Interview: Jim Mitchem on Entrepreneurship

May 8, 2018 Interviews Comments (0) 758

Jim Mitchem, an author and partner with branding firm Out of the Ether, and I explore starting a service business, the willingness to take risks, branding, continuous self-improvement, and many other things in this interview for my Everyday Entrepreneurs podcast.

 

You can listen below on Soundcloud or subscribe to the podcast on iTunesGoogle PlayStitcher, or wherever you get your podcasts.

David Harkins is a serial entrepreneur with significant experience in branding, strategy, licensing and marketing.

In his spare time, he consults, coaches, speaks, writes, hikes, explores, and creates art. Although, not necessarily in that order.

Connect with him on social media below:

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Interview: ClassB CEO Eric Hilferding on Entrepreneurship

March 8, 2018 ENT670 – Adv. Entrepreneurial Strategy, Interviews, M.E. Program Coursework Comments (0) 341

The following is an interview with Eric Hilferding, CEO of ClassB, a custom t-shirt manufacturer, and printer for my graduate coursework in entrepreneurship. Eric and I first met in 2005 when I was with the Boy Scouts of America. His company was one of the BSA's first licensees in the revamped licensing program. We became fast friends and I have long admired his attention to detail, his creativity, and his commitment to service.  

 

Eric Hilferding of ClassBQ. Tell me a little about ClassB and your role with the company.

A. ClassB is a provider of custom decorated goods including t-shirts, embroidery and promotional products to primarily nonprofit organizations. The company started in 1982. We currently have 38 full-time employees. We focus on having a great customer experience. The internal motto is we sell service not t-shirts. I am the CEO of ClassB and one of the two company founders back in 1982. I have been formally running the company since the mid 1990’s.

Q. Did you have any entrepreneurial experience or education before launching the company?

A. I have zero business or entrepreneurial education - I have a BA in History. Luckily, learning about running a business was always a part of my life. I started working at around age 8 at my grandfather's lumber yard. My parents often discussed business at the dinner table.

When my mother and I started ClassB, all immediate family members eventually were employed. I read profusely to fill gaps in my knowledge. I was very lucky to have my father with his extensive business knowledge available at all times. Without his experience, I would have failed many times over. Now I realize how right he was on everything.

Another key area is my Boy Scout experience. I learned so much by making lots of leadership mistakes in my Troop and working at Summer Camp. Having that sandbox to learn is one of the most valuable things I can imagine. If not for my parents and the Boy Scouts, my only business reference point would be work based sitcoms.

Q. What are you most passionate about and how does it tie to your work each day?

A. My main passion is that we treat customers right. It's probably some of the Boy Scout indoctrination. However, most of it is driven by a sense of perfection and trying to avoid the guilt of an unhappy customer. I obsess over a bad customer experience and have to process thru it to be able to move on. I get lots of satisfaction by improving things. I lose interest if things stagnate or a task becomes repetitive and no longer optimizable. The idea of constant iterative change and the occasional disruption suits me. I also enjoy the new things I have to figure out. On some days I’m a scientist, engineer, investigator, lawyer, judge or a plumber, etc. It’s never the same every day.

Q. Business owners have many responsibilities during the day. Some of those responsibilities are more challenging than others. What are a few of the things you find to be the hardest to do? What are some of the easiest? Moreover, why are these things easy or hard for you?

A. The hardest thing for me is finding uninterrupted time. Every day being different is great - having so much to do is a problem. I have lost weeks just trying to finish something in 30 min increments. Kind of related: the most challenging thing for me is finding good people - they make all the difference. I have learned to hire people that fill my weaknesses not people who are like me.

I can’t tell if someone is a good fit in an interview. I have to hire them and then decide in 2 weeks at most so I can circle back to my 2nd option. The destruction to customers, profitability, and other employees that a single person who is “not a good fit for the job” can bring is incredible. As long as I remember that, firing people is easy. If I forget, firing is a drawn out, expensive, painful to all parties process - especially me. The easy stuff is fixing systems and things - why because I’m a systems guy, not a people person.

Q. As an entrepreneur, there are all kinds of things that can affect the business. We could spend all day, every day, worrying about those things. What are some of the things that “keep you up at night?” And what do you do each day to mitigate those worries?

A. I worry a lot - to the point of being unhealthy. I have a terrible fear of not doing things correctly - still a Boy Scout in some ways. I always strive to go above and beyond. I always play things straight - I assume that everything will always be discovered at some point - so it should be done in a way that would be correct from the get-go.

My biggest fears are someone taking advantage of us. This comes in two forms - frivolous lawsuits and unfairly instituted/ enforced regulations. I have seen a few ridiculous claims - I have a good family lawyer to pass them off. I also worry that someday an employee here makes a small mistake that destroys the company, puts all my employees out of work, and puts me in bankruptcy.

