Hi, I’m Bill Flagg, I’m passionate about building great, organically grown, built-for-life companies.  The kind that employees love, customers shout from rooftops about, and owners want to grow old with.

I co-own four really cool Colorado-based companies. All are organically grown, cash-flow rich, and have no outside investors.

Recently, I co-founded Sovereignty, an organization dedicated to empowering self-funded businesses to manifest their independent long-term destinies.

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Picking the Right Partner(s)

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I’m still amazed at how great a business partner Attila was for me at RegOnline. I’ve also been involved with and seen many other partnerships that haven’t gone so well. I get asked every so often my thoughts on partnering-up and partnerships. So here’s my experience…

Attila & I didn’t know we were going to be great partners. A friend we both respected suggested we might be good together. We had a short romance of daydreaming together about the future potential of RegOnline. I liked his common sense business approach and his willingness to speak the truth directly and without emotion. But that, in itself, would not make for a great partner.
I’ve seen many people be unhappy with their partners and wish they had done things differently before jumping into bed together so quickly.
Attila & I had a feeling it could work to become partners. So we discussed the terms under which I could buy in AFTER a 4 month trial period.
After 4 months I knew:
1. I loved the business, it’s future, and had a sense I could add real value
2. Attila and I had a similar work ethic (hard when needed, but not non-stop)
3. We had a similar philosophy in growing our team (be direct, compliment sincerely, take action, hire sparingly)
4. We had a similar approach to testing new things, but always staying focused on growing profitability
5. We felt the same about taking care of customers and doing what’s right by them first.
6. A shared sense of humor to laugh with each other every day
After 4 months I don’t think there was a question in either of our minds that we had found great partners in each other, so we did the paperwork and officially became co-owners of RegOnline. 4 years later, we had had a lot of fun building a great company together.
So my advice to people considering partners/partnerships:
1. Have a no-strings-attached trial period with a plan for what happens if both people are delighted to be partners together.
2. Give the founder/controlling partner an easy way to buyout the other partner if things don’t work out in the medium term (up to 2-3 years).
3. Share decision making power, but let the founder/controlling partner pull the trump card every so often.
4. Share/show appreciation for each other a couple times a year.
There’s also another type of “partner”… called investors. If you want to build something great (vs. be pressured into cashing out in 3-5 years) make sure your investor-partners are on the same page as you. Tony from Zappos shares his experience on why he felt forced to sell in this excerpt from his book, Delivering Happiness.

Technology Hostage Crisis

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Technology is supposed to free up our companies to better/more efficiently serve our customers. Every so often I see companies that are being held hostage by their technology… and it’s not pretty.

It looks something like this:
1. The technology developed has not helped the business grow or serve the customers significantly better
2. An over-investment in technology and the ongoing support of the new technology undermines the profitability of the company
3. New technology priorities are planned in order to dig out of hole #2
4. More development staff are hired
5. Repeat #1
So what’s the solution? Stop. Drop. And roll.
STOP the development train.
DROP the belief that we think we know what our customers will want without asking (or have heard only from a few).
ROLL forward only after REAL feedback from prospects/customers as to what new planned technologies will make a SIGNIFICANT difference in their usage/purchasing decisions.
Then go on a technology “fast” of sorts. Narrow the project list down to just the 1-3 things that will REALLY make an impact. Purge the rest of the projects on the list. Then figure out the minimum development team necessary to implement. Once you feel ultra lean, use that new space to truly hear the voice of customers again. Then implement lightly and with a new heightened sense for where the REAL technology value is for our customers.

Good Growth

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Growth is fun. Healthy companies have lots of growth opportunities. With those opportunities come the need to hire on more folks. Those folks cost money.

I’ve found that if a company is growing profitably or has easy access to capital, then these hiring decisions are not scrutinized as much as they probably could be. What I have seen happen with several companies in the past year is they hire like crazy and then realize their growth doesn’t support a healthy profit margin like they thought it would.

