Welcome to the first “Business Brief with VPT.” Business Brief asks presidents and CEO’s of companies at the Virginia Tech Corporate Research Center (VTCRC) one question…
“What key lesson have you learned in business that would help others?”
Please enjoy this first brief with Dan Sable, CEO of VPT.
When the VTCRC asked me to impart such advice, I cautioned with the following:
- Advice is generally worth what you pay for (usually nothing)
- What works or has worked for me does not in any way guarantee it will work for you
- While hard work and smarts are important, being successful in business depends on a lot more on plain luck (other people call it timing) than anything else
About the only business lesson I am sure of is: Buy low and sell high. That said, I will try to summarize some of the lessons I learned in business that could help others and might be relevant to your business.
- It’s all about the people
Your employees are your biggest asset (not your patents, not your technology, nor anything else). Your most critical job as CEO is hiring. Hire good people and put them in the right position. Some folks say that the customer is always right. I say your employees are always right until proven otherwise. Treat your employees with respect and demand it everywhere within your organization. Develop a culture where the good people stay, and the bad people leave or are let go.
- Bad news does not get better with age
This can take many forms – a cash crunch, a failed project, a toxic employee, a delayed delivery to a customer. Understand the situation and take immediate action, including cost cutting, cancelling a project, letting go an employee, informing the customer and communicating a recovery plan, etc. If you realize you have made a hiring mistake, don’t delay in taking action, but do it in a respectful manner. This very often will involve offering a generous severance package in exchange for a general release of all claims. Hopefully, you can shake hands at the end.
- Businesses cannot exist without strong strategic partnerships
Your employees, your customers, your vendors, your investors are all strategic partners. You cannot exist without them. To maintain a strategic partnership, it requires 2 things:Win-Win attitude: You have to look your partner in the eye and basically say, if I win, you will win. There are some people who do not believe in win-win. They feel they can only win if you lose. It is crucial to recognize these people and manage them accordingly.
The pie has to be big enough for both parties to win. If a business or venture is not successful, no amount of good will with all parties can make it a success.
- Say what you do, and do what you say
People’s tendency is to hedge. (This project should be done by this date, or this software should work in your system). In fact, your employees or customers hate it when you hedge. You will get a lot more respect if you tell your customer: This project WILL be done by this date and it WILL perform to these specifications, and this is what we WILL charge. If the project is not done, or it doesn’t work, then it is your burden to recognize it immediately when you know it and take appropriate action such as informing your customer and coming up with a recovery plan. (See #2 above)
- The first to develop a new technology is rarely the one who makes money from it
This one is not going to be popular since we are in a university town where there are many businesses attempting to commercialize a new technology that may have come out of the university. Commercializing a new technology into a successful business is really difficult and my experience is that folks grossly underestimate the manufacturing, quality assurance, market acceptance, and product development time and costs. A lot of them fail trying. Then the second or third person who comes along and gets the benefit of the failed experience is the one who develops a successful product. Consider the following examples:
- First PC: Commodore
- First Spreadsheet: Visicalc
- First Wordprocessor: Electric Pencil
- First to develop a TV: Philo Farnsworth
- First to offer an on-line service: Compuserve
- First to offer a cell-phone: Motorola
These new technologies did not translate to successful products. It is often better to take an existing niche product that already has a known market and then offer improved performance, lower cost, better quality, or better customer service.
- Don’t confuse raising money with making money
In fact, raising money by issuing stock or convertible debt significantly complicates your ownership structure. Bootstrap as much as you possibly can. Borrow money from your friends and family. If you can get to the point where your business is cash-positive and you are earning a good living, then your negotiating position for raising money is greatly enhanced. Uninvolved shareholders can be very difficult to deal with. Avoid incentive stock option programs. There are better ways of rewarding employees or giving employees a vested interest in the success of your business than offering stock options. Keep the ownership structure of your company as simple as you can.
- Think International
Most of the successful companies that I know have a strong international presence. Market or manufacture your product overseas. However, this is a lot more difficult to do than people realize. There are cultural barriers, language barriers, International Trafficking in Arms Regulations (ITAR), Foreign Corrupt Practices Act (FCPA), payment terms, etc. It requires constant travel overseas to meet your manufacturing partner or customer. Even in this age of instant video communication, there is no substitute for face-to-face interaction. If you can navigate the subtleties of doing business overseas, then you will have a big competitive advantage. It can help a lot to learn a foreign language.
- Make sure you consider the four D’s when starting your business with one or more partners
The four D’s are Death, Disability, Divorce, and Disagreement. Starting a business with one or more partners is more complicated than getting married. In fact, you will probably spend more awake moments with your business partner than with your spouse. Make sure you and your partner(s) truly believe in win-win (see #3 above). Consider a buy-sell agreement that addresses the four D’s. Death, Disability, and Divorce are easily dealt with. The tricky one is Disagreement. What happens in a few years if you and your partner get into a major disagreement on running the company. Unfortunately, this is not the exception. My experience is that it is all too common. Effectively, you need a pre-nuptial agreement. In reality, a business is not a democracy. There needs to be one CEO who has the power to fire the other partner(s). However, the “pre-nup” needs to contain provisions for “fair” compensation in the event of irreconcilable differences.
I caution you that I am probably totally off-base with all the advice above. About the only business advice that I am sure of is the following: Buy low and sell high.
– Dan Sable
1971 Kraft Drive, Suite 1000
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