Tag Archives: performance

The Great Urban Entrepreneur

Five years ago, a pair of adventure loving buddies found a way to bring their love of thrills into an urban environment. They since have grown Red Frog Events into an $85 million business that hosts competitions during which teams solve clues and complete mental and physical challenges while discovering their city in a fresh way. Joe Reynolds and Ryan Kunkel have parlayed their $5,000 initial investment into a successful Chicago-based company with more than 60 full-time employees, three signature extreme races and a serious following.

The company’s most popular event, Warrior Dash, a 5K race packed with obstacles like a pond filled with logs, a rock wall, a tunnel of flames and a sinking mud pit, made appearances in 35 cities across the country in 2011 and drew 600,000 participants. This year the company is going international for the second time, taking its events to Ireland and Great Britain. Reynolds says, “When you’re really passionate about your business, you can see lots of tremendous opportunities.”

Nancy Mann Jackson says (in her Entrepreneur magazine article about him) “Reynolds had previously owned a house-painting company, but had no idea how to contend in the event-production business. What he did know was that he loved competing and creating fun experiences–and he wanted to share his passion with the masses. With hard work and dedication, he’s now doing just that. If, like Reynolds, you’d like to turn what you love into a viable business enterprise, start with these six tips:”

1. Don’t count on passion alone.

“Sometimes passion can blind you to the potential downside of your idea,” says John Torrens, a serial entrepreneur and an entrepreneurship professor at Syracuse University. “The one non-negotiable factor for any sustainable business is that they solve a problem for a specific customer segment in a way that is appreciably better than the next best alternative. Get as much feedback from potential customers as possible. No matter how great you think the idea is, you still need to understand what your market thinks.”

Remember the details. There are tons of ancillary functions that go along with running a business that must be performed well for it to succeed.

Dole out responsibility.  You’ll either have to delegate the primary work to others, or you may choose to delegate managing the operation to someone else so you can continue to focus on the primary work yourself.

2. Hire passionate people.

Having employees who share your zeal for the business will help your company succeed. For instance, at the Warrior Dash Louisiana in 2010, a series of tornadoes tore through the landscape during the event. Neither Reynolds nor Kunkel were in Louisiana, but the staffers who were managing the race stayed up through the night to repair the course and get all the obstacles ready again, so the competitors who weren’t able to finish could complete the course the following day.

3. Share your passion.

If you have a hobby, likely there are others out there who share that interest and would like to learn more about it. Sharing your knowledge can be a great way to build your business.

4. Keep the passion alive.

Reynolds and Kunkel make a point to continue competing in races themselves so they can maintain their love for running and recreation. Rather than feeling responsible for thinking of everything and micromanaging their employees, Reynolds and Kunkel empower their staffers to develop solutions to their own problems.

5. Prioritize fun.

Torrens says, “In the authentically passionate companies, everything grows from that passion, including the people, policies, branding and community relations. That obsessive focus on whatever it is that gets you out of bed can’t be faked, but it takes work to create the circumstances under which it can thrive. “

6. Expand your passion.

Reynolds launched Red Frog Events because he wanted to combine his love for adventure travel and competitive runs. But over the past five years, he and Kunkel have realized they are excited about producing recreational events in general, not just runs. This year they plan to enter the music festival industry, starting with their own Firefly Music Festival, which they hope will compete with some of the world’s largest such events.

American Restaurants Struggle to Stay Alive

Back in the late 1980s, the Turnaround Management Association was birthed out of a research project conducted at the Kenan Institute of Private Enterprise at the University of North Carolina at Chapel Hill. As the lead researcher, I had the opportunity to personally pull together a bibliography of articles about businesses whose travails were significant enough to hit the national headlines in various business publications. From the research, we published a monograph and wrote articles about best practices that appeared in 46 national business periodicals in our first 18 months of existence as a trade association. As I and other involved with the Association moved on to other pursuits, TMA moved off campus, starting gaining momentum in chapter development, and now enjoys international members as well as domestic. One of the publications of TMA is the Journal of Corporate Renewal. The Journal‘s lead article for May discusses the struggle of restaurants in the United States to remain profitable.

