Growing Great Customer-Funded Companies

Many people have suggested that I write a book about my customer-funded philosophies. John Mullins beat me to the punch (and did a much better job than I would have).  As a professor at the London School of Business he has had the opportunity to study a ton of customer-funded businesses and identified five different models for how they did it. The Customer-Funded Business: Start, Finance, or Grow Your Company with Your Customers’ Cash

In the above interview I did with John, he talks about the advantages of having a customer-funded business as well as model examples of those who have succeeded in creating $100 million+ self-funded companies.

*Sorry for the poor video quality. This was my first video interview and I apparently didn’t have the “high quality video” button checked.

I feel incredibly fortunate to be a part of an Inc. Magazine article by the great Bo Burlingham about  How to Build a Company That Will Be Around in 2115 .* It’s great to see this topic get press so more entrepreneurs can feel supported in building for the long term.

In the spirit of Summer, I am excited to announce that I bought a significant minority stake in Boulder-based Avid4 Adventure camps. Last summer, Quincy, my 4.5 year old daughter tried a handful of week-long camps in Boulder. There was only one that blew her and us away… Avid. So much so that she spent this past year periodically asking “When do I get to go back to Avid?”  She loved learning how to rock climb, kayak, and explore nature. We loved how everything about the camp lit up Quincy and how well organized and engaging the staff were.

They perfected every little detail about our experience… from calling the week before to welcome us and see if there was anything we’d like them to focus on with Quincy, to creating fun ice-breaking activities for the her to make new friends, to teaching her something new about nature or safety with each activity, to  how good they were at building confidence in trying new things, to making everything fun for her, to writing a hand-written heart-felt thank you note to Quincy afterwards.

I bumped into Avid’s founder, Dave Secunda, last Summer and told him how impressed we were with his  camp. He shared some of his growth and financial numbers which impressed me even further to say if he ever wanted to talk about selling part or all of the Avid to let me know. Over the course of the year, one conversation led to another and we decided that to make an offer to his original seed investors from 10+ years ago, giving them a long-awaited exit.

Dave was excited to create a cash-out “win” for his original passive investors while at the same time bringing on an actively-involved built-for-life focused owner like me. As he so eloquently shared in an email with his leadership team:

“Earlier this year, Bill approached me to learn more about Avid… His passion for working with companies of our size was clear, and his interest was very different from every other investor that I had met. Most investors are looking for “the big win”. They look for rapid growth, unaccompanied by solid business metrics that would indicate long-term sustainability, followed by an “exit” or sale of the company to make their money back at a multiple. Bill, on the other hand, looks for businesses to get involved with that have solid fundamentals, clear vision and a compelling value proposition, in order to see sustainable growth and returns over time. “

I like the way Dave phrased this because he alludes to a distinction, in my mind, between being an investor and being an owner. I’ve come to realize that I love being an “owner” of businesses a whole lot more than being an “investor” in businesses. I’d like to write more about this difference later.

I’m excited to work with and learn from Dave and his fabulous team, share some of my company-building experiences with them, and more importantly, be a part of growing Avid to inspire a whole lot more kids about their connection with the outdoors. Thank you Dave for giving me the opportunity to be a part of what you’ve created and are building with Avid!

I’ve been asked a handful of times in the past couple weeks about whether to take on investment. I think it’s a little funny that folks ask me this knowing that I believe in customer-funded businesses instead of raising money. I suppose they are really asking to hear the argument for not taking on investment. None the less, my answer has been:

The real question is do you have a clear way to return that investment?

Meaning for every dollar you spend on hiring a new person, advertising, product development, etc… do you KNOW you can return $2 back through more revenue?

Or are you just throwing things at the wall to see what sticks?

If you KNOW you have a clear ROI for investing/re-investing any capital, then do it! That’s how people get rich.

If you don’t know, then put a 10% probability* of the investment sticking/producing a return on the investment dollars and ask yourself if the extra debt or less equity is really worth it? *10% is the approximate percent of time that new ideas produce a return for me. Which is why I try to minimize spend while testing new ideas.

I’ve seen too many people throw away too much equity and other people’s money by not first vetting the potential ROI of what that money is being used for first.

Nail it, THEN scale it with capital.

I get asked all the time by startup entrepreneurs how to create a customer-funded business. The dirty little secret is that I haven’t actually STARTED a business on my own since college.  I’ve watched and helped many others do it. And more specifically, my expertise is helping companies grow organically from early 7-figures into GREAT 8-figure companies. But I still get asked a lot, and I still can’t resist answering and sharing the startup stories of my partners/founders.

Here’s an hour audio interview that Michael Williams, a super-cool fellow Boulderite entrepreneur, did with me on Creating a Customer-Funded Business .  If you want to skip the small talk, and spare yourself from my singing, fast forward to about 5 minutes in.

Click to hear the interview

Thank you Michael for the fun interview and creating a great resource to help entrepreneurs (www.strategicentrepreneur.com)!

I’ve had several conversations in the past couple weeks with entrepreneurs of established and growing companies about their role as a business architect. It went something like this:

Entrepreneur: “I’m frustrated that I’m the one who always needs to solve the bigger challenges or come up with the ideas for innovating for the customer. Why can’t my employees step up?”

Me: “Isn’t that YOUR job? Aren’t YOU the architect of your business?

Entrepreneur: “I guess so, but why do I feel so stressed at times?”

Me: “Because your business needs more architecting. And rather than embracing that challenge everyday, you’re hoping your employees will do it for you.”

