20+10: Fresh ideas to jumpstart your year

Dileep Rao, Ph.D,
Carlson School of
Management, University
of Minnesota:
763.588.6067
dr**@*mn.edu
www.infinancing.com

Minnesota ‘legends’
share lessons told
to Carlson School’s Rao

by Beth Ewen

ABOUT 23 MILLION businesses operate in the United States, and only 15,000 have value over $100 million, says Dileep Rao, author of the new book “Bootstrap to Billions: Proven Rules from Entrepreneurs who Built Great Companies from Scratch.” He profiles 28 of what he calls the wealth-creating legends, detailing how the Minnesota-heavy lineup built their companies into engines of job creation. In January, Rao presented nine of those entrepreneurs at the Gary S.

Holmes Center for Entrepreneurship at the Carlson School of Management, University of Minnesota, where he is also an instructor, and then added his own lessons learned. Here are excerpts from each.

Mark Knudson, Venturi Group, who built three medical ventures with a combined valuation of $250 million:

“Nothing’s ever easy, and there seldom are simple solutions to complex problems.

You need to understand the basics of the problem and work from there.

The company I’m with now, we’re pioneers in neuroblocking. We’re plowing new ground and we found the boulder. We’ll meet with the FDA and get the project moving again. If we hadn’t taken the time to understand the basic principles, we couldn’t keep going.

You must understand what problem you’re trying to solve.

It becomes infinitely more important when you run into the roadblock. You hear about entrepreneurs and perseverance all the time. You need to be effective in your perseverance as well. No. 1, think through your processes. No. 2, hire people much smarter than you.

That’s the other lesson, about vision. You can’t just be farsighted. You need to have trifocals: you have to know what to do in the near term, in 52 days, and you have to have interim goals, in 52 weeks, and then you have to know what you’re doing in 52 months.

One of my favorite savings is, Experience is what you get just after you need it.”

Tom Auth, ITI, builder of the world’s largest wireless security equipment company, according to Rao.

“Thanks to Dileep for putting me in the book, although when my wife saw the title she started looking for more zeros in our bank account.

I had early small successes, then I built from there. Many describe entrepreneurs that are single-minded. Mine just kind of happened. I became an entrepreneur more by necessity than vision. I’ve said I never met a deal I didn’t like. Some roll the dice and bet the farm. I always try to structure things to mitigate the down side.

I love going to work. That is my rule No. 1. If you don’t love it, do something else.

Once I get involved with something I don’t like losing. Someone asked me, to what do you attribute your business success? My answer: I didn’t quit when I should have.

I have three pieces of advice: 1, a small percentage of something really good is better than 100 percent of something worthless. 2, business managers who are good are not easy to manage. 3, use the tax code to your advantage, and flow through taxes away from your investors.”

Bonnie Baskin, ViroMed and Apptec, the latter of which she sold after six years for $163 million.

“I remember 30 years ago I read an article, which said anentrepreneur is only an entrepreneur in retrospect. At the time they’recalled unhirable, a dreamer, a crackpot.

I started my first company, and I borrowed $50,000 from familymembers. I created a state-of-the-art biomedical company, and it grewand I sold it. Then I started a second company. There was no way Icould do it for $50,000. I raised $12 million the second time. It wasonly because of the $50,000 and that success that I could createsomething of larger scope. The stakes are higher now, and it’s hardernow.

We in Minnesota need to create a stronger infrastructure. We have torecognize the importance of the entrepreneurs in our state.”

Tim Doherty, Doherty Employment Group, built a $400 million corporate staffing company.

“Over the last 30 years of my career, I would follow two things, theunemployment forecast and the demographic trends. I believe those twothings will create great opportunities for entrepreneurs.

It is well known that many great companies started in a recession,such as Microsoft, CNN and Fedex. I believe the high unemployment ratewill encourage people to start businesses. Then, the baby boomers,these people will start something for themselves rather than take alow-paying service job. And

Generation Y, some people believe this will be the mostentrepreneurial generation ever, because it’s the first generation thatthinks everything digital is completely natural.

One word of caution: financing is not recovering. That said, one ofthe key traits of the real entrepreneur is to keep going against allobstacles.”

Ed Flaherty, Rapid Oil Change, jumped on a trend to change oil and built a $200 million+ chain.

“I grew up in Montana and went to school in Wyoming, so I’m a cowboy. Three concepts are important: talent, hard work and luck.

On talent, my parents grew up in the Depression and they always saidI could do better than they had. They said I would go to college, andwhat little talent I had was honed in college.

On hard work, we live in America, and in America hard work is recognized and rewarded.

On luck, I think about the definition of luck. I was lucky to have agood Lord who invented in my DNA a passion. I was lucky to find realestate that was vacant, for my stores. I was lucky enough to borrow 100percent of what I needed from the savings and loan industry. I waslucky enough to have customers what liked the service. I was luckyenough to realize there was plenty to go around.

