Costa Rica, Family, Fatherhood, Leadership, Parenting, Simplicity

Our personal experiment in “simplicity”

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We have spent the last six months on a personal experiment in “simplicity.”  For us this meant “simplicity” from our accumulated stuff, consumerism (i.e., buying more stuff) and our typically busy schedules.  Not trying to suggest we led a monk’s existence while we were here in Costa Rica – we took some awesome beach trips and visited many parts of the country, but below are the intentional things we did as a family in pursuit of “simplicity”.

  • We moved here with two duffle bags per person, each weighing <40 lbs.  Each person’s bags included their clothes, electronics, books, personal items, etc.  This was to last each of us six months and needless to say, we left a ton of stuff at home.  And each of us has not only realized we don’t miss most of what we left behind, we can’t remember most of it.
  • We decided to drastically minimize new purchases that were even close to a “want” vs. a “need.”  We ended up repairing (e.g., shoes and pants) vs. replacing in many cases.  Our daughters were aware of this decision, and amazingly were able to all but eliminate “I want …” from their vocabulary during our time here.
  • We rented a relatively small furnished home.  I’ve spent less than five minutes fixing anything in this house since we arrived six months ago.  With relatively limited cabinet/fridge/freezer space, we simply don’t have the room to buy lots of food and therefore have thrown away almost no spoiled food.  At home in the US, we have so much more cabinet/fridge/freezer space than we really need and we always seem to fill it up.
  • Our girls’ sporting activities were limited to those at school, and when the bus dropped them off they were home for the night.  In contrast, my wife and I are basically chauffeurs for our girls and their activities every weeknight in the US.  Here, we have eaten dinner together as a family almost every night.
  • My wife and I shared one car.  This has been tough, although it is still a pretty blessed position by world standards where the overwhelming majority of people do not have even one car.  Regardless, there were things we simply said “no” to as one or the other had the car, we walked to the grocery store if need be, and in general, we just made it work.
  • Perhaps most important, we’ve had meaningful conversations with our girls throughout the last six months about simplicity and the options it affords you in life.

Without real intentionality, planning and family communication, I don’t think these things would have happened.  For us, temporarily moving abroad enhanced our ability to make this experiment a go as we started with a “clean slate.”  [For some awesome and inspiring examples of proactively living “simplicity” in everyday life, I highly suggest reading “More or Less” by Jeff Shinabarger.]

There is an inertia effect in our lives that seems to demand more “stuff” and more commitments and it is so hard to overcome.  I am hopeful that having “lived” the lessons in this experiment that we will be able to remember them when inertia once again begins to take hold at some point in the future.  And it’s my hope there are other aspects of simplicity we can bake into our DNA.  As Richard Foster describes so eloquently in his book “Celebration of Discipline” – “If what we have, we  (1) view as a gift vs. earned by our own merit, (2) it is to be cared for by God – I.e., we don’t get all hung up or anxious over losing it, and (3) it is available to others – then we will possess freedom from anxiety.”  And not be owned by our “stuff.”  That would be a pretty great place to be.

I believe our “simplicity” exercise will have a meaningful long-term effect on my family.  Not every day necessarily, but hopefully at some point when it really counts.

How are you simplifying your life?

Government spending, Leadership, Mass shootings, Obamacare

Some things that curb my excitement to return to the US

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imagesOne huge benefit of temporarily living outside of the US is the chance to temporarily forget.  That is, the chance to forget, or at least minimize, complex and polarizing problems that exist today in the US.  While not necessarily wholly unique to the US, these are the issues I most dread being confronted with in the daily news upon our return.

(1) Mass shootings.  (2) The Affordable Care Act/Obamacare.  (3) Federal government spending.  (4) Miley Cyrus’ tongue.  Before someone tunes out thinking this is a political rant based on items 2 & 3 – It’s not, as on both those points it’s a leadership rant – and there is equal blame on both sides of the political aisle.

(1) US Mass shootings.  Unfortunately, these “isolated incidents” as mass shootings are called no longer seem that “isolated” but rather have become a part of the US DNA, as a society we are becoming desensitized to this horror and our elected officials have demonstrated no competency at reversing the mass-shooting trend.

With way too much regularity, there is news of another mass shooting.  Years ago, it was big news to report a murder on the evening news.  Today, unless the victim or assailant is personally known, most people don’t even bat an eye at the reporting of a murder.  With the frequency we now experience mass shootings, how long until we only give a passing glance to the latest reported incident when we are not directly personally affected.

