Three Ways to NOT Start a Business

March 19th, 2013 by Rich Christiansen

Once each year I’m asked to go and lecture at my Alma Mater Brigham Young University for their entrepreneurial program. This is something quite frankly that I look forward to and, although I’m not always sure how much value it gives, I feel it is a way to give back and to connect with the students. Indeed today is my lecture at BYU and as I was preparing for this presentation my heart has been joyful and melancholy at the same time based on several interactions that I’ve had with young entrepreneurs.

My presentation today is going to be dramatically different than in years past. I’m not going to use slides or do a big fancy presentation or get right to the nuts and bolts and gritty details of The Zig Zag Principle which everyone knows that I love so dearly. My presentation today is going to start out telling three stories. These are three stories that all came from Brigham Young University entrepreneurs. These stories indeed highlight three ways NOT to start a business.

Story Number One:
Last year at this very lecture there was a young man that kept having tears come to his eyes during the presentation. He was taking notes almost faster than I could speak and I could tell that there was great impact. After the lecture he asked to visit with me and we had a dialogue and he proclaimed that, “Everything you said to do, I did the exact opposite and I’m paying for it.”

This young man now has visited with me several times. He was in my office last week again with tears in his eyes as he explained that he had great desire to be an entrepreneur as did several of his dear friends and roommates. They’d all jumped in without an operating agreement and chewed off a great opportunity for a service industry in the local area that required high capitalization. This happened to be a massage business.

This young man then highlighted to me how he’d signed personal guarantees as well as collateralized the one asset that he had, which was a piece of real estate, shortly into the venture while he was an undergraduate. He got married and began having children. Ironically his partners exited without signing the personal guarantees and he ended up getting stuck with all the liability.

Indeed the business model, although superficially looked great, the reality was it was not financially viable. Each year, despite tremendous efforts, it would lose as much as thirty, forty, fifty thousand dollars in a year and membership base in the business grew. It appears to be somewhat high profile but now the young man in preparing to graduate from college with a Master’s degree. He has a great and promising future before him, indeed several very large and well-known companies desire to employ him. His situation led him to ask me, “Rich, do I declare bankruptcy or do I try digging my out of this? I can’t stay in this anymore. It will disrupt my marriage, furthermore I’m moving. Do I pay this debt off for the next period of life?” He estimated that he lost around $150,000 while going to college. Although I have great respect for this young man and his tenacity to try being an entrepreneur he exposed himself to risk that wasn’t appropriate or necessary.

Story Number Two:
A young man at the age of twenty-five years old was working for a company and saw that the model was just slightly askew. The company ended up going out of business. Well, this young man saw a solution to the model, put $15,000 on his credit card at the age of twenty-five, and indeed he was right. He instantly had a team, they started having tremendous success and before long the company was doing several million dollars a year on a kind of an edgy business model, but a brilliant business model nonetheless, and he started buying all his employees BMWs. It was a pretty darn arrogant company, full of swagger.

He sold that company and within a couple of years, I think at the age of twenty-eight to the tune of $12 or $13 million. Great win, right? Twenty-eight years old, done! He’s got it made! What did he do? Well, he kept the swagger up, kept driving the fancy cars, acting like he had it all made, but he couldn’t resist from violating the non-compete agreement.

What’s the result? He violated the non-compete with the company that he’d sold. They came back and sued him, taking basically every bit of the payout that they had given him, completely decimated the new company he had created, and in many ways I think really damaged his future potential. Devastating.

Story #3
A young man who for twelve years now comes to me at least twice a year. I expect the call every spring, every fall. “RICH! Great idea! I’m ready to start the business now! I’m finally gonna do it!” Twelve years later he still hasn’t created the company he’s been talking about.

These three stories highlight the reasons I passionately believe in zigzagging, failing efficiently, and not exposing yourself to more risk than you are prepared to deal with. Now I realize, some people have a higher risk threshold than others. The first story was dramatically higher risk than the second one. I’ve come to the conclusion after many years of battle wounds, cuts, and scars, and scrapes that failure is very good and important. And going forward I will not be consulting, helping, or supporting or enabling anyone who can’t show me two or three really good failures.

The secrets to success aren’t really secret at all.
Secret Number One: Fail efficiently and learn from your mistakes
Secret Number Two: Avoid risking what you can’t afford to lose
Secret Number Three: Maintain a proper balance in life so you don’t end up destroying the most important things in your life

That’s what defines entrepreneurship. I think in my next post I’m going to talk about the three ways TO start a business with great success and it’s going to involve a young lady, my mentor Alan Hall, and I’m going to pick one other just for joy.

Go forward. Zig Zag. Don’t be afraid to be an entrepreneur. Keep these key things in mind. Don’t risk what you can’t lose. Fail very efficiently. Avoid destroying the most important things in your life.

Five Steps to Thrive when Bad PR Happens

March 11th, 2013 by Rich Christiansen

This past week I got an urgent email from a college of mine who had just received notification of a caustic article regarding his industry and sector on the front cover of The Wall Street Journal. Although it did not call him out by name it did call out his primary competitor and somewhat poster his career as being in an erroneous industry.

The first reaction of my college was to want to jump in and to make comments and boo and protect the industry and protect his name. With great wisdom the other peers on the email counseled him not to do that.

