for success.

Organization, then, requires some planning and a whopping dose of management skills, even for a one-person business. In fact, it’s doubly important for a one- or two-person business because of the significant operational constraints of such a frustratingly understaffed organization.

The point is, you need to manage your resources – especially if “you” is the only business resource you have – in such a manner that all – ALL – the tasks necessary to your business get done at a high performance level. You can formally organize your one-person business by dividing your time up among “job positions” (I actually advocate that you create an organization chart with real job slots and, well, you hire yourself into all those positions) or you can do it on-the-fly. As long as the tasks get done and done well, you are “organized,” even if you look formally unorganized.

You cover financing quite extensively in Chapter 2. A big question Ideate is asked often is “how do I secure finance for my world beating idea?” – we often advise start-ups that they should go with “FFF”. Would you agree with that answer?

The funny thing about business is that there are no “right” answers. As a natural-born contrarian, whenever I hear “best” or an “unbreakable rule,” my mind quickly goes to the folks who broke the rule. “You must have a business plan.” Okay, Google didn’t have a business plan. Hewlett-Packard didn’t have a business plan.

The “there are no right answers, just better answers,” applies to financing, as well. The “best” financing is not any one thing, whether FFF, loans, lines of credit, or investors. “Best” is always in line with the operational necessities of the business, the goals of the owners, and the realities of the marketplace.

For instance, I work with a young man who has invented a projector that will turn any cell phone into an HD projector. Whip out your cell phone, point it at a wall, and you have an image to rival that of a 60 inch plasma screen. The technology requires enormous capital investment and the intellectual property requires some legal heft to defend (remember: your legal rights extend only as far as your ability to pay for lawyers). In addition, the frightening competition and lightspeed innovation in the tech marketplace means that time to market is a critical component of success. Undercapitalization is one of the greatest threats in the tech industry because it almost always means that someone else will cross the finish line first. The number one concern of this company is time to market and dominating the market early. The “best” way to go is equity investors that sufficiently capitalize the business for rapid initial market entry – and that, indeed, is what we achieved. His company is now majority-owned by a tech holding company.

Every business, however, must start on some sort of seed money, whether it’s the pay check or savings of the founder, or FFF. There are many situations where FFF financing is ideal. First, there can’t be major cash flow issues during the stage that’s being financed. If you anticipate any cash flow shocks, FFF financing does not necessarily guarantee a cushion. At some point, people begin thinking along the “throwing good money after bad” line. Second, time-to-market can’t be an issue. If competitors are out to beat you to the finish line, undercapitalization is your greatest handicap. Third, the business needs to move to other financing OR profitability in relatively short order. If all you’re looking at is FFF financing, then your prospectives should realistically project profitability pretty soon.

You’ve written a great resource for entrepreneurs and we will be advocating it highly to our readers. What books have influenced your thinking in the past?

As I grow older and more adept at the mysteries and esoterica of business, I have less patience with the rah-rah books about business, the purple cow and four-hour workweek books. These books have great things to teach us, but the reality is that business is about making the right decisions and, to really make it hard, the right decision for my business is the wrong decision for your business. Okay, Steve and I have a company where we’re rolling out dozens of entrepreneur books in the next two years. Do we blog? You bet. Social networking? Absolutely, required to build our audience. But suppose we owned a company that manufactured the universal joint for Subaru drive shafts. Blogging? Social networking? Purple cows? Cows of any color? Are you mad?

So when I reflect on books whose content I’ve used day-in and day-out, they aren’t big, romantic, glitzy bestsellers with bald guys on the cover, but the real white bread affairs about decision making, thinking, and planning. Books like Barbara Minto’s The Minto Pyramid Principle, which I use every day when confronted with planning and business issues – so unconsciously that I don’t realize I’m doing it. This isn’t a book that changed my thinking, it was a book that changed how I think. And since there are no right answers, only “better” answers, knowing how to think about business is a million times more valuable than the what. Believe it or not, books like Gene Zelazny’s Say It With Charts – that and the Spartan maieutics of the McKinsey consultant I was working for who forced me to change all my ways based on that book – totally changed and clarified how I thought about business problems. If ever there was a book about how to think in a structured way that doesn’t really talk about structured problem-solving, it’s that book.

I have a very strong and immovable contrarian streak and an equally strong libertarian streak. As a result, I don’t have much patience for folks who tell me what to do, like purple cows, especially when they use language like “the 22 immutable laws of branding.” Give me an unbreakable rule and ten seconds and I’ll hand you back a rule broken from here to next Tuesday. As a result, I have a great fondness for the books that give me more power and control over the way that I think, that provide methods to turn ideas into realities, and provide the basis for genuine creativity and problem-solving. So I only recommend business books that actually help you solve practical problems (like ours) or books that teach you how to think (like Barbara Minto’s). If you’re after ideas, creativity, or innovation, skip the biz books entirely. You’ll get more from ten pages of Nietzsche or Dickens or Dante than you will in the entire business section in Barnes and Noble.

Sweat capital is often deemed a perquisite of a successful start-up. Hard work is invested in a business, often at the expense of family, relationships and any vestige of a social life. What is the antidote to this, if any?

In our blog (www.shoestringventure.com) and the first edition of our book, we continually make the distinction between being an entrepreneur and being an employee. My answer to this question is simple: if you think you can separate your “job” as an entrepreneur from the rest of your life, including your family, like you would separate your “job” for some company from the rest of your life, then you’ve got a hard wake-up call coming. We are encouraged to think of our job as “not who we are” when we work for wages (something Marx called “alienation”), so our real lives are what we do when we go home – including our family. That’s because someone else “owns” you, owns your work, and owns your ideas when you work for someone else. So you naturally think of your family and your social life as the place where you get to “own” yourself.

But becoming an entrepreneur is not a “job” decision, it’s a lifestyle decision. In particular, when you start a business, you get to “own” all your ideas and all your work. Your business is “you,” so you should make it continuous with your family and social life. If your business does not become a family project, then you’re probably doing something wrong with both your business and your family. The most successful entrepreneurs I’ve met have worked hard to integrate their family with the business – there is no clear boundary between the two. If you don’t, then your family and social life becomes the place where you aren’t “who you are,” and that, my friends, is a recipe for disaster. Just ask William Lauder.

Richard Hooker, MBA, divides his time between writing books and running a Los Angeles marketing agency that specializes in start-ups, turnarounds, and independent films. Thanks Richard for the insights you provided on your book and your general business sense!

Yolandi Janse van Rensburg writes about social media, marketing, life and, of course, cars. We say “of course” because Yolandi is nuts about anything on 4 wheels and runs Autofemme, a blog about cars. Our Ideate sub-editor is also the Heavy Chef girl at World Wide Creative. You can follow her on Twitter @Yolandi_JvR View more articles by Yolandi Janse van Rensburg.

Tags: Business books, Richard Hooker, superhero interview

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