We can’t even seem to agree on the number of mass shootings. CBS evening news recently reported 85 dead in 11 mass shootings so far in 2013.  According to a recent USA Today article, 121 people have died in 26 mass shootings this year.  Per Reddit/Gunsarecool there have been 316 mass shootings in the US so far this year (Reddit defines a mass shooting as > 4 people shot, not necessarily killed, hence the greater number of shootings).

Our government response too often rings hollow.  The repeating pattern seems to be (a) mass shooting occurs, (b) our leaders emotionally state “we have to fix this”, (c) nothing is fixed or changed, repeat pattern a, b, c, a, b, c …

(2) Affordable Care Act/Obamacare.  I doubt the real increased costs or potential savings will be known until it’s fully implemented, but it is clear that confusion reigns.  To help clear the confusion both political sides state their case with amazingly precise and often incorrectly applied statistics.  And at the end of the day, I am simply worried that thirty years from now both federal and state budgets will be choked with yet another government program whose impact was not correctly estimated or planned for when implemented.

I find it amusing that people on either side of the issue state with certainty the additional expense or savings per family as a result of this program.  I’ve seen personal friends post how much more expensive their new insurance will be based on their new cost estimate.  I’ve seen news reports of how much certain people will save.  Regardless, we are currently saddled with a system that cannot seem to correctly apply government credits in either direction, so it’s currently unclear who is really saving or spending more and to what extremes.  And like any forecast or estimate, it is wrong by default, the only question is how far off?

Both sides liberally misapply statistics in their arguments.  Republicans have called it the biggest entitlement ever and base their math off of a comparison to the initial projections (instead of the actual costs) of other programs like social security and Medicaid.  Democrats base their savings estimates against decreases from forecast spending (instead of against current spend levels).  Both methods of comparison play with the truth, rather than strive to achieve it.

Perhaps it’s the history of other large federal government programs (under Democrats and Republicans) that make me the most nervous about Obamacare.  For example, long-term program costs have been woefully underestimated on many other federal government programs.  The actual cost of Medicare and Medicaid since inception are staggering multiples higher than initial government forecasts.  Is there a bit of evidence to suggest this program will be any different?  Additionally, few ever point to the federal government as the model of efficiency.  Personally, I hate inefficiency in my work, in my personal life and also in tax-spent endeavors.  How many millions of your tax dollars were recently spent to design the exchanges that don’t work properly?  How many more millions are now being spent to fix the exchanges?  But should anyone really be surprised that a federal government program is inefficient?

(3) Federal government spending.  The train wreck is so easy to see in other aspects of life.  Imagine a family that makes $50K per year but spends $72K per year, already owes $347K and wants to borrow more.  Would you loan them more money?  Would you listen to the husband or wife who said they were being “responsible” by increasing the amount they borrow each year?  These are obviously rhetorical questions.  How about a company that operated this way? The CEO would eventually be fired and the company would be delisted.  Unfortunately, those example numbers are reflective of our 2012 government economics, but on a much larger level.

In 1993, our debt ceiling was ~$5 trillion.  In 2003 it was ~$8 trillion.  Today it is ~$17 trillion.  When the latest debt-ceiling raise was put into effect the government cheered and the stock market rallied.  My first thought was who would be dumb enough to loan our country more money.  I’ve heard the argument that as a percent of GDP, our debt level has actually stabilized, so even though it is rising in absolute terms there is no need for concern.  This reminds me of the person we’ve all seen recently on the evening news – someone understandably upset at having their home taken away because the bank put them in a loan they could have never rationally expected to pay.  I can see the same general dialogue with someone on the news in the future stating disbelief that our government has done “this” to us as we were told borrowing more was the “responsible” thing to do.

I am not smart enough to understand all the complexities of the national economy.  However, it is crystal clear that a family, a small company or a large company (many of which are larger than many countries) cannot operate this way long-term and to some degree, this must be true for our country.  One on one, I suspect most Democrat and Republican elected officials would at least partially share this concern but collectively they are unable to do anything about it, which is a shame.  And a huge failure of leadership.

(4) Miley Cyrus’ tongue.  The item itself defines the issue.  I have nothing else to offer.

Facebook, Family, Fatherhood, Friendship, Parenting, Social Media

The caricature trap of Facebook

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imagesThe caricature trap of Facebook – as in a greatly exaggerated version of real life, that often imparts the wrong take-aways.

