growing a business

the price of authenticity

2011-10-04T09:50:00.000-07:00

The economists are right. There is no free lunch. But is a free lunch what we really want anyway?

This may be the most expensive salad I’ve ever eaten, but it's also the most authentic. I literally made it from scratch, starting with the weeds I scratched and pulled (with help from friends) out of an abandoned garden plot in Rockville, Maryland. I bought the plants, topsoil, fertilizer, and pesticide, all organic. I then shaped the soil and put the plants in the ground.

The groundhogs and rabbits quickly had their way with my spinach, so I put up a net barrier. Beetles destroyed my cabbage in spite of a periodic application of organic “pesticide.” The record rains followed by record weeds also took their toll.

Here is a picture of the garden in its pristine state. It was a brief experiment in local production. Before our move to Colorado, Anna and I spent the past month and a half in Maryland to kick-off her new consulting career. I took the opportunity to do research and plan for my new business (selling authentic, locally made products). I thought working on a small garden would be an instructive hobby, and good blog fodder.

Last Sunday we harvested the surviving veggies, enough leafy greens for about four personal salads and herbs to garnish a full Thanksgiving table. On Sunday night, I carefully washed and sorted our bounty and put it in our hotel fridge. Overnight, the fridge then froze our prized greens into crunchy leaf-cicles. You should have seen my face. Yet post-thaw soggy salad never tasted so right.

What have I learned from this experience?

I’m a terrible gardener. (I had to start somewhere, right?) I have tremendous respect for gardeners and farmers of all stripes, and I’m glad to pay them to do the job better than I can.

Still, I’m proud of what I made. Producing something as simple, tangible, and immediately valuable as food makes me happy—even more sharing it with someone else.

People in my community make amazing things. In my short time in the community garden, fellow gardeners have generously shared (out of pity?) their figs, heirloom and cherry tomatoes, bell peppers, basil, beets, flowers, and more. These products were more valuable to me than anything I've bought in a grocery store.

Authenticity matters to me. After toiling in my organic garden, food is more personal. I want to know where it comes from (preferably a local farm or garden), who produces it, and how it's produced. For me, this knowledge makes the product better, and I’m willing to pay more for it.

A conscientious producer is a more conscientious consumer. It’s not just about food. When I look to buy almost anything now, I want information about its source, contents, and process. Authenticity, health, and environment are all part of my definition of quality.

Can I build a business on these insights? No. At least not yet. My experiment in local production was a very un-scientific study, with a biased sample of just one (me). However, I do have a working hypothesis:

Conscientious customers will pay more for a better and more authentic product—made locally, by people they know, using contents they value, with a process they appreciate.

Next steps: Develop a simple product with the above features, seek out a specific set of conscientious customers, offer the product through the right channels, and observe.

good soil

2011-09-08T12:01:00.000-07:00

To grow a good plant, you need good soil. Just the same, to grow a good business, you need good values.

Howard Schultz, CEO of Starbucks, believes that every company must stand for something. In his first book, Pour Your Heart Into It, he talks about his vision and values: competitive drive…make sure everyone in the organization can win together…blend coffee with romance…dare to achieve what others said was impossible…defy the odds with innovative ideas…and to do all this with elegance and style.

Sam Calagione, founder and CEO of Dogfish Head, writes the following in Brewing Up a Business: The values around which you choose to focus your business will form the backbone of your company more so than your business plan, management team, marketing plan, budget, or product line…Having good business values starts with a single, all-important idea—you either treat people with love and respect or you don’t.

Over dinner this week, I asked Frank Priznar, founder and president of PRIZIM Inc., what advice he would offer to an aspiring entrepreneur. He didn’t hesitate to explain the primacy of core values to me and my wife (one of PRIZIM’s newest consultants). To paraphrase, Frank said, Nobody else can tell you what your values are. Only you know. Write them down, ask for feedback from people you trust, finalize your values, and then stick to them. Your business may change, but your core values do not.

The following is my first crack at a personal values statement, phrased in the “we” of my future company. I welcome your feedback.

· Community. Life is better when shared. Our company seeks to create authentic community from the inside-out. We celebrate the genius of our community, and we invest in it.

· Creativity. To make something is an art. We are a company of artists and innovators. Our products are made with great care and quality, and they make a difference in people’s lives.

· Initiative. There is brilliance in beginning. It is usually the hardest part of any endeavor. We are a company of entrepreneur-leaders. We put a premium on collaboration, action, and learning by doing.

· Exploration. To explore is to learn. We embrace the unknown. We step outside the building to connect with people and nature. We are treasure hunters.