Many regulations often require academic-like responses, seem punitive, or meant for an unspecified situation—they are a time and soul killer. My fear comes in because they often seem to be unfairly applied. Unfortunately, you never know for sure how to comply or if the rule is real. You have to wait time to have an idea. It’s the uncertainty that gets me. The personal interpretation of a regulation by a single inspector has been devastating in time and money.

I mitigate these two things by trying not to think of them. I do all I can to do the right thing anyway and just hope.

Q. How do you motivate yourself each day? What do you do to let off steam?

A. Motivating is easy for me - I’ve worked all my life, so has everyone in my family. I’m a workaholic for sure. When things become overwhelming as they often do, I just have to remember to ignore the 100 things going on and move one thing forward at a time. Eventually, I can work out of the mess. I wish I could say being a business owner is glamorous - clearly, I’m doing it wrong, but my 'letting off steam' is maybe two days a year where I get to go hiking in the desert with not a soul in sight for miles.

Q. What’s your favorite customer story from your business?

A. For owners and managers, you really only hear the problems. It’s great you ask this question because it's important not to lose sight of the daily things that go right. Ninety-eight percent of the time, things go good or perfect. The customer service people at ClassB get to hear all the good stories. I encourage them to share with everyone. We have the entire wall of the customer service area with photos and experiences that customers have shared with us.

I think my favorite situations are when we go out of our way big time to get the customer their shirts in time for an event that has special meaning for them. We have turned out shirts in a day and overnighted them because the customer made a mistake and we wanted to make it right for them. The best customer experiences come from looking for the customers best interests and ignoring the effect on any single transaction. Bake in some money to your price to be able to treat them the way you wish things worked.

Q. In your experience, what have you found works best to motivate employees?

A. Wow, have I worked the gamut on that! The one thing I have learned the hard way is don’t listen to what they say will motivate them. Money, benefits, and perks only work in certain market conditions or individual situations and are secondary or even a counter to the true motivator. The number one motivator is good managers. Those managers have to have people skills. They have to make the work environment-friendly, positive, professional, productive, fun and fair. They have to respect all the
employees by having their fellow employees have a purpose and contribute to the team.

All managers have to pull their weight and show appreciation for everyone's efforts. They also have to hold a high standard. If all that is in place - employees will be close to self-motivated and not look to leave. They are more productive, and guess what: Now those managers worth more, and they get more money. Try to work it backward, and it does not work at all. I personally am a horrible motivator - I am lucky that I have managers that are really good at that.

Q. Entrepreneurs are risk-takers. We know there’s a probably a more significant chance for failure than for success. Still, we move forward. As you think about your entrepreneurial plans, what is your worst-case scenario? What makes that the “worst” for you?

A. I always view the current situation as transitory. What is working today will not at some point. All I can do is keep moving and try my best to adjust.

I think my worst case scenario is that I get so caught up in the day to day issues of running my business that I lose the big view of where the market is going, and we fall behind. Know this always happening to an extent. I don’t want to fail my family or employees because of something I missed. I don’t want to look back after the failure and realize I spent too much time on ABC instead of XYZ.

There is a burden in having so many people and their families relying on you for their lively hood. I have maybe 60-100 people indirectly or directly relying on me. I do not want to fail them. If it was just me, failure is easy and guilt-free - plus the Boy Scouts taught me how to survive in the woods if need be.

David Harkins is a serial entrepreneur with significant experience in branding, strategy, licensing and marketing.

In his spare time, he consults, coaches, speaks, writes, hikes, explores, and creates art. Although, not necessarily in that order.

Connect with him on social media below:

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Interview: Gregg Smith on Entrepreneurial Investment

September 25, 2017 ENT650 – Adv. Entrepreneurial Finance, Interviews, M.E. Program Coursework Comments (0) 696

The following is an interview with Gregg Smith, Founder, Evolution Corporate Advisors, for my Advanced Entrepreneurial Finance graduate course. Gregg and I have known each other since about 2010. We discuss entrepreneurial investment from an investor’s perspective

Q. Tell me little about yourself and Evolution Corporate Advisors as it may relate to or support the financing of entrepreneurial ventures and small businesses.

A. I spent ~20 years on Wall Street as an investment banker, with most of my career spent helping growth stage companies execute private placements. I have completed over 120 private placement transactions for clients in the healthcare, technology, consumer & retail, energy and other sectors. I have also (conservatively) reviewed more than 1,000 business plans and met with 100s of management teams and entrepreneurs. I have seen many success stories of small companies I financed that were sold for >$10 billion, and many I financed that failed.

Q. When considering an investment, which is more valuable to an investor, experience in an industry vs. experience as an entrepreneur? Why?

