Flying Solo

If you’re the “solopreneur”, the entrepreneur with no partners, you have a few huge advantages. There’s no consensus when it comes to decision making, you just make the decision and move on. Your vision for the business is the only vision. If that changes, there’s no one to convince. Having a solo vision and consistent decision making can be a very good thing for your customers and future employees.

There are two relatively sizable disadvantages to being a solo entrepreneur though. First and foremost, it’s next to impossible to be an expert in all of the areas required to run many businesses, so you’re likely limited in the types of businesses you can run (especially in the beginning when it’s going to be just you). The other disadvantage is that you don’t have to run your decisions by anyone. Emotions or bias or short-sightedness can come in to play without you even realizing it.

A Single Partner

Once you introduce a partner in to the equation everything changes. You now have to come to a consensus on decisions, which can be both good and bad as we’ve already covered. It will be a pain sometimes to have to discuss something for hours that seems like a slam-dunk decision in your mind, but that pain can be offset by the many bad decisions that you’re talked out of.

You also now have the advantage of having another person around so that you don’t have to do it all. You (hopefully) have complimentary skillsets, so now the developer doesn’t need to do the marketing, or the accountant doesn’t need to do the customer service. You’ll most certainly be wearing multiple hats, but at least you will be able to offload a few of your weak areas to someone else who can do them better.

The primary disadvantage of a two-man team from what I’ve seen is that there can end up being a me vs. him attitude. Everything should be split 50/50 but it never is. Often times both partners will think that they’re doing the majority of the work. It’s kind of like a bad marriage. And if that happens, each party starts to think “I could just be doing this by myself with none of the headaches and make twice the money”.

Two Partners

So once you introduce that third person in to the mix, you solve all of the problems…right? Yes and no.

Having three brings some huge added benefits.  You now have one more person who offers a complimentary skillset to yours.  With a team of three, you should each only have one or two core functions within the business, and they should be the core functions in which each person is strongest.

You also now have that third person to help mediate disputes.  I’ve seen firsthand that having a neutral party when there’s a one-on-one dispute can do wonders for calming everyone down and providing the proper focus.  Of course, this third person can also team up with one of the other partners so that every single meeting can be a two vs. one ordeal.

With three you also start to introduce multiple lines of communications.  It’s harder to schedule meetings or even to find a time when everyone is available for a group Skype chat.  And once you’re in said meeting or chat, you have to now come to a three-way consensus, which can sometimes take a lot longer than you feel like it should.

Three or More Partners

Once you hit a team of four you run in to what I call “the combination problem”.  You remember combinations from the probability section of middle-school math class right?

From the above link:

The number of ways (or combinations) in which r objects can be selected from a set of n objects, where repetition is not allowed, is denoted by:

What does this have to do with business partners you ask?  Well, you can use this to determine the number of relationships in the group.  If we use C(n,r) as our notation, you can calculate the number of relationships amongst business partners with C(x,2) where x is the number of partners on the team.

For instance, on a three person team, C(3,2) = 3.  This makes sense.  At Pure Adapt we have Mike, Greg, and I.  For us to be successful, I need to have a positive relationship with both Mike and Greg (2), and Greg and Mike need to have a positive relationship with each other (1), for a total of 3 relationships.

Three relationships is manageable.  However, once you hit a four person team, you end up with C(4,2) = 6.  That’s much less manageable.  Each one of those relationships needs to be positive for your team to be on the same page.  There can’t be any bitterness or bad blood on any of those six lines of communication or your done for.  In all six cases, the people need to be able to work together and solve a problem.

This is where, to me, any gain that you get from added perspective or skills, is entirely offset by the unlikelihood that this large number of relationships will exist in perfect harmony.  Need more than three? Hire someone part-time or full-time, or outsource the work to a contractor, or automate it, or don’t do it quite yet until you can afford to do one of those things.

Thinking about a team of five?  C(5,2) = 10.  A team of six? C(6,2) = 15.  Talk about complex!  Good luck finding a place to eat dinner together, yet alone making a business decision.