· Sustainability. Each year, we seek to become more sustainable than the last—better for people, planet, and prosperity. We invite stakeholders to help us set ambitious yet realistic goals, and then help us beat them.

· Honesty. It is still the best policy. Our business is all about integrity and transparency, both in our people and products. We guarantee product quality and customer satisfaction.

· Freedom. We are free people, and we give our time freely. This privilege comes with duties and reciprocal benefits.

· Flexibility. We deserve enough flexibility and time off to take care of ourselves—body, mind, and spirit—and to take care of our family, friends, and community.

· Respect. People are infinitely more valuable than any “box” we may attempt to put them in. We honor the dignity of all people with our words, actions, and attitudes.

Would you work for this company?

clearing the land before planting

2011-09-01T12:42:00.000-07:00

This week I met a good friend for a drink near the White House – not a bad place to think about strategy. And Ryan is a good strategic thinker, so I wanted to let him in on my nascent business idea and hear his feedback. He listened patiently. Then he asked a simple, but powerful question:

What do you think is the biggest challenge to making your idea a reality?

I thought for a moment. The answer seemed obvious...it was money. “Getting enough investment to build our company and open our first store,” I responded. I couldn’t have been more wrong.

Ryan acknowledged that investment would be an important challenge, given the need for cash to get any startup company off the ground. We talked about options to avoid a cash crunch, e.g., partnering first with another “brick & mortar” business instead of paying our own rent. Then he shared a book recommendation: The Four Steps to the Epiphany by Steve G. Blank. Ryan had heard rave reviews from a colleague and thought it might help me think about who my customers are.

I downloaded a preview of The Four Steps yesterday, and I quickly realized that my response to Ryan’s earlier question was dead wrong. Steven Blank would argue that my “getting enough investment to build the company and open our first store” was the same kind of flawed thinking that led to the dot-com crash of 2000. Yikes. I thought my MBA would have taken me further than that.

Blank gives colorful examples of startups that were extremely successful at attracting investment – to the tune of hundreds of millions of dollars – and building spectacular companies. Sadly, many imploded within months of launching their product. Cash burned. Executive heads rolled. Giant companies, some with multi-billion-dollar market capitalization, went bankrupt and took unsuspecting employees and stockholders down with them. Why? The answer is painfully simple. These companies didn’t understand their customers. They were too busy developing their products.

Blank was a serial entrepreneur. He led many successes, but also failures. Eventually, he joined a venture capital firm as an advisor. From this outside perspective, he watched other startups grapple with the same problems he faced. He came to see that “the path of a startup is well worn, and well understood." Blank writes:

"There is a true and repeatable path to success, a path that eliminates or mitigates the most egregious risks and allows the company to grow into a large, successful enterprise.”

Blank calls this path Customer Development, an iterative process of customer learning and discovery. In short, it is trial and error, but on small enough scale, and early enough in the startup process, that the errors are constructive rather than destructive (i.e., they don’t waste cash).

Customer Development is more art than science. It is not marketing or sales in the traditional corporate sense of those disciplines. Instead, it is all about getting key people, including founders and product developers, out of the office and in front of potential customers. They need to present their stripped-down product, see if it meets an important customer need, validate the customer’s willingness to pay, adjust the offering based on reliable feedback, and then create a replicable and profitable business model. Building a full-scale company before taking these steps is just a roll of the dice.

Ryan, thanks for the great book recommendation. You and Steve Blank have definitely helped me to "clear the land before planting."

breaking ground

2011-08-24T12:44:00.000-07:00

Let's face it. Starting a new business is hard.

A stagnating economy makes it even harder. Investors seek safe havens, banks hold back on small-business loans, and consumers spend less on products and services. Under these conditions, some might say starting a new business is idealistic. I disagree.

Entrepreneurship is necessarily optimistic. It is a deliberate act of creation in light of the real possibility of failure.

Only through the entrepreneur's calculated risk-taking does anything get done differently or better. In that sense, the entrepreneur embodies the kind of American spirit that we need to get through our current crisis:

belief in the power of an idea to improve peoples' lives
confidence in oneself and one's team to make that idea a reality
initiative to plan, execute, learn, and innovate
humility to balance risk, return, and duty to coworkers and community
tenacity in the face of challenge and uncertainty

Successful entrepreneurs and small business owners, I salute you. I aspire to put your virtues to work in my own enterprise and, in a small way, contribute to a clean & green American renewal.

This blog will be a case study in growing a small biz from the ground-up. It will document my adventures (and misadventures) in choosing an idea, doing market research, creating a unique value proposition, branding, incorporating, developing a website, forging partnerships, financing, and more.

Here's to breaking ground! Please subscribe to my blog and join the conversation.