A. Many outsiders have come to existing, “old world” antiquated industries and completely disrupted the norm—all with no prior in-depth industry experience. I would rather back a highly successful entrepreneur who has succeed elsewhere in a new industry, than back an industry insider who does not have any meaningful record of success. Also, many outsiders have a fresh perspective on things that don’t live with every day and may innovate and/or solve a problem that is not obvious to the industry insider.

Q. In your experience, which is more important in early state financing, the fit with the entrepreneur, the apparent accuracy of the pro forma assumptions, or the expected potential of the business? Why?

A. In the more than 120 transactions I completed, I have only had one client meet their first quarter projections after closing a deal. Things are very difficult to predict, and everything in life ends up costing more and taking more time than one anticipates. The same holds true with even the most sophisticated management teams using their best judgment to project where their business will be in one-quarter or one year. It is hard. I am more interested in understanding the drivers of a business and the assumptions used to project where growth will come from and anticipated costs. With this being said, for someone that is backing an early stage business, the “fit” with the entrepreneur is paramount. You will live and die at the hand of this individual, and you must understand their strengths and weaknesses. If you have confidence in the leader, then it is easier to understand the potential of the business and how and if it will be achieved.

Q. What are the top three things you look for when considering an investment partnership with an entrepreneur? Why are these three things the most important to you?

A. When evaluating a new [early stage] investment opportunity I first look at the business. Does it excite me? Will it disrupt the norm? Can it scale and scale fast? What are the barriers to entry? Next, I look at the individual and the team. Is this a team that can do it and have they had previous “wins”? Do I have confidence in them and do I want to be partners with these folks—thru good and bad? Lastly, I look at what is required to execute the plan in terms of resources and funding requirements and what is my potential exit for this investment. If invest today, what expectation should I have and how am I going to exit this investment and get a return on my capital? Will it be an IPO or a sale to another company?

Q. How important is a formalized business plan for a venture when considering an investment? What are those things you look for in a plan?

A. Formal “business plans” were popular until sometime within the last ten years. In the 1990s, I got long business plans sent to me almost daily that were mostly comprised of pages and pages of text and some financial statements. Today, most of what you see is a “deck,” some type of PowerPoint presentation on the company and opportunity that tells you everything you want to know in a more graphically, storytelling manner. Ultimately, I like seeing a deck and a working “model,” which would be an Excel file with quarterly projections and use of funds and, most importantly, assumptions that I can change and toggle if I want to evaluate my own assumptions.

Q. What are the three most important financial measures (statements, ratios, etc.) when reviewing a pro forma or a later stage investment?

A. This depends on the business. A retailer or manufacturer of a consumer product will have different metrics to review and understand than a biotech company. As it pertains to a financing, there is always risk involved when investing in a company and an investor always seeks to minimize the risks they take. Hence, I want always to understand “How far will this capital last the company?” when I am investing, and I want to try to reduce my “financing risk.” If a company tells me they need $2MM to execute their plan and get to a meaningful milestone, I don’t want to invest if they can only raise $1MM, because this would leave me exposed that they may not be able to raise the next $1MM to meet such critical milestone.

Q. How often would you, for example, use ratios to identify potential problem areas in a venture’s performance when compared to an industry sector? Which ratios are most important and why?

A. The most relevant ratios or measures I may look at today would include “customer acquisition cost” and gross margins and cost of goods. I want to understand how profitable a business is before you add in their overhead and as it relates to many online or product or service companies, how much are they spending to acquire a customer.

Q. How might seed investment requirements of an entrepreneurial venture differ from early-stage or late-stage requirements?

A. When investing in a company at the “seed stage” or start-up stage, there is a lot of risk because the company’s model may not have been proven out. In fact, a seed stage company may not even have a demonstrable product, customers or working prototype or website. In contrast, an “early stage” investment should have at least proof of concept or a working model as well as customers and customer references.

Q. What advice would you offer an entrepreneur seeking start-up or early-stage financing?

A. Finding money is almost as much about finding a partner that believes in you and your business, so there has to be some chemistry between the investor and entrepreneur. Try to find an investor that will also help accelerate the growth of the business in other ways than just providing money. Develop a pitch deck that clearly outlines what product or service you are offering, [for example] why it is better than existing solutions on the market today, how you will generate revenue and your growth strategy, why you are the strong candidate to lead this venture, how much capital you need (to do what with?), and how long it will last you till you hit milestones that will increase your valuation and lead you to raise more capital.

David Harkins is a serial entrepreneur with significant experience in branding, strategy, licensing and marketing.

In his spare time, he consults, coaches, speaks, writes, hikes, explores, and creates art. Although, not necessarily in that order.

Connect with him on social media below:

Continue Reading