As we were growing RegOnline 50% a year we would have a wish-list of positions we wanted to hire for. How did we decide how many were too much? We knew we wanted to maintain a certain margin level every month – like 40% net profit. We were willing to sacrifice some of that margin to hire more, having a floor of 25%. It would have been easy to say, well since we are continuing to grow we can hire more than that and grow into our profitability again later. But we didn’t. And I’m glad we didn’t because we had lots of months where we didn’t grow or went backwards. We would have felt unnecessary pressure because of a bloated overhead. It felt much better to know we were continually enjoying great profit margins AND growing.

This process then forced us to prioritize our hires based on ROI. How would each hire produce more profitability for the company, what was the certainty level, and in what period of time. Adding to our support or sales team based on metrics was a little easier than doing the math on another developer or admin person. None the less, prioritizing our hires and doing the math helped us stay profitable in up and down months.

Know Your Customer

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REAL business boils down to ONE thing at the end of the day. Serving peoples’ needs and getting paid for it in a way that you can operate profitably. The best way to do that is to know your customers.

At RegOnline we constantly listened to what our customers needed and wanted. It was an iterative process that started with my partner, Attila, building the first version of the software for one client based on what they said they wanted to make their event registration management easier for them. Then Attila turned to the next customer, and the next, and the next, until we were at about 5,000 customers.

As we began to expand our marketing to be more self-service (didn’t need a salesperson to learn about the product). We constantly looked for how we could make it easier for prospects to FIND what they WANTED in our product by listening to what they asked the salespeople on the phones and then repeated that in a simple way online.

Getting inside my prospects and customers’ minds was one of the most valuable activities I did at RegOnline. Getting face-to-face at trade shows helped me learn and play back what customers WANTED. Sitting in on our public online demos to hear the questions prospects asked helped me get in their heads and understand what they WANTED. And then eventually we got into doing usability testing to see where our prospects and customers would trip up and fall in trying to do business with us. And then we would iterate like hell to fix what confused people. To create a frictionless experience and make it super easy for people to fall in love with us.

We wanted our customers to know that we respected that basic exchange of “we are in business to serve you well and don’t want to get paid if we don’t.” We decided to put a message on our invoice “If you are not completely satisfied with your service, mark down this bill as you feel is appropriate and tell us where we can improve.”

It’s refreshing to see startups that focus their first priority on providing real value in their products and services to people who are willing to pay for it. There are SO many distractions that we face as entrepreneurs – building cool technology, getting funding, hiring, office space, partnerships, acquirers – that its easy to lose sight of THE reason we are in business. STAY FOCUSED. Listen to what people need and help them get it. Then do that again, and again, and again… and enjoy watching your CUSTOMERS make your business more successful.

Appreciation

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I talk a lot about creating value. It’s important. But, there’s something that we all crave more than getting value for our money… and that is appreciation

Being appreciated as a customer, employee, boss, friend, husband, wife, child, human being… is priceless. It’s worth more than anything money can buy. It means we are loved.

Over the years I have flowed in and out of hand-writing thank you notes to those I appreciate. I’ve probably written over a thousand of them. I have welled up inside as I have written many of them. I have later seen them pinned up on cork boards, sitting on desks, and stuck to refrigerator doors of friends, family, and colleagues.

I don’t do it to get a reaction. I do it because it feels great to share a piece of my heart with others. I try to do it as soon as I get the inspiration. When my companies were smaller, I wrote thank you notes to coworkers to express what I uniquely appreciated about working with them.

Yes, it feels weird sometimes. And sometimes the receiver doesn’t know how to respond. But every time I do, I feel great. I’ve also done it via phone and email. But there’s something about the hand-written note, especially in our digital age, that means more to the person getting the note.

If “to appreciate” means “to add value”. I have discovered that “adding value” to my relationships makes my life more enjoyable.

Thank you to all of you who have given me a reason to appreciate.

Cooking for our Customers

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I’ve talked about how we’ve sent company cookbooks to customers for our holiday card in the past with amazing response from our customers about how great it felt to be able to connect with us in that way.