The key ingredients to being successful: Be lucky. Pick something you love to do.

Bet a lot of resources so you’re committed. Never, ever, ever give up.

Perseverance trumps talent. It trumps genius, and it trumps education.”

Gary Holmes, CSM Corp., becoming one of the largest real estate developers in the country.

“The most interesting thing about this book is there are a lot ofways to become an entrepreneur. You can have a plan, or not. It’strying to seize the opportunity.

Today with the terrible economy, think physics: for every actionthere’s an equal and opposite reaction. Today the market is such thatthere’s a real need for new, innovative ideas.”

Joel Ronning, Digital River, built an Internet software vendor with a $1.3 billion market capitalization.

My first company was when I was a student. I sorted out the fact that the

Mercedes Benz dealerships in the U.S. didn’t know who had the cars.I bought an Apple computer. I put together a database of who had thecars, where they were, which kinds. We sent our list to thesedealerships. It was a company that if someone wanted a bizarre car, Icould arrange it to be delivered.

What I really understood was the advantage you’d have withinformation, without needing a mainframe computer. You don’t have tostart with these big ideas. My second company, I used $40,000 in creditcard debt, $10,000 each with three partners.

What I’ve learned is there are five things that matter.

1, if you can measure it you can improve it. Measure everything atfirst, just for the discipline of it. Test it cheaply, and if it workson Monday it should work on Tuesday. Start small, inexpensively.

2, Along with testing, fail fast. There’s a tremendous amount of ideas, so the limiting factor is time.

3, be open when handling bad news. When someone brings you bad news, you can’t pound on them. I have a saying, worst first.

4, hire beyond your needs.

5, pay more attention to mistakes than successes. Don’t confuse good timing and luck with genius.”

Brett Shockley, Spanlink Communications, built a $130-million venture to make call centers more efficient.

“When I look at my background, the one thing I don’t see is astraight line. Everything I’ve done I learned something. My parentswere entrepreneurs. I started building unicycles and riding them as akid. But then I found out performing was scalable, while buildingcycles wasn’t. I could perform in front of a hundred or a thousandpeople and make much more.

One thing I learned, what’s the right price? You learn to ask acouple of quick questions: Who’s it for? There’s a big differencebetween if it’s performing for the McDonald’s Corporation or a localLion’s club.

I talked Southdale into riding the world’s tallest unicycle, 51feet, to get into the Guinness Book of World Records. The only problemwas I had only ridden a 16-foot. I taught myself to weld, and in twoweeks I did this.

You have to have a balance. You have passion, and then you have tobe able to compartmentalize the obstacles. You have to temper thecharging ahead with evaluating the business.

My father’s friend said, when somebody tells you something can’t be done they’re an idiot and they should be ignored.”

Craig Swanson, Definity Health, built a $307-million health care venture in four years.

“I’m the guy in the group who starts the company so I don’t have towear a tie. The thing that makes all these people successful is they’vebeen able to take all these disparate things and synthesize all thesethings and expand it into a new product or service.

One of the things I heard 20 years ago is, there was an engineer atSony who said, I’m going to create something smaller and you putheadphones and listen to music alone, and they said that’s stupid. Andhe came back and said just try this, and that’s how the Sony Walkmanwas made.

It truly is perseverance and hard work. Thomas Edison, a trueentrepreneur, said, most people miss opportunities becauseopportunities come in overalls and look like hard work. Don’t forget,Bill Gates spent 15 years trying to build Microsoft into a success.

All of these people run the fine line between perseverance and fanaticism. It’s hard to distinguish between the two sometimes.”

Dileep Rao, author, columnist for forbes.com, financial consultant, U of Minnesota adjunct professor.

There are several lessons for entrepreneurs from this book and thesepanelists, and I’ll count down to one like Letterman. 5, How can youunderstand your opportunity and develop your advantage? Many of theentrepreneurs didn’t appear to have an advantage when they started.Ninety-six percent went with their passions and/or trends. Once youhave found your passion or trend, find your advantage. Then add capital.

4, How can you sell effectively to serve customers with littlemoney? Learning how to sell is one of the most important things, andyou must operate intelligently. To get sales Glen Taylor printingcompany magnate had to cut prices. He told me, his competitors likedtheir prices and made the customers adjust. He likes his customers andhe had his prices adjust.

3, Monitor and adjust intelligently. The best business owners, theyknow by 9 or 10 o’clock what happened the pervious day. Never say, ‘I’mnot a numbers guy.’ You have to be one.

2, You can’t do it alone. Steve Shank Cappella Education said, me my whole life.

1, How can you become a better leader than your competitors? To be abetter leader start early and never stop learning. By the time many ofthese entrepreneurs are in their 20s, they’ve gained confidence becausethey’ve done things.