Facebook is an awesome tool for connecting and I am a fan.  However, I have lately been confronted by two dynamics that are just wrong.  They are wrong for adults and they are wrong for my oldest daughter who just turned thirteen and recently set up a Facebook account.

Don’t compare your real life to someone else’s Facebook life.  Looking at my page or my wife’s page one might assume our life is all sun, beaches and margaritas.  We receive comments from people all the time about “living in paradise every day.”  In reality, we live minutes away from pretty bad poverty, we struggle with language barriers daily, we struggle through homework with four kids every evening and we usually go to bed exhausted.  There are ups and downs like everyone else.

Facebook only shows a few snapshots of an otherwise long movie and most of us (myself included) tend to show nice pictures from nice experiences.  In a similar fashion ESPN highlights show perhaps 5 plays out of ~130 from a typical football game.  They don’t show the plays that produced no tangible results yet took the same effort and energy.

I love this quote from Jim Collins – “Comparison is the cardinal sin of modern life.  It traps us in a game we can’t win.  Once we define ourselves in terms of others, we lose the freedom to shape our own lives.”  How much more is this true when we are comparing apples (our real life) to oranges (someone else’s Facebook life)?  And with 10% of Facebook accounts believed to be fake, the comparisons can be even more outrageous.

Don’t seek worth or approval from “comments” and/or “likes”.  A day after my daughter put up pictures on her new Facebook account she was a bit miffed that neither my wife nor I had “liked” her pictures.  She actually felt unappreciated because we had not “liked” her pictures.  I suspect this one instance is a microcosm of what happens with lots of people – I.e., feeling upset, disrespected or unappreciated because of not receiving “likes” or “comments” after posting a message or picture.

“Unexpressed gratitude expresses ingratitude” (from Andy Stanley) exists in real life.  If my wife continually goes out of her way to do something nice for our family (she always does) and no one ever takes the time to recognize it, her likely inference would be that no one really cares. Somehow this dynamic gets incorrectly applied in the online world where the lack of a “comment” or “like” is viewed as a personal affront.   This situation reminds me of a funny line (“people like-button me, they really like-button me!”) in a very funny song some friends wrote and performed – So Many Friends (That I Broke Facebook.)

My counsel to my thirteen year old (and to myself at times) is to not be so fragile in spirit or desperate for an approval that really doesn’t matter or have any bearing on your self-worth.

At the end of the day, Facebook (or any other social media platform) can be a great tool.  Beyond simply staying connected, it highlights the above lessons (and many others) and can lead to some great parent-child conversations in your household.  What lessons have you gleaned from Facebook and how have you applied them in your life?

[By the way, some “nice” new pictures are in the picture gallery]

Faith, Family, Fatherhood, God, Parenting

Don’t make me come down there! (and other lessons God might be teaching us through parenting)

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Me and my little girls

Me and my little girls

The statement “there is no better or harsher corrective to one’s thinking about human transformation and development than one’s children” is so true at times.  As we wind our way through parenting our children, it is easy to envision God looking down at us, the parents, and shaking his head at the irony of how often we miss the lessons we attempt to teach.  I assumed I might find a book or a series of articles on this topic, but could not, so I thought I’d share a few I’ve collected over time.  Where I can recall a direct source for the metaphor it is attributed.

If you believe in God you might identify with some of this content.  Even if you are unresolved spiritually or don’t believe in God, but are a parent you might identify with some of this content.  For me personally, many of the below examples hit closer to home than I would like.

Situation: You are driving in the car and your children are arguing in the backseat about something that is completely trivial.  You respond with something along the lines of “Don’t make me stop this car and come back there.”  Lesson: How often must God look down at us arguing over denomination issues, biblical interpretation issues, inter-family issues, etc. – where we are certain it is more critical to be right than to simply show love to each other – and think, “Don’t make me come down there.”  Metaphor from a Craig Groeschel message.

Situation: Two of your young children are fighting over who gets to cuddle with you (or run an errand, do something fun, etc.).  Before you want to do the fun thing with either of them you want them to reconcile with each other, and if they are not willing, you don’t really want to give either of them any special time.  Lesson: How often do we go to God with prayer, concerns, questions, etc. when we have unresolved conflict in our life?  How often must God look upon us and think first apologize to those you have wronged and then come to me?  Metaphor from a Craig Groeschel message.