Some interesting facts from the National Restaurant Association are cited:

  • Restaurants account for 4% of GDP
  • 10% of the U.S. workforce is employed in the restaurant industry
  • 50% of adults have worked in a restaurant
  • one-third of all workers had their first job in a restaurant
  • 48% of the average household’s food budget goes to restaurants (vs. 25% fifty years ago)

The bankruptcy filings of a number of restaurant chains since the recession began in 2008 is but one indicator of a model that is teetering on the brink of survival. The photo above is taken from a Food Network show entitled Restaurant Impossible, wherein Robert Irvine turns a restaurant around in 48 hours. The menu is revised, customer service issues are addressed, $10,000 of strategic remodeling is performed, the revenue and costs are examined for opportunity, and the restaurant owner is challenged to run the business at a profit going forward.

Macro trends in the recent few years towards buying more groceries or becoming value-conscious have definitely affected the top and bottom lines of many restaurant owners. Franchises, which account for about half of the restaurant revenues produced nationwide, have really taken it on the chin. Franchisees who own one or only a few stores have inadequate access to capital these days. Another big factor is the conflict of interest in most franchise agreements that are based on sales volume. The franchisor can implement discounting programs to increase traffic and sales volume, but the franchisee has less and less profit as a result of the agreements.

What can be done? Turnaround experts recommend a process of performing store-level profitability analysis, followed by benchmarking against peer stores. These analyses can highlight purchasing/inventory issues, training issues that are evidenced by waste, and theft/shrinkage that depletes the operator’s assets needed to produce a return.

There are many good consultants who can help a restaurant owner sort through the challenges and create a plan for growth and renewal.

Secret Judo Guides Start-Up Success

What do you know about martial arts? Here’s a few things I found through a combination of sources:

  • Karate – is a series of punches, blocks and kicks that focuses on strength and offensive techniques; a primary theme is to either put or catch the opponent off guard and then attack.
  • Tae Kwan Do – incorporates many aspects of karate, but with more emphasis on the use of feet and spinning/flying kicks.
  • Jujitsu – uses strikes, kicks, strangles, locks and takedowns to disarm the competition, still aimed at offensive techniques for the most part.
  • Judo – uses throws and its intent is to avoid an opponent’s strength while redirecting its power to one’s benefit.

Tom Tunguz (whom I have quoted before), in his blog Ex Post Facto, encourages entrepreneurs to recognize the highlights of  judo philosophy  in never trying to fight strength with strength, and to find ways to maximize leverage. Tom also references Peter Thiel (from a series of lectures given at Stanford Graduate School of Business) who describes the use of a “secret” to secure a unique niche within your target market. The “secret,” though is not as one would think, but instead “something just not widely believed to be achievable or feasible. In other words, it’s an insight, a thesis that isn’t widely held.” The Secret becomes the “flywheel” of Jim Collins’ strategy – a series of well-executed small decisions that others find it near impossible to duplicate. For many entrepreneurs, the choice of distribution channels is a ripe field for building out one’s “secret.”

Tunguz writes of distribution:

Many companies are now using distribution as their secret – mobile app stores and Facebook Open Graph enable startups to access hundreds of millions of users in ways that incumbents simply aren’t prepared to leverage. Expensify uses mobile app stores to acquire hundreds of thousands of SMBs in ways that their market’s incumbent, Concur (market cap $3B), simply can’t copy. Branchout is building a massive job network on top of Facebook to compete with LinkedIn. If LinkedIn were to copy Branchout, they would marginalize the value of their existing network because LinkedIn would cede their graph to Facebook – an example of the classic “innovator’s dilemma.”

In order to remain relevant, (solve the innovator’s dilemma), entrepreneurs must find a way to continue to grow new ideas within their organizations, less their businesses become to mainstream and lose their uniqueness. This is where/how moving to principles-based strategy trumps reliance on a skilled technician and his or her own suite of strengths and abilities. Continue to recognize what strengths competitors have, then find a way to use those strengths against the competition and towards one’s own competitive advantage!