A couple months back I got a tin of homemade cookies from Trada (a great way to outsource PPC). When I sent the founder, Niel Robertson, a thank you email, he said something about his house still smelling like cookie dough. I asked if he cooked them. He said yah along with the rest of his team and they did a strategic launch plan while making the cookies too. Now this blew me away that a technology company got together to bake cookies for their clients. AWESOME.

Then I thought about it a little more. Isn’t that what we are doing everyday? Making things for our customers? As we have all compartmentalized the roles in our businesses, have we lost touch with the fact that it’s the complete package that our customers want and choose to buy from us? Not being marketed to, then sold to, then setup with the product, then supported, then sent a holiday card. It’s a much more holistic thing that I REALLY want from a company that I buy from. I want it to feel like I bought from one person who honestly and fully described what the product can and can’t do for me because they built the product and then will support me on it too.

When we are just getting started as a company, and only have a couple cooks in the kitchen, this comes naturally. As our companies grow, they become more compartmentalized and the customer starts to get the feeling that the right arm doesn’t really know the left arm. And they then get the feeling that they are dealing with a machine without a heart more than a real company with a heart and sole connecting all the parts together. And since we are humans with hearts and souls, we are attracted to companies that remind us of our own hearts and souls, want to do more business with them, and tell others about them.

What is your team making for your customers? Does it have heart and soul? Do the arms and legs know what were cooking for the customer?

Beware of the Executive

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I heard a story today that I’ve heard happen to half a dozen other entrepreneurs in the past year. It goes something like this…

1. Entrepreneur is growing company and has lots of good paying customers
2. Thinks they don’t have what it takes to take it to the next level (or is getting tired and wants to just focus on what they are good at)
3. Gets introduced to a former executive of a well-known company and thinks this person has seen a LOT more than them and could grow their company better.
4. Hires the executive on as their President, COO, CFO and/or CTO
5. New executive convinces entrepreneur to raise money to fund all the people they need to hire to really make their BIG plan work
6. Entrepreneur gets diluted down and sometimes loses control of the company
7. Entrepreneur wakes up and realizes their BIG executive didn’t really know anything about growing a small company, fires them, rights the ship, and wishes they had believed in THEM-SELF at step #2, were more patient, and grew it themselves.

I think part of the problem is executives from big companies have credibility in managing already successful systems but don’t have experience in being entrepreneurial and creating growth. Entrepreneurs have experience and an intimate connection with creating value in their business but don’t have the credibility in their own minds.

Now, I’m sure there are success stories out there where this story did turn into a happier ending. Hopefully, I won’t have to hear a hundred more to find one.

Berkshire Hathaway 2010

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I just got back from my annual pilgrimage to Omaha to listen to Warren Buffet & Charlie Munger share their wisdom for 5 hours at the Berkshire Hathaway annual shareholders meeting. This is the third year that I’ve done this trip with my 76 year old father, which is such a wonderful opportunity for us to have fun, reminisce and connect with each other. I enjoy our shared love for learning and taking naps.

While a lot of what Warren & Charlie talk about each year is the same, I still get inspired in new ways each year. Remember BH is the 7th largest company in the world with only 21 people at HQ.

Here’s eight nuggets that came up for me this year:
1. The power that lives within you is new in nature.

2. Integrity is the safest way to make $. Professing isn’t the same as having it. Situational ethics problem is huge (“everyone else is doing it”)

3. What’s important isn’t size of circle of competence, but knowing where the perimeter is.

4. Bearish on ALL World currencies holding their value over time because of huge deficit spendings. If we continue the policies we have now, inflation will become more severe. Safest antidote is to add as much value as possible and you will always command your inflation adjusted price.