Situation: You have bought your child something to eat – candy, popcorn, whatever.  You innocently reach over to grab a bite or a handful and your gesture is met with groans or screams.  Your first instinct is to say “I gave it to you and you can’t share just a little?”  Lesson:  My first instinct is way too often that what is mine is really mine.  It is easy to envision God shaking his head thinking “I gave it to you and you can’t share just a little bit???”  Metaphor from a Kevin Myers message.

Situation:  Think back on the birth of your first child.  Remember looking down at that little girl you just saw for the first time and thinking you would lay down your life for her, that you loved her more than you could describe, etc.  And the truth is that she had done nothing to be deserving of your love and affection.  Lesson: It is easy to forget that God loves each of us to an even greater degree than we can comprehend; despite the fact that we have done nothing to deserve it and way too often actively rebel against it.

Situation: You witness your child do something nice or selfless for someone else.  Your heart gets filled in an amazing way and you find yourself wanting to lift up your child in some positive way.  Lesson:  God lifts up those that lift up others.  Every day I am confronted with many situations where my simple response can lift someone up or bring them down, bring more love into the world or more anger, etc.  I get so proud when I see my kids make the obvious choice – it’s too bad that in a hurry or frustration or whatever other emotion, that I too often make the wrong choice.

Situation:  Your child wants an additional privilege or responsibility and one of the first thoughts through your head is “you haven’t even done a good job with the other stuff you are responsible for, why would I give you more?”  And that once they have proved themselves, you’ll consider their new request.  Lesson:  How often do we want to expand our earnings, our influence, etc. when we have failed to truly be a good steward of our present situation?  It is easy to see God looking down in frustration saying, “please take care of this first and then we can consider something new.”

Situation: You are observing your young child trying to do something difficult – e.g., assembling a new toy.  He or she gets frustrated but continues on without asking for help and their frustration grows along the way.  You think, “I am right here, you just have to ask for my help.”  Lesson:  How often must God see us struggling, living in frustration, and think “I am right here – why don’t you ask me for help?”  Metaphor from a Ken Coleman podcast.

The above sampling is just scratching the surface of real life examples that are easy to see with a bit of reflection – I can only imagine how deep this list will be for me once I’ve survived the teenage years with my kids.  I’d encourage you to look for similar metaphors in your life that you can see in your parent/child relationship.  Sometimes the pause for reflection can lead to real life change.

So, what lessons do you find yourself trying to teach your kids, that perhaps God would say you might need to listen to as well?

Costa Rica, Family, Leadership, Learning a second language, Learning Spanish

What’s the return rate on an “experience?”

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images copyIn a recent national poll with two choices – keep your current debt level or gain 25 pounds and have your debt erased, 72% of Americans said they’d rather keep the debt than put on the pounds.  A fascinating statistic considering the average household’s debt is 112% of disposable income.  So for most of us, vanity trumps financial peace of mind.  What other financial trade-offs might we be willing to make?

Here is one for consideration.  What percentage of your current savings would you give up to spend a one-year sabbatical, family experience abroad complete with rich learnings?  This question hits close to home for me as we are trying to capture the following things on our experience abroad.

For some context to answer this question here is some food for thought.

A one-year excursion to a foreign country is very expensive.  Without real intentionality and financial planning, it will never happen.  And all the advanced planning and budgeting still doesn’t ease the pain of seeing investment dollars (and Colones) go through the drain (especially while the faucet is temporarily shut off).  There are the cash costs such as school, rent, a car, monthly expenses abroad, monthly expenses back home, etc.  Add on top of this new foregone savings (you don’t really give up salary on a sabbatical, only the savings/investment that would have resulted from that salary).

Assessing the value of an abroad “experience” is very difficult. It’s kind of an expense and it’s kind of an investment, but not exactly either.  Keep in mind that there will be storms along the way, so your notion of the “experience value” will likely shift throughout the experience and well after.  And the value placed on a particular experience will vary by as many people as you ask, so perhaps consider the questions below:

  • What would be the value to you in reclaiming a year with your oldest kids?
  • How about the value of your family knowing a second language and culture?
  • How about the value of personal reflection time vs. a never-ending to-do list?
  • How about the value of pursuing and mastering a long-desired hobby?
  • How about completing all of the above things at the same time?
  • Are you ready to weather the storms that come during the experience?

