Letter 014 - Ten Lessons I Learned Watching A Parent Build a Business (Without Outside Funding)
Some takeaways helpful for thinking through the growth of an organization
This is a longer one that I mostly wrote recently for myself as I contemplated what I learned during a childhood spent in a very entrepreneurial home. It’s a bit personal and talks a bunch about my family and business.
Last year, we moved from Seattle to Atlanta. The move was certainly motivated a bit by the desire to be closer to family, but it was also motivated by the incredible evolution of the city and its rapidly-growing startup ecosystem.
We’ve seen something really remarkable developments happening here (many people moving to / back to the area; incredible development of the food scene, more unicorn startups, etc.). But as I’ve driven through the city I called home for most of my childhood, I’ve also experienced countless moments where my heart feels a wild mix of emotions — the feeling of failure, the sweet satisfaction of triumph, anger, joy, the pure fun of coming up with a way to grow part of a business. It’s all there.
Many of these emotions have come from having a front-row seat to watching my family (not just my Dad! — this was a team effort) build a business from scratch, with no outside funding, as an African American in the Southeast…a business that still grows to this day, and still employs a bunch of great people while treating them with deep respect and appreciation (they have something like a 98% retention rate over the last decade…). We’re approaching the 21st anniversary of the company, so I thought I would write down some of the biggest lessons I’ve learned from watching my family build something that has outlasted virtually all of its competition. While my career has taken me more into consulting + tech startups than manufacturing services, it’s still an inextricable part of our family, and I am beyond grateful for the character and lessons earned throughout the last 21 years.
Here is a list of ten things I learned from watching my family build a tech-oriented, manufacturing services business. More detail is below, after the break
If you have a family while building a business, you need to make sure they understand the Why behind your journey, and how it might impact them (and be prepared for it to be challenging)
Obsess over your early customers’ value derived from your services
Build deep relationships with your customers
Practice kindness at all times, and always do right by others
Index the markets you’re playing in, have a deep understanding of your competitors, be focused when you go to market
Justify Every Cost, Embrace Scrappiness, Do Not Skimp on Employee Compensation
“Betting the company” is not a strategy that most people should employ
Have a 5-10 year vision, and a longer-term set of aspirations beyond that
Point That Has Worked…That I Disagree With: Err towards doing things in-house versus outsourcing
Meticulously Personalize Your Sales Motion (for high-value prospects)
Before I go into more detail below, I wanted to share this picture of my Dad, his father (Eugene), and I on one of our first vacations after the company had started turning around after a rough couple of years. It was (I think) the first time my Father had been able to pay for a vacation for his Dad, and we decided to celebrate in style (…yes, my glasses have a blue tint — … it was “a style choice” as my fiance might say!). The journey from zero to (whatever you’re targeting) is challenging, and it’s important to celebrate when you hit milestones. My grandfather passed away not too long after this picture was taken, but I think he knew his son would build something special. Likely photo credit to my Mom (who, yes, also worked for the family business for a very long time!).
If you have a family while building a business, you need to make sure they understand the Why behind your journey, and how it might impact them
I watched two parents be very eyes-wide-open to how difficult the journey would be, and they were straightforward with me about the types of sacrifices we would have to make. It was harder than I think any of us imagined it would be, but also incredibly rewarding
Tactic: they involved me in many aspects of building the business, so that I felt like I was part of the journey too (and over time, I did my part to help!). This helped reduce the distance that a kid can feel from this all-consuming thing a parent is doing.
My parents did a lot of this. I grew up spending late nights in commercial banks and hanging out in my Dad’s office before he left corporate america / F500 land in 2001
Reminder: Watch your health at all times. My Dad, after a particularly rough few years, got into a brutally consistent fitness habit that he has sustained for essentially 16 straight years at this point — multiple spin classes, walking at a local park / mountain, deep relaxation time
Know that this journey will impact your kids in ways you can’t predict — going to be totally raw here:
When you grow up with a successful founder in the family, it puts ENORMOUS pressure on you to try to “live up to” what they did. It probably took until I was 30 years old to actually process this in a healthy way. Over time, you learn how to have your own dreams and your own bars for yourself
The stress of building a company oftentimes spills over into your home life, and in our case I saw many … “debates” over business strategy - some totally cool + logical, others very heated. Our nightly dinners usually featured a discussion about some business topic — I joke about it now with colleagues, but it got to be exhausting at times! Which leads me to the next point…
Work never stops when you’re building. When we went on vacation, we talked about work. When we were taking walks in the park, we talked about work. When we went to see a play, we marveled at the backdrop, and then thought about work. When I went to college and called my parents, we talked about work. And when I got my first job in consulting and called my parents after work, we would first talk about the consulting firm, and then we would talk about the company.