Start-Up Key: Sell to Educated Customers

Tom Tunguz of Redpoint Ventures has a WordPress blog I follow, Ex Post Facto. While many of the posts are over my head in terms of technology terms, his posts on carving out a market advantage always catch my attention. Today’s post, “How to Pick Your Start-Up’s Market,” makes the point that the Goldilocks Principle is key–picking a market that is right-sized; neither too big nor too small.

Tunguz credits the Blake Masters blogs, and Peter Thiel’s summary classes in particular, with illustrating what others have learned through expensive market plays. In “The Last Mover Advantage” class, Thiel argues that:

Too small a market means no customers, which is a problem. This was the problem with PayPal’s original idea of beaming money on palm pilots. No one else was doing it, which was good. But no one really needed it done, which was bad.

Markets that are too big are bad for all the reasons discussed above; it’s hard to get a handle on them and they are usually too competitive to make money.

Tunguz attempts to explain major internet successes by combining Goldilocks with Last Mover:

  • Google – last mover in search and search ads. The search market was roughly half of the $8B market– not too big, not too small.
  • Facebook – last mover (at least for now) in social media. Social media ad market was less than $1B when the company started.
  • Dropbox – near last mover in consumer storage. The industry was considered unprofitable by investors given Mozy and Carbonite’s trajectories and was at most $2B at the time the company started.
  • Apple – near last mover in portable music players and computers. What a turnaround we’ve seen.

Common across all these examples is significant market growth driven by one company who brought much better product design, strategic management and effective sales processes. It’s easy to point to the product differentiation – later founders used previous product generations and built something significantly better. But it’s also easy to overlook the importance that sales had on most of these companies.

  • Google had a team which mechanized closing and on-boarding large search partners growing the revenue base dramatically.
  • Dropbox focused significant fractions of their engineering team on optimizing conversion-to-paid funnels. And they maxed out the refer-a-friend program.
  • Apple built the best retail experiences which today drive a huge, but undisclosed fraction of sales.

Significantly, Tunguz goes on to say that each of the example successes were selling to a market that someone else had educated. It is important that the target customers already knew both the Problem and the Solution the product(s) were created to address. In each case, others had been first-to-market, but were not offering premium products. With a premium product and an educated consumer, the start-up enjoys favorable pricing and better selling scenarios. Who wouldn’t want those factors in their favor, right?

Like Being in a Rut?

As a business owner, every day brings new challenges and issues that demand our attention. When 100% of our time is given to doing the business (marketing, selling, making, fixing, shipping, accounting, etc.), we’re stuck.  We’re in a rut that (often) leads to failure. Perhaps not failure in the sense of going out of business or having to take a day job, but a missed opportunity to see the business become what it could/should be.

It’s a common trap we can all fall into.  We have something the market wants.  Demand increases and the technical activity associated with getting and filling orders completely fills our schedules.  Forty hours per week becomes fifty and then sixty.  We start taking work home (it’s a sign when what we once enjoyed becomes work).  Everything becomes more mechanical.  We lose balance often at the same time our business is losing steam.

When we’re in the rut, the solution appears to be counter-intuitive and impossible to execute, but we must allocate a portion of our time to work on the business if we want our business to survive.  It’s not optional – it’s essential. You may have heard the admonition to not work in your business at the expense of working on it–the question, though, becomes “how?”

We need to continually infuse creativity into our business–if we want to stay out of the rut.  That won’t happen if we don’t:  1) purposefully allocate time for it and 2) utilize an agenda that maximizes the creative input in the time allocated. The best solution to infuse the most creativity in the shortest amount of time is setting aside 5 days per year with your executive leadership team and 90 minutes or less per week (5% to 6% of your total work hours), using specific agendas to extract creative input to prioritize, solve your issues, maintain focus and advance your company.

Applied faithfully, this regimen will move you and your company to a top performing level. Rather than rehashing worn out frustrations, being stymied in your rate of growth, or feeling like you have to come up with all the answers by yourself, you will find freedom, organization, and synergy flowing from your efforts. Dare to try it!

A special thanks to Don Tinney, who posted many of the concepts above in a blog entry this week at http://www.eosworldwide.com