In our current situation, the immediate costs are much easier to determine than the collective long-term benefits, which makes the process a struggle at times.  Regardless, this was our dream and our gut feel is that it will pay off in many multiples over time, and likely even in some unexpected ways.

Amazing Things, Family, Friendship, Nicaragua

Still Amazed

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I recently sat on a balcony in Nicaragua for 30 minutes just watching the skyline and the falling sun in this picture. I’ve seen thousands of sunsets and they never cease to amaze me. Even when I know something will happen, should happen or could happen, I still find myself amazed when it does happen.

The dictionary defines “amaze” as follows: to overwhelm with surprise or sudden wonder; astonish greatly; something unexpectedly wonderful. Even Jesus, an all-knowing savior, was amazed at something he knew would or could happen [albeit only twice; in Luke 7:9 he was amazed at the centurion’s demonstration of faith and in Mark 6:6 he was amazed at a lack of faith in his hometown of Nazareth].

Focus on amazing things – they are all around you – and they can overcome the negative nuance of the day.

As a kid it is easy to marvel or wonder at lots of new things and as we get older our sense of wonderment at new things or experiences tends to fade. Each day, it is so easy to let my mind dwell on the negative things around me, instead of centering it on amazing experiences that enrich it, be they large or small. My current outlook and even my whole day can quickly turn positive when I look for and focus on amazing things all around me, such as:

  • Watching a beautiful sunrise or sunset. There is something lifting to the soul to quietly watch this happen.
  • Seeing my kids do something completely selfless, demonstrate great sportsmanship, etc. We expect these outcomes at least some of the time, but even so, when it happens it is magic.
  • Witnessing someone simply do the right thing – return incorrect change, stop and help someone with car trouble, etc.
  • Hearing a sermon or a verse in a song, or reading a passage in a book that seems to be crafted just for me and what I need to hear or read at that time.
  • My four girls running to give me hugs and kisses before catching the school bus in the morning warms my heart and provides lots of perspective on other issues.

How are you amazing someone right now?

As mentioned above, Jesus was only amazed twice in the New Testament; yet he continuously amazed everyone by what he said and what he did.  I heard a message from Craig Groeschel once where he asked a simple question that has weighed on my mind since – “When was the last time people were amazed at your boldness (for the Kingdom)?”

The above question can be applied in some other similar contexts.  What actions, big or small, could I be taking each day in my own life to amaze someone and give them something positive to focus on in their life?  How could I amaze someone in a way that inspires him or her to take action? Or get out of a rut? Or take an uncomfortable step in a new, but needed, direction?

What’s amazing in your life that you should focus on when negative thoughts and feelings creep in?  What could you be doing now to amaze others in a life affirming and uplifting way?

See more pics from our recent trip to Nicaragua in the picture gallery

Entrepreneurship, Leadership, Start-ups

Identifying and short-listing your next start-up ideas

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So what is a good start-up idea? How do you even go about finding one if you don’t have an idea weighing on your soul?  How do you narrow your focus if you have several ideas?

Somehow, the topic of start-ups became a four-part blog series for me.  First, themes of my successful start-ups.  Second, themes of start-up failures.  Third, reasons start-up ideas never launch and lastly, this blog on how to identify and short-list start-up opportunities.  Below is a sampling of themes that my partners and I have used as a funneling process to evaluate potential ideas, before getting too deep on the economic evaluation.

  • The industry is irrelevant. The underlying economic opportunity is much more interesting.  There are few industries we wouldn’t pursue given the right economic model.
  • “Go where they ain’t” as an old business school professor of mine use to say.  I.e., seek off the grid areas that attract much less competition. My brother has a company that picks up sludge from food and beverage processing facilities; I will go out on a limb and state there aren’t lots of Harvard MBAs flocking to this sector.
  • There is significant disparity in power along the value chain. Both of my prior start-ups took advantage of this dynamic by offering a service that was critical to the 800 lb. gorilla in the industry, who in turn could force the rest of the value chain to play along and help pay for our offering.
  • There is a noticeable gap between the “experience” and the “expectation.”  Each of us is confronted with this scenario often.  Which of these occurrences could uncover an opportunity for your next business?
  • Important items/occurrences/events are discussed only hypothetically, when real data could be collected, analyzed and monetized.  This creation of primary data is a key piece of the offering of great consulting firms, like Bain and Company.  Where could you offer new and relevant insights based on primary data – and get paid handsomely for it?
  • Larger company frustration points, build vs. buy situations and political situations. It’s often easier for a large company to fund or purchase an outside group than to build the capabilities internally. I’ve witnessed acquisitions that didn’t make sense, but simply satisfied a large company political situation.  Creating a company that can fill these known voids can lead to great exit options in the future. Of course, to be aware of these type opportunities, you need to be intentional about networking in the right circles. Or maybe you work at that large company right now, and already see the voids that could be filled by your new start-up.
  • The prevalence of smaller established players.  There are a lot of cash strapped small companies, that much like real estate, can be had cheap if you have the cash.  And often with small companies, the cash-strapped nature of the business can be a function of an owner co-mingling business and personal books vs. the underlying economics of the business itself.  Buying vs. starting from scratch can eliminate a lot of infancy problems.