There was an unyielding obsession with building & getting it right, because if we didn’t get it right, there was no multi-generational wealth safety net. Savings were gone. It had to work. And particularly as African Americans / Cubans we knew that winning for us would help us play a more powerful role in helping to support more entrepreneurs of color (in particular)
For context, it was virtually impossible for our family business to get funded. They tried, but they were turned down over and over and over and over, and in many cases treated with pure disrespect. The end result was pretty enormous risk-taking for my family — basically betting our life savings on the company
Which leads into some points about how to “make it work” …
Obsess over your early customers’ value derived from your services
Everything at the company was/is value oriented. Every single interaction has to be valuable, and every single thread of the business is always getting better.
By obsessing over what your first (or first two) customers need, you end up creating hyper-tailored offerings for them —> allows you to build a consistent / repeatable revenue base —> allows you to start layering other offerings into the mix
Do not take your core customers for granted. If you do that, they will leave you. Our business has placed huge emphasis on gaining the adoration and trust of customers, over and over again, through every interaction, whether it’s an unscheduled Friday afternoon phone call, or a multi-hour negotiation meeting surrounding a business opportunity
Build deep relationships with your customers
If you don’t have a personal connection with your customers, they’re going to have less affinity for you. Lower affinity —> lower barrier to exit (the business relationship)
We have always gone above and beyond to know the people we worked with, and many of these people are still close family friends 20 years later
In the high tech space, this oftentimes looks like a Customer Advisory Board (CAB) or Design Partner Program (DPP) — the customers who are willing to stick with you while you’re still in the core building of your offerings
I say “offerings” a lot, this just means: products, services / experience. So, “Offering Design” = the design of a product / service / experience
Practice kindness at all times, and always do right by others
Being kind / warm to others is important because: (1) it feels great to make others feel great (at least that’s my view), and (2) in business, people remember how they felt around you likely more than they’ll remember whatever you’ve spoken about over time
Screwing over competitors or partners in order to make more $$$ is a shitty way to behave, and it’s an even shittier way to do business. You can needlessly create enemies, and all it takes is a collection of enemies getting on the same team to make it really hard for you to move forward / do business
The business has embraced partnering with other organizations as a way to create win-win scenarios. “One should always strive to be fair” is a quote I wrote down from my Dad a while ago
Index the markets you’re playing in, have a deep understanding of your competitors, be focused when you go to market
To win repeatedly in markets, you absolutely must know who is playing in them and what technologies could disrupt the way a market is organized.
Know Your Market = know all of the major players, the medium-sized players, the smaller / newer entrants. Understand their value proposition, know their values, get insight into how they sell, how they price their offerings, get feedback on them from potential buyers. And do this constantly. This market visibility is ultimately how you can make more informed strategic choices
Use this visibility to have very services that are hyper-tailored to the buyers in your market space. Nothing should feel generic
Know Tech Trends = the business I’ve been discussing is largely focused in the manufacturing services and operations industry, and we’ve kept tightly up to date on things like 3D printing, Internet of Things, robotics, and process automation very closely, because each of these technology areas has impacts on the fundamentals of our business. By studying it closely, we are more likely to take advantage of new trends than we are to be a victim of the disruption they cause
Justify Every Cost, Embrace Scrappiness, Do Not Skimp on Employee Compensation
Justify Every Cost = while my family didn’t explicitly do ZBB (zero-based budgeting, a practice whereby a business must, line-by-line, justify every cost incurred as a means of ensuring maximum cost control + spare resources to invest in higher-output/higher-margin activities), we did approach the business with a ZBB-esque mindset.
We stayed in decent hotels, but not super nice hotels; we had enjoyable meals, but we weren’t doing Michelin star dining haha; employees — including executive officers — were paid reasonable salaries + had long-term incentives in place to align their behaviors with target outcomes of the business
Embrace Scrappiness = innovation is often born out of limitation. For example, there were plenty of times where a larger competitor had a mammoth marketing budget (we never did), and we would find ways to out-hustle them at conferences. Our trade show booth (which I proudly manned for many years!) was nice, but the time we saved in breaking it down at the end of the afternoon was more time we spent at happy hour with potential customers
Don’t Skimp on Employee Compensation. I actually pressed delete here because what I was writing was too watered down. I’ll say it this way: pay employees more than market, even if (and it usually does) mean taking less executive compensation. One of the things I am most proud of our family business for is paying WELL above market, and actually saying NO to projects that don’t allow the company to continue making a reasonable profit + pay employees very well. This IS the strategy if you want to keep people for a long time (some businesses, like Netflix, have a model that’s more akin to tours of duty; this was not our approach)
In the early years when there basically was no income (read that again, imagine having a family with medical costs / costs from raising two kids, your savings are completely depleted, and you know it will likely be this way for years), it was easy to almost fantasize about the days when you would have income again
At the point when things started to take a bit of a turn, it would have been enormously easy to just take as many of the profits as possible, but that is not what company leadership did. They carved out a very sizable portion of the profits from that year and immediately distributed it to the employees, and then they kept doing it…and kept doing it…and kept doing it, and still do it. Which makes recruiting the best people in the segment wayyyy easier. The best people in the segment want to go work at this company
“Betting the company” is not a strategy that most people should employ
As I’ve read through countless business books / articles / podcasts, I’ve oftentimes come across cases where businesses made MASSIVE bets to grab parts of a market, bets that could kill the company if they failed
Business press loves to glorify the entrepreneur who bet the company (I know a couple who did this successfully!). We are mostly hearing about the cases where it worked, but most of the time this does not work.
