Q&A for entrepreneurs, Part I.
In 2004, I founded Forisk Consulting, a research firm that studies the forest industry and timber markets. Today, we are an employee-owned firm with offices in Georgia and Washington. Our clients own and manage over 100 million timberland acres and account for nearly 50% of the annual wood use in North America. News outlets such as The Wall Street Journal, The New York Times and NPR cite our research.
Students and mid-career professionals sometimes ask me for advice about managing or starting a business. I often ask questions in return to confirm they have a basic idea of what’s required. For this question-and-answer essay, I share a few thoughts on starting a business based on my experiences and what I’ve learned from mentors.
How did you learn to start a business?
Forisk is not my first business. In elementary school, after reading all of the Encyclopedia Brown mystery books from the local library, I started a detective agency with my younger brother. We had one client, a neighbor down the street, and we helped her find a lost dog. She paid us in milk and cookies. They were delicious.
Over the years, there have been other businesses, in addition to lemonade stands, baby-sitting and lawn mowing. In high school, my friend, David Elias, and I started One Way Study Guides (the “one way” to success!). We developed and sold study guides for the U.S. History AP test to students at high schools in our county. We had reps at the other high schools and split the proceeds from the sales with them. Dad let us use the massive copier at his office (it collated), and he made us pay for the paper and ink. (“This is not a charity,” he said.) That’s how I learned about cost of goods sold.
While running Forisk, I self-published and marketed books and, with my wife, started speaking and property management businesses. The entire entrepreneurial concept of having an idea, developing a plan and putting it into action seems normal to me. Sometimes the plans work out, and sometimes they don’t. You learn and try again.
I learned a lot about planning, dealing with uncertainty and getting things done from my parents. As a family, we moved a lot, around the U.S. and Europe. Mom managed these moves, while substitute teaching, handling our finances and volunteering. Each move meant a promotion or new role for Dad. His last three jobs included serving as CEO for start-up biotech and pharmaceutical firms. Inc. Magazine named him “Entrepreneur of the Year” and Chief Executive awarded him the “Gold Award for Biotechnology.”
Helping people and growing businesses were regular topics of conversation in our house. Also, I always observed how others managed their teams and businesses, and I’d ask them questions. And reading. I’ve learned a lot from books.
In your opinion, what are the basics for starting a business?
To paraphrase Peter Drucker, a business does two things: it makes something and sells something. Without a customer or client cutting you a check to deliver to them a product or service, you don’t have a business. So, it starts with having a clear idea for meeting a need or creating value for a customer. And it helps if you are in a position to address this particular need because of your skills, experience, team or resources.
Next, take the time to really know your numbers. I am surprised how often folks fail to know, even in general terms, the size of their addressable market, or the monthly cash break-evens or current balances in their own businesses.
Years ago, I worked with a logger who could tell me, to the penny, the impact on his business from a leaking hydraulic hose on one of his skidders. He ran an award-winning and profitable business.
Here in town, I have a friend who owns a profitable insurance business. He has one employee. He serves a specific niche. He has well-defined processes for serving existing clients and prospecting for new ones. He stays current on the relevant laws and changes in the marketplace, looking for new offerings for his clients. And he really knows his numbers. Calls per day, retention rates, margins, cash flow, overhead etc.
Understand and be close to the numbers that make your business work.
What do you wish you had learned or known earlier?
The importance and power of sales and marketing. I started Forisk based on my industry expertise and ability to assess problems for clients. That’s enough for a part-time consulting shop, but not for growing a sustainable business. Without a sign out front and a clear understanding of your target market and customer base, you don’t have a business. Understand how to get in front of your target market consistently.
Power of good processes. A well-run business can get (almost) everything done by someone else. This requires delegating and training to leverage simple, easy-to-follow processes for everything from sales to product delivery to answering the phone.
You need to make and schedule time to think. It’s a shopworn phrase that instead of always working “in” the business, you need time to think and work “on” the business and yourself. Well, it’s shopworn because it’s useful and helpful.
If people always accept your quotes and proposals, your prices are too low.
Finally, it helps to understand how the world works. Much of business (and life) is a game with formal and informal rules. When applying to college, having extracurriculars and letters of recommendation help get you in the door. Is that good or bad? It doesn’t matter. If your goal is to make positive change, study how things work and find mentors to test your thinking. Then choose your strategy. That could be to go around the system and chart your own path, which works for some, or leverage an existing framework. For entrepreneurs, that could mean acquiring an existing business or starting a franchise.
What advice would you give someone looking to start a business?
Citing a favorite quote from my Dad, “begin with the end in mind.” It all starts with understanding why you, as a business, exist and why someone else would care enough to cut you a check. When I ask a person starting out, “What is your business model?”, I need to hear an idea that clearly connects a need and value to customers.
At the end of the day, it comes down to having a basic plan and getting to work. I’ve met hard workers who failed to think through their business models, and I’ve met coffee shop dreamers unprepared to put in the hours. Starting a business is not that complicated, but it does require commitment and an ability to adjust and adapt as you learn new things.