Most entrepreneurs are first and foremost business architects, but they don’t know it or fully embrace it. At their best, they architect systems that make their products, services, pricing, and cultures better and better. I believe the role gets confused a lot of times with leading people. And there may be a sense of not being a good leader without  giving themselves enough credit for being an architect.

I chuckle when I hear people criticize successful entrepreneurs for not being good leaders. I’ve gotten that criticism too… and felt bad about it. Until I realized that I like, and am good at, being a business architect…  the kind that creates structures that enhance peoples lives so that I can be the introverted un-leader that I am, and read quietly in a corner by myself.

So my advice to entrepreneurs is to OWN it. Be the architect for your business. Be proud of it. Embrace it everyday. And love your employees for empowering you to do it. And nurture business architect thinking for others in your organization by trying open book management.

If I had to pick two of my favorite words they’d be Unconventional & Freedom. I’ve been told my whole life that I see things differently than what’s conventionally done. At times it’s gotten me into trouble because I tend to question everything. But, overall I’m really happy with the results. I feel like I’ve been able to live a life I dreamed. A life with great freedom.

The key for me is that it has nothing to do with what others around me have dreamed. I’m not happy because I have money, live in a cool place or because I own fancy things. I’m happy because I’ve gotten to live my life on MY own unique terms. I became an entrepreneur not to get rich but to feel the freedom of creating things that could be of real value to my customers. To feel the freedom of creating an organization in my own unique way. To have the flexibility to vacation when I wanted (or not in the early days).

Growing up, the conventional wisdom was to follow the rules in school, go to a good college, and get a job/profession that could pay the most. Then it was get married, buy a house, start a family, and work to retire one day. It all seemed rather boring and pressure filled with expectations that didn’t seem to inspire me. Each time I tried to follow the conventional path, I lost energy and felt more lost than before. On the flip side, each time I did what felt uniquely right for me, I gained energy and felt inspired. I call that unconventional freedom.

I also found that in business when I did the things no one else was doing, I had more success (and it was a lot more fun for me). And when I did things because I thought I should, they didn’t turn out as well.

An example of this was when we were deciding on what to do for holiday cards for our clients. In the past we sent out thousands of relatively generic “Happy Holidays” cards “from all of us to you.” When my marketing manager, Cindy, came to talk details about that season’s cards, I said “I want to puke, these cards are so predictable and boring. What can we do different?” She came back with an amazing idea to do a company cookbook, with each co-worker who wanted to could cook their favorite dish that we’d photograph at a potluck lunch and then share those pictures and the recipes in a pamphlet-like holiday cookbook. We said, why not, wouldn’t cost us that much more, and we’ll have fun with it. Well, it was a BIG hit with our customers AND we all had a lot of fun doing it. I’m still reminded of it as a half a dozen or more companies I know are doing their own unique versions of company cookbook holiday cards!

 Click to see 2006 RegOnline Cookbook PDF

I recently saw Jack Canfield (co-author of Chicken Soup for the Soul) speak at a conference here in Boulder. People have bought half a BILLION of his books around the world over the past 20 years.  This is a book that got rejected by 180 publishers while Jack and his co-author almost went broke.  He hit on a nerve that people went nuts over.

At this conference Jack did a demonstration that I’ll never forget. He asked someone from the audience to come on stage. A woman volunteered. He asked her to hold out her arm and push as hard she could against the force of his hand pushing down. Which she did with some great strength.

He then asked her to think of a goal she had, and how SHE would benefit from that goal being achieved. He pushed down on her arm again and it got weaker.

He then asked her to think about her goal in terms of how it would benefit OTHERS in the World. He pushed down and her arm got significantly stronger.

It’s called muscle testing, where your body derives strength or weakness when focusing on certain ideas (or foods).

Whether you believe in muscle testing doesn’t really matter, the point of the exercise was to show how our goals or visions can be or feel stronger when viewed from a standpoint of benefiting others.

I was reminded of the power of this in my own life today when I was talking with one of my former co-workers from RegOnline (now at SurveyGizmo). I was replaying how our vision at RegOnline was simply to make people’s lives easier. Not only easier for customers to manage their events with our software. But also easier for them to find us, try us, start using us, and do business with us. We also looked internally and kept asking what would make it easier for people to work there. The vision was absolutely focused first on what we could do to help others by making it easier for them. We had forecasts of what we thought would happen with our revenues and profits, but they weren’t the top priority. And interestingly enough we usually ended up exceeding them anyway mainly through consistently figuring out how to better serve our prospects, customers, and co-workers.

I’ve also noticed that some of the best and most successful entrepreneurs are constantly talking about how to better serve others. Richard Branson, Steve Jobs, Tony Hsieh, etc.

Back to Jack.  After his talk, I thought to myself,  what an interesting demonstration for a guy who is known for feel-good story books. Then it hit me, maybe that’s EXACTLY why his books were so unbelievably successful. All the stories were about people HELPING/SERVING other people. AND he had written the books not because he thought he’d get rich on them, but because he truly thought it would inspire OTHER people.

Now I’ve had many goals/visions in my life. Most were pretty self-serving. But when I look back at the ones that weren’t, I have to say they felt a lot better AND succeeded more often. I’m personally starting to look at all my visions and decisions through a new lens of “how can this serve others?” Give it a try with your goals/visions and see how it feels.

I sincerely hope this post helps to create a positive impact for you in some way.