And more and more, I find myself focusing on a new layer of thinking. In addition to finding the right cash flow business model, I’m equally interested in how the new entity can help crack a serious social problem(s). The excitement of achieving strong business results while simultaneously having a strong Kingdom impact would make getting out of bed each morning and going to work a pretty awesome experience.

How do you identify and short-list your next great business ideas?

Entrepreneurship, Leadership, Start-ups

Starting a business is like doing a backflip

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I wrote last week that most of the conversations I have with friends and acquaintances regarding start-up ideas die as dreams and never are pursued. This is fascinating because most of the time the people involved in these conversations are competent, connected and appear motivated. So why don’t most of them ever move forward?

In some respects I believe pursuing a start-up is like doing your first backflip into a pool. Mainly, it’s scary.  But until you get your confidence up and the nerve to simply do it, it will never happen. You can extend the metaphor if you like, e.g., you won’t get everything right the first time, it’s important to have a few people around to help point out the things you’re doing wrong, etc.

But beyond just getting over the fear of the unknown and making the decision to do it as started above, I began thinking about why most of the start-up ideas that people have discussed with me never launch.  Ironically, lack of third-party investment didn’t make the list.  Below are my observations:

No financial margin. Most people live right up to the level of their earnings and have no financial margin in their life to pursue a start-up, either as a sideline gig or full-time. It’s tough getting your house in order to invest cash and go without a salary for a substantial period of time, which are often start-up necessities.

The overall process is confusing and intimidating, even to someone to who has previously run a large company. In a prior life, I had a CFO responsible for payroll and HR was responsible for benefits.  Selecting the vendors for these services on your own can be pretty scary. I had questions for tax attorneys who referred me to tax accountants who referred me back to tax attorneys. All of the federal, state, county and other tax considerations can cause the most competent of people to gloss over. At some point, you just have to be willing to jump in the water, make the best decisions you can with the data you have available, and correct course along the way.

The disease of “Someday”; which for most people is a disease that they take to the grave. Lots of times I hear someone say something like;  “I’m still thinking about it, probably next year,” or “Just three more years for the big payout at my current company and I’ll be ready”. Ironically, I tend to hear these statements from the same people every year, as the timing seems to always roll forward. John Maxwell’s book, “Put Your Dream To The Test” might be a great read for some people to determine if the “dream” is real or simply a pipe dream.

Lack of self-awareness on personal risk profile. Amongst all of the various reasons, this one might be the biggest. I believe most people simply don’t have the proper risk profile to pursue a start-up. Most people prefer stability and the known vs. risk and the unknown, despite what they might occasionally say or think.

What else? Why do you think most people who have an idea never pursue it?  Why haven’t you taken the jump into the pool yourself?

Entrepreneurship, Leadership, Learning Spanish, Start-up Failures, Start-ups

Start-up failures I’ve witnessed

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It’s no secret that most start-ups fail and become painful financial lessons.  I recently wrote about the themes of my past successful ventures (Got some start-up ideas in mind?).  On the opposite side of the equation, I’ve seen some common themes in start-up failures where I’ve had a front row seat as a witness.

Lots of people continue to pursue start-ups.  According to CNN Money, 340 of every 100,000 adults launch a business each month, creating 565,000 start-ups monthly.  Incidentally, immigrants (particularly Latinos) at 560/100,000 people, are almost twice as likely as Americans born in the US to launch their own business.  Learning Spanish is becoming increasingly important (Why we moved to Costa Rica for a year).

