I just spent the morning with another successful, entrepreneurial company. In truth, I guess I should say I spent the morning with the founder of that company.

One of the things that I really like about doing what I do (either interviewing entrepreneurial founders or trying to get them to sponsor our show) is that it allows me to more or less compare notes with them, vis-à-vis building a company. This particular gentleman had successfully built an accounting practice.

After leaving that meeting, I stopped to grab a bite. While eating, I started to think about exactly what this gentleman, just like the more than fifteen hundred other entrepreneurs I have interviewed and therefore learned from over the years, did to build his successful businesses. And while what I’m about to tell you is by no means the be-all-and-end-all, it is, and in my opinion, a reasonable summary of what it takes to build a successful start-up.

Here goes.

Last week, I received feedback from readers who disagreed with my definition of “entrepreneur.” I said then, and I’ll stick with it now, that a true entrepreneur was/is someone who builds an enterprise wherein the product/service is truly unique. That is, that product or service simply did not exist before that particular entrepreneur came along.

So, I differentiate the term, “Entrepreneur,” from “Small Business Owner” by defining the SBO as, “someone who starts a new business that is modeled after an already-existing one.” For example, another restaurant. Another dry cleaning establishment. Another clothing store.

At Duquesne University, I teach a course entitled “Introduction to Entrepreneurship.” I spend half of the fifteen weeks available in that course teaching the students how to find a uniquely differentiated idea. In the example of the dry cleaner, for instance, I suggested to the students that, in addition to just cleaning clothes, the business also specialize in “renting” clothing to people who have broken limbs. (This idea actually came to me once when I broke my leg and arm skiing --- when this happened, I thought to myself, “Why is there not a dry cleaning establishment where someone can, and in effect, ‘rent’ shirts with just one sleeve or pant leg? Or whatever. You get the idea.)

So the first step in building a successful business is to find a safe harbor. I often tell my students, “Find the biggest/smallest unique niche that you can, and then find a way to defend it against competition.” The goal, therefore, is to, “find some uniquely differentiated area of endeavor wherein the buyer marketplace is big enough that you can build a significant company, but yet small enough that it won’t draw the attention of the ‘big boys’ who, really, are the only ones that can hurt you.”

Sometimes you can be ahead of your time. I’ve had many start-ups that fall into this category. One company I can recall had a beautiful idea for a software tool. This tool would have automated a significant and time-consuming process. The trouble was, the “real” market had not yet manifested because significant adoption of the language that our tool created was still one to two years away. We had to put our guns back in our holster.

You can also “miss” a market going the other way. Example: You wouldn’t want to make your living by fixing cassette recorders these days.

Finding investment dollars (something I personally don’t do) for a unique and one-of-a-kind product/service start-up can also often be quite difficult. If you think it’s hard finding “early adopters” for a product or service, magnify that difficulty factor by ten in terms of looking for investors for that same product/service. It’s just a very tough road.

But let’s assume that you do find a unique product/service and you do find the money to get you through the early months of losses. Even then, the race has just begun. Because, you still have to build barriers to keep out competition until such time as you and your company can achieve escape velocity. (For those who like metaphors, just think of those old war movies, where the wounded guy is firing the machine gun out the front window while his healthy troops are scurrying out the back door to safety.)

So, assuming you can come up with a unique product idea that is highly differentiated and for which barriers that keep your product/service unique (and therefore your profit margins high) still exist; you must next focus on the actual creation of a business that features this product idea.

Frankly, I don’t know which is more difficult: coming up with the idea or building the business. But they are both formidable tasks. As the entrepreneur/founder, the first thing you must do is look inwardly. You first must figure out exactly who you are, and then where, exactly, your weaknesses lie.

This is my famous “gas pedal”/”break pedal” analogy. That is to say, the Great Creator built people who love the accelerator pedal, as well as people who prefer brake pedals.

It is essential that you determine who you are because this inward analysis will be invaluable in helping you find your counterpart. You have got to find this individual and make him/her a partner or at least a highly-paid executive in your company. In either case, his/her job is to hit the gas or brake, depending upon your personality.

You have got to flow chart all the processes in your business, from start to finish. There are a million of these. But you have to look at them all because it’s the only way you’re going to figure out such things as:

• What can be outsourced,
• What can be done in-house, and at what cost, and,
• Who does what?

Also, it is imperative at this point that you figure out exactly what it is that you and your people do best. This is your core competency and/or your “secret sauce.” And you’ve got to both protect and perfect this core competency.

Once you have identified these factors, it is time to create an organization that is capable of building the products/services that will be shipped out the back door. This is your next challenge.

Staffing an entrepreneurial start-up is different from staffing a long-standing business. People who join start-ups are oftentimes “mutants” (my word!). I say this because the brave women and men who work in start-up environments generally will not find themselves happy or comfortable in “corporate” environments. And, of course, the reverse is also true.

Basically, you need to find people who (for the most part) are risk takers and hip shakers. These are people who love excitement and action and who would be bored to death in a traditional, “corporate” environment. This is not to say that it doesn’t hurt to have a handful of more traditional people manning key positions. Especially in such areas as production and accounting --- after all, the organization is generally growing toward these people, and away from the risk-takers.

