How to Maximize Entrepreneurial Success
May 29, 2009
Roger Blume, ’67, CEO of a company that trucks perishables to supermarkets, summed up how rough the road can be for entrepreneurs: “There were days when you’d work seven days a week and read your Chapter 11 book at night.”
But today his company, Quickway Distribution Services Inc., is an industry leader. With 1,000 employees, the Nashville-based operation is Kroger’s largest hauler and handles all dairy for the Dominick’s grocery store chain.
Blume was part of an expert panel that included Dhiraj Rajaram, ’03, and Eric Belcher, ’95, at Chicago Booth’s 57th annual Management Conference at Gleacher Center. Their topic: “Optimizing an Entrepreneur’s Chances for Success.” Ellen Rudnick, clinical professor of entrepreneurship and executive director of the Michael P. Polsky Center for Entrepreneurship, moderated the panel.
Unlike the other panelists, Blume bought an underperforming division of an existing company in the Fortune – after mastering his chosen field in staff and line jobs for other companies, including four trucking outfits of which he was CEO.
By contrast, Rajaram founded Mu Sigma, a Schaumburg, Illinois–based firm that does mathematical analysis for other businesses. Only 29 at the time, quitting his job and selling his home to help raise capital gave him a bad case of the “post-partum” blues, he said.
But being in a tight spot early on can be an advantage, Rajaram noted. “If there is a foot race and one person is wearing track shoes and the other is barefoot and a dog is chasing him,” he asked, “who do you think will win?”
Rajaram added, “We want to be the world’s largest math factory.” With clients like Microsoft, Walmart, Abbott, and Allstate, he’s off to a good start. Belcher is CEO of InnerWorkings. The Chicago-based company handles others’ print and print-related interests — everything from direct mail to labels — bringing expertise to a business function he calls “rife with inefficiencies” and marked by lack of tech savvy.
The firm was founded after Belcher “bumped into a bunch of entrepreneurs” in 2004. He assumed the CEO-ship only last November, “in time to watch our stock crater.” But things have improved, and he expressed confidence that InnerWorkings will soon be a multi-billion-dollar company.
Belcher and his partners sold 25 percent of their company to New Enterprise Associates (NEA), not so much for the capital, he said, as to get someone on their board who has a lot of experience with successful companies.
To someone in the audience who asked if that meant the company had an outsider telling it what to do, Belcher replied that this wasn’t a problem. “They invested with us because they believe in the philosophy and strategy of what we’re trying to do,” he said. But Rajaram cautioned against using too much of other people’s money. Although accepting a little guidance is OK, “If you’re looking for help from investors, you’re living in la-la land,” he said. “Don’t include [investors] in the management process because it would be a distraction for them.”
This is a good time for certain entrepreneurs, the panelists agreed. “Most of our customers are not affected by [today’s] economy,” Blume said. “Supermarkets are doing better than restaurants.” And Rajaram noted that over the past 50 years, corporations have moved from manufacturing big things like airplanes to little things like software. Saluting the revolution wrought by computers, he asked, “How could you ignore the fact that this has become our only universal language?”
Is California the best place to start a tech company? Belcher told a questioner from the audience that he’ll take Chicago, citing its major universities, strong corporations, and a “fantastic” talent pool.” NEA’s director tells him that “many of its recent investments have been in the Midwest, specifically in Chicago.”
Tips for Success:
In addition to recommending resources offered through the Polsky center and Hyde Park Angels, a group that funds early-state companies, Rudnick listed the following success factors for startups and entrepreneurs, many from the book The Illusions of Entrepreneurship by Scott Shane.
• Pick the right industry. Firms’ four-year survival rates range from a low of 38 percent in the information sector to a high of 55 percent in education and health services.
• Firms with more than $100,000 in startup funds are 23 percent more likely to survive over time.
• Don’t go it alone. Entrepreneurial teams generally perform better than sole proprietors.
• Consider buying an existing business. Although more than 90 percent of entrepreneurs start from scratch, they’d be much less likely to fail if they purchased a company.
• B to B firms comprise 9 out of 10 of the list of the fastest growing and most successful.
• Experience matters. Businesses founded by people ages 45-54 tend to do better than those founded by people under 35.