Betting the company can take your company out of the game…when half of winning is showing up
Most great companies are not built in 3 or 4 years (which might seem counter to much of the news I read). It usually takes 5, 10+ years to build something great. During that time, most entrepreneurs will have opportunities to make really bold plays to quickly ascend up a market’s pecking order.
There are times when this is the optimal move, but we’ve found that in most small/medium-sized businesses (read: not companies trying to fully own a global category, like many venture-backed companies), it’s probably better to be more measured and avoid the temptation of get rich quick schemes. For our business, this was taking on risky international projects in geographies we had not been to ourselves and where we did not have a deep appreciation for the local way of doing business (including contending with local regulations)
Have a 5-10 year vision, and a longer-term set of aspirations beyond that
The reason I went into the industry of defining multi-year strategies was probably because I saw my Dad do this over and over again, every year iterating on the multi-year arc that the company would take. I saw the power in thinking ahead of where most people are, and in going so far as to draw out exactly how you think a game might evolve — literally drawing out charts and timelines with different scenarios and plotting key potential actions on these timelines, and thinking through — “If company Y exits this market because they can’t make enough margin, how will that impact us when they would be likely to pull out, say in June?”
But at some point, you need long-term aspirations that guide your choices today. In our case, there has always been a 10-20 year vision (albeit loosely defined…) as to where the company COULD go, and that helped to prioritize where we would NOT focus our energy in the near term
This ability to NOT focus on certain things helped keep the company focused on the activities and pursuits that could deliver the best-possible outcomes only. In the words of my Dad, “be careful chasing shiny objects.”
Point That Has Worked…That I Disagree With: Err towards doing things in-house versus outsourcing
I stronglyyyyy disagree with this approach, but I appreciate that the business has grown largely by totally avoiding the will to outsource certain functions. I am fairly certain that the company has never spent a single dollar on a marketing or advertising agency (for example), preferring instead to embrace peer-to-peer marketing via 1-1 relationship development and very consistent participation in a set of select trade shows + other ecosystem partnership plays
The reasoning for this has largely been cost management oriented + having concerns over how IP could be stolen — two things the business has always been hyper focused on — but I do think it’s challenging to build sustainable businesses by doing everything in house
Clearly I’ve been wrong here (for this particular business)
Meticulously Personalize Your Sales Motion (for high-value prospects)
Sales makes or breaks a business
When there is a high-value opportunity to pitch offerings, you should create a direct connection between the problems a customer is trying to solve for and exactly how your offerings are uniquely suited to solve said problems
It was in the early days of business building that I learned some of my research habits that now underpin much of how I operate in a sales context (things I’ve mentioned in prior articles, specifically Letter 002)
Role play how a key meeting will go…if not with yourself, then with a colleague who has sufficient understanding of the context.
Example: “OK, what if they say we’re too expensive? How do we handle that objection?” ——> (insert crisp bullet points about the value they need to see, how our higher price is more than offset by other factors, and how the quality of our outputs are unmatched + how our track record is utterly superior to any other company they could be talking to)
Consider that it’s taken 20+ years to build the business, these ten points barely scratch the surface of how it was done… However, they do encapsulate a bunch of what I’ve been reflecting on lately, as I’ve driven past places I haven’t seen in 15 years, sat in the same home we moved to back in 1997, and watched my parents continue to live the family business every day.
To have built a lasting industrials business as a minority in the Southeast is a wonderful accomplishment; it’s rare… And it’s virtually impossible to find another case where someone in this position has remained on such strong footing with their customers for so long. In fact, most of the competitors we played against back in 2002 are out of business. I think some of the points above give insight into why this company is still here, still growing, still creating value, while many other businesses failed (see point #2 about kindness and point #7 about “get rich quick” schemes — failure to heed those two points in particular has rendered at least three key competitors finished).
Back to my above point about having your own dreams and setting your own bar… I long ago came to the conclusion that to try and fully separate from this was futile. The experience of building is a fundamental part of my identify — who I am, and so instead of trying to blunt it, I’ve welcomed its influence.
Keep on keepin’ on, Dad + thank you, Mom, for also playing such a big role in the journey. You two are heroes, and I get my intensity from you both :) (my parents love to comment these days on how “intense” I am haha).
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