TOTD 1/2: Small Business

Mine, that is.  Today is the fifteenth anniversary of the startup of my LLC, and also marks the year my total of independent employment exceeds my years as an employee of others.  Although the legal details were prepared and registered (quietly) in December of ’02, fifteen years ago today, three of my peers and I simultaneously resigned from the industrial systems integration firm of which we were senior employees.

We each had discussed our frustrations with the 51% owner’s management style, and his apparent intention to never yield any more ownership to future partners.  Gaining ownership was a five-year goal I had stated outright when I interviewed for that job, with that owner, four years before.  Or more precisely, when asked for my five year goal, I answered “Ownership of or partnership in a company like yours.”

The early years were quite difficult, as we had taken the high road with existing customer relationships — no hint whatsoever what was to come prior to our actual startup.  A few customers followed us to the new company, but most took a wait-and-see approach to the new startup.  And our old boss wasn’t shy about sharing his feelings about his former staff.  Our partnership’s (actually an LLC operated as an S-Corp) size fluctuated in the first few years as the rigors of full independence exposed some flaws and highlighted some opportunities.  The LLC stabilized at three members by the end of 2006.

The downturn of 2008 hit my last two partners quite hard, as their customer relationships were dominated by residential and commercial building products manufacturers.  With Obama’s economy failing to bring any normal recovery, they both left in 2011.  The first solo year for me was a great year, as I discovered that my own projects were quite profitable under the new low-overhead regime.

Juggling multiple customers entirely alone does have its downsides, and I put a fair amount of effort into cultivating complementary relationships with other contractors with related skill sets.  I also expanded the scope of the business to include more software content (SCADA in particular), something my less-geeky former partners were never comfortable pursuing.  The slowly morphing direction of the company has inspired other changes: for the first time, the company (me!) hired an actual non-owner full-time employee.  Given that one can’t actually hire someone out of any engineering school with the combination of skills that make me valuable in the market, I went outside normal procedures and hired a non-degreed whiz kid that I knew from a Linux users’ group.

I’ve not regretted it.  First, a non-degreed employee is cheaper to hire.  Second, you don’t get any mistraining in industrial concepts that engineering schools are prone to produce.  And if you pick someone with demonstrated self-motivation and an aptitude for technology, you can expect their skills to match a degreed individual in relatively short order.  I’ll probably have to pay this kid’s way through a tech degree to keep him, but I expect it to be worth it.  I’ve poured more resources into the company this past year than in any previous year (training the new minion, mostly), and am looking forward to the rewards of business risk-taking.

It almost certainly wouldn’t have happened if Hilary had won.

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9 thoughts on “TOTD 1/2: Small Business”

  1. Good to see this, Phil, I am wandering in the wilderness. Can we set up a time for lunch or something, so I can pick your brain on the start up consutlting idea I have?

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  2. Congratulations and best wishes, Phil.  You kept your project alive through the long 8 years and came out at the other end.

    On top of that, you did it without having behaved in an underhanded manner to your former employer. Boy that must be sweet: really; it’s fun just to read about that happening. So often we hear of underhanded action working well for the underhanders while the upright lose out.

    And on top of those, you did it right here in the very blue Family of New York, correct?  Good land, that adds so much to the achievement.

    May all continue to be satisfactory and successful. Thanks for the report.

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  3. I think entrepreneurs that successfully start something up are a cut above. It is not easy to go from 0 to 1.

    Phil, what is the one piece of advice you would give to people about to or in the middle of a start-up? (I am sure TKC also has some input here.)

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  4. The single most important piece of advice I would ever give a new business (after experimenting for a finite amount of time) is to try and narrow your vendor resources to those who make you the most money and offer the best product. You become far more important to them and they will bend over backwards to accommodate you.

    We were able to write a test order for $15K at cost from one vendor and grow it to over $750K at cost in 18 months because they were willing to take back everything that didn’t work and replace it with items that did. We had a retail business and never had to take a single markdown with this particular brand.

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  5. Also, focus on the flow of inventory and how to incur high turn rates without losing sales. Fortunately, many of our resources were located in the state we practiced business, except of course, our biggest vendor who shipped from 2,000 miles away. As we ran a “tight turn,” it was often necessary to request 2nd day or even overnight shipping. That company was willing to pay for the upcharges because of the volume we did.

    My husband and I don’t play golf, but we did manage to develop a very close relationship with the owner who is a part-owner of the Chicago Blackhawks as well. Bingo! We shared the love of hockey despite the fact I was and am a Wings fan. 🙂

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  6. @Bryan: Lunch anytime.  Office is in Fairburn — traffic is light at lunchtime.

    @jzdro: 1) Yeah, Obama was no fun.  OPEC hurt my business, too, but I have enough customer diversity that it wasn’t fatal.  2) No, I don’t live in New York.  Live on the south side of Atlanta.  Born in Ticonderoga, but that was a long time ago.  Grew up in Maine.  Interned near NYC a couple summers.  Headed to the southeast as soon as I earned my degree.  3) My former employer accused us of being underhanded with a few customers, but they all backed up our insistence that there was nothing of the sort.

    @ET: As an engineering and software professional, I don’t have any simple pass-through products.  I do occassionally supply custom hardware with a project, and having the right suppliers to build it for me is important.  Business survival means cash flow, and the key to it for me is breaking projects up into milestones with deliverables.  Keeps my reserves up, keeps the customer’s risk low (if I get hit by a bus, of course).  The business has never borrowed money, other than standard vendor terms (Net30, mostly).

    @Dime: My start-up advice is simple: think about/manage risk every day.  Easier said than done, but a good “what if?” brainstorming session every so often is extraordinarily valuable.  Track loose ends so they always get tied down.

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  7. The business has never borrowed money, other than standard vendor terms (Net 30, mostly).

    Oh boy, this is key, especially to this business owner. I am totally averse to debt so much so I don’t even have a mortgage. I took money from my dividend income and although I was forced to live a simpler life for a period of time, I can sleep at night.

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