The "Small Steps" It Takes to Build a Multibillion Dollar Business

Elaine Pofeldt,

In the old days of entrepreneurship, you were either succeeding or failing. Your business was the next Apple, or it was a dud.

But in the past few years, thanks in part to the lean entrepreneurship movement, something’s shifted in our thinking. There’s more of a recognition in the media and popular imagination that businesses are constantly evolving, almost like living organisms. The startup that’s limping along during its early months could evolve to become the next Facebook or LinkedIn. Now, says Leonard A. Schlesinger, president of entrepreneurial mecca Babson College and former COO of Limited Brands, “people don’t fail. They pivot.” If the original business concept isn’t working, the entrepreneur tweaks it, until he or she gets it right—or realizes it was all wrong in the first place and tries something else.

In Just Start!, a new book Schlesinger coauthored, he looks at how serial entrepreneurs who built businesses with revenues ranging from $200 million to the billions—actually behaved when starting a business. And, contrary to the popular image of entrepreneurs as swashbucklers who routinely take crazy risks, many turned out to be pretty careful and analytical. “What surprised me, quite honestly, is the fundamental difference between the myths we structure for entrepreneurs and the reality,” he says.

The first thing serial entrepreneurs do when starting a business, the authors found, is to take a small, “smart step” toward something they desire to achieve. Next, they stop and reflect on what that action accomplished. Finally, they decide if they still want to move forward, given what they have deemed to be their “acceptable loss”—or, as Schlesinger put it recently— “how excited you are about an idea against what you have in time and money.” With each step they take, they go through the process again until they either bail out, shift in another direction or succeed. Of course, they act quickly. Moseying through the steps doesn’t work in a fast-paced, global economy.

ZenCash's Brandon Cotter

Schlesinger’s analysis rang true when I spoke recently with Brandon Cotter, 42, a self described “chronic entrepreneur” from Dallas who’s scored some nice wins. He got a crash course in what it takes to run a successful business when he started a series of them after graduating from Texas Christian University. Early in his career, he sold one startup, CreateTech, which built websites for companies like Hummer, to Broadcast.com and found himself working alongside Mark Cuban for a while. He sold another one, musicforce.com, a Christian Music Site, to Gaylord Entertainment Group. However, a follow up act, Stick Networks, a wireless operating system network, went under in early 2001, after he and his founding team raised $15 million from outside investors. “After two great successes and two exits, I was in the position of having to tell 50 investors we lost their money,” he recalls.

What learned is how important it is to get an idea out there and start testing it early. While he put up the sitefor musicforce.com in a month and quickly saw that it had legs, he and his team spent two years perfecting the technology for Stick Networks and seeking patent after patent. “We ultimately ran out of money and failed before we had a chance to bring it to market,” he says.

He kept on innovating and got involved in other startups. At his most recent, ZenCash, he’s taken the lessons he learned at Stick Networks to heart. ZenCash is an automated collection system for receivables aimed at folks like freelancers, who often find themselves twisting in the wind when a customer pays really late, or not at all. Customers can set things up so, for instance, someone will call to remind the client about a bill every 30 days and to send it to collections at specific point, such as 120 days from when it was issued. “There’s a discipline that comes from inserting a mechanical nature into your invoicing and having a contract in place,” he says.

Cotter launched the site for Zen Cash in February, six months after starting up, using $500,000 of his own money and funding from friend and family. “You’ve got to get it in front of customers so you get real world feedback,” he says.

As a freelancer myself and co-editor of a site called $200K Freelancer, aimed at helping indie professionals earn a living, I wonder how easy it will be for ZenCash to make its customers whole. I had a number of normally great clients pay me late during the worst of the recession, and I wonder what would have happened to those relationships if I had asked a third party to call them about the invoices instead of keeping it between us. Maybe it would have helped me pay my own bills faster—or perhaps it would have just annoyed them at a time when they were waiting for checks to come in from their clientele. All of them paid me in the end.

But it’s for Cotter to find out what the results of ZenCash will be. Like the successful serial entrepreneurs in Schlesinger’s book, he’s taken the small smart step of getting his idea out there. If what he’s doing is working, he’s positioned to step on the gas pedal. If customers don’t buy his services, he’s ready to pivot, like any smart serial entrepreneur these days. “Until you get it out in front of random strangers who are willing to pay for it, you really don’t know,” he says.

SOURCE: www.forbes.com