5. BH has been structured so they can act when everyone else is paralyzed

6. Never hire a compensation consultant – each biz has different economics – some easier to run than others. Simplest way to compensate given the dynamics of biz requires ability to differentiate and interaction with managers to agree on what ACTUALLY adds value to company. BH system the opposite of GE or US Army (with centralized comp structures)
Treat people fairly – rationale should be understood. No Managers have left BH over compensation. HQ doesn’t impose, keeps simple

7. 100% failure rate at trying to change a company’s culture

8. Energy solution is the largest benefit to society to come

And 69 more:
1. Don’t believe in EPS (because of managed earnings)
2. Goldman Sacks – doesn’t feel like they did anything wrong
3. Options – complexity is counter productive
4. New options legislation – if retroactive, then unconstitutional
5. Bearish on ALL World currencies holding their value over time because of huge deficit spendings
6. The US system has enabled ordinary people to do extraordinary things
7. Confident in succession & culture of BH continuing success of BH companies
8. Reinvestment of cash most important for BH
9. I like businesses where customers tattoo your name on their bodies (Harley Davidson)
10. Debt investment decision simpler because the only question is “will they go broke or not?”
11. BH has been structured so they can act when everyone else is paralyzed
12. Took decades to build BH culture
13. BH has become the premiere insurer of the world
14. $60 billion of float and keeps going
15. BH doesn’t invest as much in India & China because limited to under 25% ownership
16. Would bet on higher inflation going forward because of high deficits relative to GDP
17. 90% depreciation of dollar since 1930
18. Good financial habits early in life important – Ben Franklin’s ideas
19. McDonalds hires marginal kids and teaches them responsibility and hard work
20. Taxes are 15% of GDP which is a good level
21. NetJets mistakes – buying planes at prices not able to sell for later and operating costs out of line. Sokol turned $750 million in loses into profitable company now.
22. Performance of BH managers far beyond dream when started BH
23. BYD – learning new things – Sokol driven
24. “I want to hear about problems fast” to protect reputation of BH
25. Always look for risk and get compensated for it
26. With our insurance we allow other companies to smooth their earnings while ours look lumpier
27. Why friend likes to be sole owner – “I like to look in the mirror and say ALL my shareholders love me”
28. Usefulness of derivatives overrated – commodities and currency beneficial – others are not. Does not condemn anyone form using derivatives to hedge risk.
29. 95% of derivatives activity is gambling
30. China has record dramatic growth per capita
31. “too many words in an annual report can obfuscate rather than illuminate”
32. Charlie is converting his IRA to a Roth IRA this year
33. In 1975, there was nothing that looked more bullet proof than daily papers
34. There will always be investing opportunities. Be patient and wait for the right opportunities
35. “Take the high road, it’s far less crowded”
36. Municipal bond default rate risk is contagious
37. Owning equities over the next ten years better than owning bonds
38. Ratings agency – requires no capital and have great pricing power
39. We don’t believe in outsourcing our investment decisions
40. 150 years ago, oil changed the world in a major way. The world will not be dependent on oil in another 100 years. If I picked a time to be born, it would be today.
41. Krafts Pizza & Cadbury deals this year were dumb. We’re stupid in many ways, but have avoided a small subset
42. Integrity is the safest way to make $. Professing isn’t the same as having it. Situational ethics problem is huge (“everyone else is doing it”)
43. BH managers don’t submit budgets.
44. Create structures that minimize human failings
45. There were NO apologies for the recent financial fallouts. No one felt responsible.
46. If you get scared when others are scared, won’t make much $. Love it when stocks get cheap.
47. Develop courage with experiencing more failure
48. If you want to put in solar panels, wait because it’s going to get cheaper
49. BH isn’t dramatically undervalued
50. There’s no better way to be happy than to reduce expectations
51. Gets misquoted in interviews which is why writes on stuff and does video interviews instead.
52. We want shareholders who think the way we do so they wont be disappointed
53. We view our shareholders as family. Blessed by the fact that doesn’t have an investor relations dept
54. It won’t work forever to have huge budget deficits. Stocks are up because interest rates are low
55. What’s important isn’t size of circle of competence, but knowing where the perimeter is
56. What business will be around 30 years from now?
57. Observed what was working and what was failing in terms of fundamental economics
58. The great consumer businesses need little capital
59. People approach us to buy when they wouldn’t sell to anyone else (PE groups, competitors, etc)
60. BYD outside of what they usually invest in. Shows ability to learn new things. BYD will help solve significant problems of the world
61. BNSF better for their shareholders than ours – but still good for ours
62. Can you keep using your capital effectively enough? In 10-15 years size would make it hard
63. Wealth is he who spends less than he earns. Follow your passion. Love what you do. There’s not much competition
64. If you do something well you won’t have much competition
65. Pragmatism – when something is working well, we keep doing it.
66. High speed rail service in US not economically feasible when compared with auto and air travel
67. BH could handle $250 billion of catastrophe exosure and still be profitable
68. BH could withstand more than any major corp could
69. Our gov understands the necessity of taking major action in a meltdown “I’m not worried about it”