My Experiences

To some extent, I’ve had experience in each of these situations.  From January 2006 – December 2006 I worked solo on SportsLizard, iPrioritize, and doing SEO and web development as a consultant.  From December 2006 – December 2010 Pure Adapt was a four person team.  From December 2010 to the present, we’ve been a three man team.  And while I haven’t been in a two person partnership, I’ve known many who have been.   So I think my perspective comes from a very real place.  It’s based upon what I’ve experienced and what I’ve discussed with countless other business owners over the years.

If I Was Starting Out…

I’d go one of two ways depending on the type of business I was starting.  As you can probably already tell, there’s no way I’d ever start a business with three or more partners again.  It’s far too complex because of the combination problem.

If I was starting something small, a “lifestyle” business that I envisioned keeping small (maybe an employee or two, lots of outsourcing and automation), I’d probably go at it solo.  I’d offset the negatives by having a board of advisers.  I’d give them each a little stock.  I’d find a way to meet with them all regularly, either in person or virtually, sometimes as a group and sometimes solo.  It wouldn’t be perfect, but it sure could work for me.

If I was starting something that I had big visions for, a “sky-is-the-limit” type of idea, I would take on partner(s), preferably two partners.  I thoroughly enjoy my current situation.  To me, the three person team is the perfect balance of upside and downside. It takes the right group of guys, but if it works it can be immensely fun and rewarding.  I am grateful that I don’t have to worry too much about accounting or inventory management because my partners have those “departments” under control, which allows me to focus on development and other projects that I enjoy more.  Plus, to me, achieving things is always more fun when you do it as part of a team.

Thankfully over time we’ve grown and now I don’t have to go at everything alone. First I had partners. Then we teamed up with a lawyer and an accountant. And then we started hiring employees. We have more money, more connections, and more experience. All also great things.

However, I haven’t really lost the mentality of “solving by learning”. Most of the time this is still a good thing. If I don’t know a specific programming technique, if I don’t know how to use a specific piece of software, if I don’t know enough about a service that could help grow our business, I’m more than happy to spend a weekend reading up on it until I know what I need to know to get the job done.

Other times though, I’ll foolishly dive in to something that isn’t my expertise, doesn’t need to be, and can be accomplished better by me not learning it. Either there’s someone else who can do it better – one of my partners or our employees – or there’s an existing service out there that solves the problem. This is odd to say, but it’s been a challenge to learn what to learn and what not to learn (that’s a tongue twister!). When you’re naturally used to learning and doing everything, delegating and outsourcing take some getting used to, as does determining exactly what to continue to do and learn vs what to outsource and delegate.

In the past we never would have been able to afford Google Apps for Business, Backupify, RescueTime, ProXPN, Pandora, or any of the many other services that we now happily pay for because they solve a business problem. In the past I probably would have spent considerable amounts of time attempting to solve the same problems for free. Worthwhile then for sure, not worthwhile now.

Another great recent example is our hosting provider LiquidWeb. We switched over to them in a matter of days during the great server disaster of 2008. I think that those few days took a few years off of my life. Just re-reading those posts stresses me out! After the dust settled, my initial instinct was to take control of everything involved with managing our servers. While not my expertise, I decided that I needed to learn how to be an expert systems administrator.

And so I started spending some nights and weekends learning. It only was natural. Except during that time something awesome happened. I had to start several tickets with the LiquidWeb “heroic support” and I came to notice a few patterns. Each email was responded to within minutes by a sysadmin who actually knew what he/she was doing! They were always happy to go above and beyond to solve the problem quickly. If I needed to call, a sysadmin always answered and could help me right away.

Over the years I’ve spent less and less time doing any of the sysadmin tasks that I do know how to do. For instance, I can install a SSL certificate. It’s not hard. But it does take me a few hours. Instead, I can just shoot them an email that says “I’d like a SSL on domain X at IP address Y and you can bill it to my account” and it’s done within a few hours. They have a team of experts willing to help any time we need it. Their service goes beyond anything I’ve ever experienced. Even though we pay them quite a bit of money for our two servers, I never expected to essentially have my own team of sysadmins available to me 24/7/365.