So, you’ve got to not only have the right balance of gas and brake pedal people at the top, but you’ve also got to have a majority of risk-takers and a smattering of risk-averse folk all throughout the organization. (By the way, my ratio here is about 80/20 – risk-takers to risk-avoiders. Years later, these numbers will almost organically reverse themselves.)

And so that’s the constituency of your start-up organization. Now, let’s talk about the leader of this organization – YOU!

Ideally, the founder/CEO of an entrepreneurial start-up is both an “idea guy” and a leader. The good news is that these two characteristics do often manifest, naturally, in the same people.

But what if this is not the case? What if the “idea guy” (who almost always is an entrepreneur) is not also a leader?

You better be ready for this, because it can and will happen. And when it does, you’re going to need to find a leader who buys off on the idea with just as much passion and resolve as that idea’s true “Mommy.”

This gets tricky.

Making matters worse is the inevitable fact that entrepreneurial success will invariably force the seat-of-the-pants founder/leader/entrepreneur to become more of a pure manager. (Note: If you’d like to see someone’s skin color change right before your eyes, try telling an entrepreneur that he/she has to become a “corporate puke” [again, my term!]. They’ll not like it at all.)

Yet, that’s what must happen. He/She either must become a manager, or at least fake it. A third option, of course, is to go out and find that same person and pay him or her a great deal of money to run your business. Sometimes, this even works.

But the organization will indeed “work” when a true manager begins to institute management practices.

(Note: For a great discussion of this, tune in to my June 19th show with Regis McKenna, perhaps the greatest high-tech entrepreneur of all time. Regis was on my show last Saturday, [May 8th] and I thought that his insights into the formation and growth of Silicon Valley were just magnificent. Wait until you hear what he has to say about building high-tech start-ups on the 19th.)

Once you’ve sorted out all of the above, things start to get a lot easier. But of course, there are activities that must never stop happening, and here are just a few of them:

• Sell, Sell, Sell - Mr. McKenna would tell you to first “influence the influencers.” By this, he wants you to more or less “Find the lead cow and get that lead cow’s attention.” Have you ever seen a herd of cattle? There truly is a lead cow, and that lead cow will indeed turn the herd and the herd will indeed follow. Why, I know not. But it’s quite interesting to watch.

  These are not necessarily what Geoffrey Moore (a direct disciple of Regis McKenna BTW) would call “early adopters” or even “innovators” – for while there are quite a few of these “types” mixed in, “influencers” can also be people in the trade press, key bloggers, and/or generally-known industry leaders.



• “Watch How You’re Growing” - Look for moles that are changing color and keep an eye on your organization’s respiratory rate. In other words, it’s not yet time to take vacation (this will come --- and in spades, but later).

There are so many ways that a company can implode: sometimes it’s an innocuous hire made by someone who doesn’t quite “get it.” This is why I always insist on taking a long and hard look at every single person who comes to work for us, regardless of our size at that time. Michael Jackson was right when he sang about “one bad apple spoiling the bunch.”

The only real way to know what’s happening in your organization is to track your company’s activities using relevant metrics. You really need numbers on everything. Feel free to invent ratios that may themselves not even seem to make sense. (Try this one right now --- for example, go back and count the number of sales prospecting visits your salesperson or staff [or you!] made during the first, say, six months after your startup. Then, analyze and compare the most recent six-month period. Scared yet? Even worse, you may not have this data to analyze. Ugh!)

And of course, there’s nothing at all wrong with MBWA (Management By Walking Around). When you start either not knowing or even remembering the names of your people, it’s probably time to slow things down a bit.

Regular readers of this column and/or listeners to my radio show have heard me say this many times. I don’t care what business you’re in, that industry and your place within it is/are dynamic. Not only are competitors gunning for you, but changes (opportunities?) are happening by fiat (e.g., government edict), as well as by accident (look at this current crisis in the Gulf of Mexico).

Plus, it never hurts to keep your people on their toes. Remember, most people seek repetition in their day-to-day tasks. They like to do the same thing, over and over.

Unfortunately, this does not dovetail with a successful entrepreneurial start-up; these companies thrive on broken-field running. This means that it’s the job of management to push employees out of their comfort zones on a regular basis. You can accomplish this in many ways, including making people trade jobs and/or creating whole new divisions with different responsibilities.

Whatever you do, don’t fall into the trap of “complacency though repetition.” Do this and you’ll soon find yourself on the outside looking in.

What you’ve just read is a tiny preview of a much larger “product” that we intend to create here at The American Entrepreneur. This will be coming to a theater near you in the relatively near future.

But it does, and at a very high level, reflect at least some of the lessons that I have learned over the years; the two biggest ones being:

• Find a unique niche, and,
• Manage your people “differently.”

And of course, it sure as hell doesn’t hurt to be lucky. This is the one thing that, and in my observation over the years, seems to always find the most successful entrepreneurs and their startups.