Rich Presence

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Each year I say it can’t get any better and it does. A week ago I was at my annual inspirational trip to Boston for the Gathering of Titans (GOT). It’s a wonderful group of 60 entrepreneurs that bring in 20 or so speakers over the course of three days. They challenge and inspire our way of thinking, being, and doing like nothing else.

This year I walked away with a nugget that, while so obvious and subtle, has given me a dramatically richer/more colorful view of life.
In past years I would go to GOT with my laptop and cell phone a blazing. Doing emails, tweeting, text messaging – all in the name of “I can multi-task AND still get the nuggets out of the speakers”. The night I arrived this year my iPhone wouldn’t turn on. At first I panicked about the idea of not being able to connect for days. And then it hit me, this is perfect! I got a smile on my face and decided to up the ante’ by not bringing my computer into the meeting room either (I did use it at night to video conference with Chelsea & Q (my wife and 4 month old)).
As I sat through the presentations this year I felt a calmness and richness that I haven’t felt in a long time. It hit me this was the start of “being present” for me. Just listening, absorbing, and feeling what was coming through each speaker. Then I started to realize how much of my life is distracted with making plans, responding to emails, checking Twitter & Facebook, texting, and my ongoing infatuation was getting things done.
A couple of the speakers echoed the power of being present
When I got back to Boulder – I got a new iPhone but didn’t load a single new app. Haven’t used it for email, facebook, twitter, or anything else. I haven’t even loaded my contacts back onto it. And it FEELS great!
I am now using email for just 1 hour a day (or less). And feel that urge to be instantly “responsive” fading away.
I am finding a deeper richness in every interaction where I am thinking about “other” things less and less distracted with being “plugged in”. I LOVE my in-person meetings (always have), because I love how deep and rich they have always felt to me. The less time I distract my self with technology, the more time I am finding to be present and in the presence of other great people.

Bootstrap-Loving Angels

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A couple weeks ago I got inspired by attending the Colorado Open Angel Forum. A great group of angels & VC’s and six really interesting companies. However, the amount of cash and the valuations they were asking, with little to no revenues, made me feel like I was in the wrong place. Which for those of you who know me… well, let’s just say I walked away wanting something more organic, more bootstrapped.

I love the bootstrapped entrepreneur who generates value AND revenue the day they open their doors (or website). The kind of entrepreneur who likes to do the math on whether adding a water cooler to the office makes sense or not. The kind that likes to keep things real and gauge their sustainability by profitability, not how much they raised in their last round and at what valuation. The kind that value the experience and involvement of their angel investors more than the money they put in.

So then it hit me, why not riff off of OAFCO and have a gathering focused on bootstrapping entrepreneurs and local angels who believe in the power of bootstrapping. So here’s the deal…

Hosted at my house April 7th at 6pm:
5-10 Bootstrap-loving Angels (combined net worth of $100 million)
5 Bootstrapping entreprenuers
15 minute product demos/discussions (no PowerPoints)

Pizza, Beer, & Mega Monopoly afterwards

Criteria for Angels

  • Colorado based
  • Ability to invest up to $300k
  • Successful at building their own bootstrapped companies
  • Loves bootstrapping entrepreneurs and have invested/helped in the past

Criteria to apply to be one of the presenting companies

  • $30k-$200k/month in revenues
  • 40% growth over previous year
  • Break-even or profitable
  • Asking $300k or less in expansion capital
  • Colorado based or wanting to move company to Colorado
  • Internet-based business
  • No outside investors (except a little F&F seed $)
(until April 2nd, selection April 5th)