As I thought of this situation I recalled another great tragedy with incredible negative press that should have quite frankly devastated an entire industry. Everyone knows that I love to climb in the Himalayas at altitude and indeed in 1996 the greatest tragedy in the history of that mountain occurred. Two very famous climbers that led probably the best-known guiding services, Mountain Madness by Scott Fischer and The Adventure Consultants led by Rob Hall, were at the very center of this crucible event. A terrible storm hit, they broke several of their rules, and many climbers died on the mountain including these famous guides. Jon Krakauer wrote a book called Into Thin Air, a best-selling book that documented this terrible tragedy.

What was the result for the mountain climbing industry? The result was even after this documented tragedy came to light several other agencies stepped in and focused on their own safety and success rate. What do you think happened? They ended up thriving. A few examples are Alpine Ascents led by Todd Burleson and Himalayan Experience led by Russell Brice. The Discovery Channel even created a special program documenting Russell’s teams. This only added more fuel to the fire.

I showed this example to my college and as well as five crucial steps that were necessary to execute when bad press happens. I think this is also very applicable and appropriate for you to take advantage of these rules.

Number One: Resist the urge to jump in
Your first reaction is going to be to jump in the fray and get right in the middle of everything. My wise uncle used to say, “When you wrestle with pigs you’re going to get mud on you.” It’s very important that you resist the urge to jump right into the middle.

Number Two: Differentiate your company
Identify what went wrong within the industry. Pinpoint the problem and make sure you clearly show your client how your company differentiates from those problems. Bring it up every time you speak, every time you present, and every time you see a client. Indeed, that was the key things that these Everest companies did that helped them to survive. Every time they dialoged they didn’t bring up the tragedy, as a matter of fact they avoided it. But what they did is say, “We are a safe company. Here is our safety record. Here are our rules and this is how we handle difficult situations.” Make sure you differentiate on your key value propositions especially where your competitors failed.

Number Three: Strategize with your trusted network
Just like my associate did, the first thing he did was reach out to his network and with their help came up with a strategy and plan of how to posture and position. Take a few breaths as you back out of the fray and come up with a really solid game plan of how you can advance forward as everyone else is retracting.

Number Four: Put on your white hat
Putting on your white hat means never making slanderous, pointing, or cutting statements over what occurred. As a matter of fact avoid the topic and whenever it is brought up and thrown right in your face you can make comments such as, “Oh, well in the case of Rob Hall, he was an incredible climber. I have nothing but respect for him. My heart and best wishes go out to him and his family at this difficult time. You’ll find that we’re a company that focuses on safety and on safe success.” ?Indeed, put on your white hat.

Number Five: Use the publicity to your advantage
A New York politician said, “I don’t care what you say about me, just make sure you spell my name properly.” And indeed that’s the fifth point. Oftentimes press, even the bad stuff, can be beneficial. So don’t get right in the middle of the fray where you end up getting mud all over you, but use the renewed interest in your favor. Any type of press, PR, and exposure can be good for the industry. Just make sure that if your name is used they highlight you properly and they spell your name properly. That means links to your website, Twitter, Facebook, all the social media pages, and other various ways to contact you.

Indeed, what could seem like a very negative, caustic event can end up being one of the best possible things for you. I’m confidant that applying these five steps when negative PR happens, rather than going out and hiding under a rock or rather than jumping in front of the bus, can advance your business rapidly. Indeed, as we talked about the Seven Moments of Impact several posts ago, anytime there’s chaos such as this it’s usually an incredible opportunity to advance your business. Take advantage of the negative PR, as a matter of fact, draft off of press, whether it’s positive or negative and your business will do nothing but thrive.

The Rest of the Story

March 4th, 2013 by Rich Christiansen

When I began writing The Zig Zag Principle I strongly knew that I wanted to have a section about eating your own cooking. When I wrote Bootstrap Business I already had a great story about the business I was currently running. We grew from $5,000 to $1.2 million the first year and then over $2 million the second year. We sold the business two years, three months, and nine days after creating it. However, there was one resounding complaint. It was, “Sure, Rich. But you’ve done it thirty-five times already.”

When doing The Zig Zag Principle I wanted it to be an independent success story. We based Froghair on the principles in the Zig Zag book and by following those principles I was able to report in the book that in the first year alone Froghair indeed had grown to just over $3 million in sales. Today I’m very proud to announce The Rest of the Story.

Two years after having been created, Froghair grew to $4.4 million in sales with a 14% net margin of $603,000 net profit. (Not bad for a $5,000 start.) My expectation is this coming year Curtis and Shane will yet double the business again. But what I’m MORE proud of is how literally and exacting the team has applied the principles. Now that’s not to say there haven’t been some extreme ups and downs. After that first year we had a major supply problem and indeed the company had a near death experience. However, through perseverance and determination on both the supply and consumer side of the business we’ve completely stabilized. I would like to publicly give a hat tip to Curtis, Shane, Jared, Emily, and all the other team members who have been involved in this effort. What you’ve done is spectacular and I will tell everyone boldly and publicly that the principles and concepts in The Zig Zag Principle work. They work! They work! They work! If you apply them you will see a dramatic impact in your own life. Now this isn’t saying it’s easy, because it’s extremely hard and oftentimes you feel like you’re hanging on with your fingernails, but it’s so totally worth it.

I look forward to hearing the rest of your own story.