While the aggregate statistics are interesting, my perspective below is based on a much smaller world of friends and acquaintances that have started a business.  Typically, this involves making the jump from W2-earning corporate life and partnering with one or more people to pursue a start-up.  In no particular order, here are the most common drivers of failure I’ve observed:

  • Legal steps, such as detailed operating agreements are overlooked or delayed.  When I hear someone tell me “it’s not a problem, we are good friends and we’ll get all the legal stuff done later on” or something of that nature, it feels like one of the few times in my life when I can really predict the future.  Spend the time and the money on professional advice, as it will protect the business and the friendship.
  • The business is based on a personal passion with no real understanding of the economic engine or the practical implications of running the business.  Not to be confused with passion plus capability plus a good business model, which is a great combination.
  • The focus is on a remote probability business (albeit with a potentially large payoff).  When the overwhelming majority of your success is out of your control that is a hard business.  When you are trying to create demand vs. fill demand that is a hard business.
  • The cash flow is not managed or even worse, not really understood.  To say “cash is king” is a “master of the obvious” type statement, but it’s amazing how many people get into a business and don’t understand it, or for that matter, the differences between gross and net sales, gross and variable and net margins, etc.  If you (or your partners) don’t understand these concepts from some level of experiential knowledge, be careful throwing money into a start-up.
  • The exit options (I.e., beyond annual salary and/or distributions, how do you monetize this thing at some point via a sale or public offering) are not considered at the outset or actively managed along the lifespan of the business.  When you are simply ready for a new challenge, or there is a business downturn or a bump elsewhere in your personal life, if you haven’t already determined how to exit, it won’t happen.  As coach John Wooden said, “When opportunity (or presumably tragedy) comes, it’s too late to prepare.”

What are the most common (and possibly avoidable) reasons for start-up failures you’ve observed first-hand or experienced first-hand? 

What might be just as sad as a start-up failure is a great start-up idea that simply dies a dream.  Most of the conversations I’ve had with friends and acquaintances regarding potential start-ups land in this scenario.  More thoughts on the reasons for this in a later entry.

Entrepreneurship, Leadership, Start-ups

Got some start-up ideas in mind?

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Start-ups get into your blood.  My partners and I sold our last start-up a year and a half ago and my integration commitment was up five months ago.  Since then, many friends have said “You must have something in mind, what are you going to do next?”

With summer over and my girls back in school I have more time for reflection, and find my thoughts are more and more focused on – what’s next?

In the spirit of “experience is only the best teacher if it is ‘evaluated’ experience,” I thought I’d share some common themes from our (i.e., myself and two great partners) last two successful start-ups.  I deem them “successful” because we had lots of fun, created some cool professional opportunities for some great people, maintained a great life balance and earned returns over 55X invested capital on both.  I mention this last point not to be boastful but rather to establish some creditability for the points listed below.

Macro Considerations:

  • We didn’t create a business and then go look for a customer; in both cases we were asked to provide something from someone willing to pay.
  • Both businesses had asymmetrical risk profiles with significantly more upside that downside.
  • We didn’t quit our day jobs to pursue our dream jobs.  Both concepts were crafted on the tail ends of previous ventures.

Set-Up:

  • Trusted, proven partners with equal entrepreneurial bents, with a shared understanding each of us would play to our individual strengths.
  • Exit options were extensively evaluated as a part of the original planning.
  • Lifestyle balance was a non-negotiable item.
  • A willingness to simply get going and course correct along the way if needed.

Legal:

  • Before business was formally commenced, significant energy spent on legal operating agreements, and early on, equal focus dedicated to employee agreements, vendor contracts, etc.
  • Created (and defended in one case) intellectual property we believed acquiring companies would value in a sale process.

Operations:

  • The economic engine was very clearly understood from the outset.
  • Intentionally minimized support headcount, support procedures, etc.
  • We always priced our service based on value (unashamedly) and never pursued the pricing race to the bottom in order to “win” business.
  • Knowledge of how large companies run was critical to the success of each business, operationally and in the exit phase.
  • We managed our financial books like we were a public company from day one.
  • We hired A-players and took good care of them; and attempted to align with A-players at the customer.

Exit:

  • We helped drive the exit demand by creating the market – or as we called it “inception” type planning to spur identified acquirers to pursue a sale.

Again, these themes are simply what worked for us – there are lots of ways to put a start-up together as they are as much art as science.  However, there tend be to corollaries I’ve witnessed when certain of the above items were disregarded.  More about those examples next time.