Startups: More data, same file

One of the highlights of this year has been watching my friends bring two new businesses to fruition. Come to think of it, that’s the only highlight of the year. Oh well, I’ll take vicarious success over none at all. And at least it provides a couple more points to heap into the file on startup businesses and entrepreneurship.

Although these are worthy cases, they’re hardly glamorous: Both businesses are prosaic. One is a restaurant. The other is a trading company that buys simple consumer goods in one place and sells them in another place, doing the old “Buy for one dollar, sell for two dollars, and make a lousy 1 percent” routine.

Both businesses are in the Pacific region. Neither is on Saipan. Neither differs from the overall trends I’ve seen in startups over the past few years. And, despite their successes, neither really inspires me to craft an elegantly arranged layout of the gig, so I’m just going to offer some random points.

Taking even the simplest cut at this requires drawing up some basic categories, so I’ll lump business tasks into three basic categories: Finance, marketing, and operations. That’s not some sacred division there; it’s just how I slice things up.

In today’s office-based culture, finance and marketing get all the glamour. After all, everybody relishes the idea of being clever with their computers. These roles are more appealing than operational tasks such as driving a delivery truck at 3am, or mopping the floors of a store when the janitor fails to show up, or tending the deep-fryer when the kitchen staff is falling behind.

Still, from what I’ve seen, operations are indeed the key to getting a business launched. This jibes with the old military adage, “Amateurs talk strategy. Professionals talk logistics.”

Of the successful entrepreneurs I’ve known, the vast majority were tradesmen who were used to getting their hands dirty. They knew how to get things done. So, despite all the glamour and glitz pertaining to superstar fortunes in the high-tech industry these days, I suspect there’s still a lot of action in the quiet and unglamorous industries.

Here’s something I’ve noticed: In the past few years, all of the successful startups I’ve seen first-hand were family affairs, sometimes involving as many as three generations for funding, labor, and management. The family as a means of capital allocation and risk sharing is a time-tested model. The East and the West, however, have two very different outlooks in this matter.

In the cases I’ve seen first-hand, successful startups usually saw encouraging results soon after opening, or had even lined up solid action before they opened. Reciprocally, none of my pals have managed to turn around new businesses that suffered sinking fortunes upon opening. There are, of course, famous examples of well-funded and sophisticated companies that strategically bled cash as they carved out market share; Amazon.com is one great example. But this kind of high-stakes, deep-pocket action is far beyond the context of the small business startups that most folks can undertake.

Meanwhile, I’ll note that the successful entrepreneurs I’ve known have shared some similar traits.

All of them recognize that people are the basis of any business. In fact, all are “people” people who have good manners and pleasant personalities. This is, I’ll note, a far different thing than being a back-slapper or a hustler.

Another trait I noticed is that none of them ever put much, if any, credence in forecasts or projections for a raw start-up. They understand that trial-and-error is the only way to test a concept. That’s why they are fast to follow-up on a winning idea and just as fast to fold a losing hand.

Most, or maybe all, of the successful entrepreneurs I’ve known wound up starting multiple businesses. In most cases, this worked out well. But in a few cases, especially when taking on a business in a glamorous industry, the results have been lousy. I’ve been the numbers guy in some of these arrangements, aviation in particular, and it never ceased to amaze me how capital that should know better would chase high risks and low rewards; it’s supposed to be the other way around!

Well, so much for my latest random walk through this topic. Has 2014, so far, at least, presented any new insights in this realm? No, but it has been consistent with the old insights, which is something worth heeding.