More recently, their migration team handled the transition of Detailed Image over to a new server. Moving DI (or any e-commerce site) is more complex than the average site because we needed to preserve our IP address, SSL, and be PCI compliant. There were a few minor minor hiccups, but overall they did a much better job than I ever could have and they did it in a matter of days from start to finish (the actual migration only took a few hours). There was frequent, clear, communication between myself and the engineer doing the work. It was like he was a member of our team.

Because of past server disasters, because of how critical having the site online is to our business, and because I naturally want to do anything that’s important myself, this was something that was hard to give up control on. But it also caused me to reflect on when it’s intelligent to do something myself and when it isn’t. We’re at the point where not ceding control to a migrations expert who does this every day for a living would be crazy.

…Plus I had backups upon backups in case anything went wrong, that also helped ease my nerves

*Fresh out of college, I also had the oft-assumed ability to learn quickly, a skill that I believe diminishes over time if you don’t continuously learn. One of the many reasons I think the best time in your life to start a company is when you’re in college (that link goes back to my third post ever, from 11/25/2005)

For instance, some developers solely want to develop websites all day long without ever worrying about the other facets of running a business. And there’s absolutely nothing wrong with that – there are plenty of jobs where you can thrive doing just that. However, I know that I would personally get bored out of my mind if every single day I booted up my computer and built websites all day long.

It’s been a busy and unusual last few weeks. Aside from the general busyness of of the holidays, I spent a lot of time setting up laptops for Reece & Bobby, getting their training plans ready, and then actually training them the past few days. It’s an exciting step for our company, but it’s definitely out of the ordinary. We’re also upgrading/migrating Detailed Image’s server this weekend, as well as reviewing our ’11 numbers, and beginning to work on the next phases of LockerPulse (finally!). All stuff that’s also a bit out of my ordinary routine, but also really enjoyable and fulfilling, which ultimately makes running a business more fun to me than most jobs.

I learned a lot about us this year. Shit is going to happen. That’s life. The unfortunate reality is that we’re less in control than we think we are. What you can control is how you react. And we reacted by having our best year ever. We set revenue records for our largest day, month, and year, all while increasing our profitability. We worked on our culture and made two hires. We managed to keep LockerPulse growing without slowing down on Detailed Image. The business has never been in a better position.

Here’s hoping for continued prosperity and a little more peace in 2012.

Happy New Year’s everyone!

Except anyone who has run a business knows that’s not true. Business success does not have such a simple formula. The time and effort you put in does not necessarily correlate to success at all. In fact, a lot of hard work can leave you in a much worse spot than when you got started (think of the entrepreneur who spends his/her life savings on a failed venture).

And since this isn’t something we’re taught, and since most of our parents and teachers would never even consider teaching it (or know how to teach it), we’re all taken by surprise the first time we start a venture, work really hard on it, and don’t see the results we’re used to seeing all of our life. We expect that if we just put in a few weeks/months/years that we should see comparable success to when we put that much time in to our school or our jobs. Then when we don’t, we get frustrated. Even ventures that ultimately succeed have an unbalanced effort-to-success ratio: you put in the longest and hardest work in the beginning when the success is minimal, with the long term payoff of a venture that has a lot of success for comparatively less effort (for instance, if we stopped working on Detailed Image today, it would probably still grow because of the 5+ year foundation we’ve built).

Most people I’ve known, myself included, learn this pretty quickly. Then you decide whether or not to keep going. If you do, and you’re successful, those years of hard work are much harder than other types of hard work because of the ongoing uncertainty of success and this unbalanced effort-to-success ratio. People who aren’t business owners have a hard time grasping this.

For a successful venture, you don’t just need to work hard. You need to be working on the right stuff, at the right time, in the right market, with the right people, with the right amount of capital, and still have a considerable amount of luck…while also working very hard.

I had a pocket of time before the chaos of the holiday shopping season ensues next week. Rather than digging in to a large project that I’d have to put on hold for a few weeks, I decided to make the most of my time and just release something.  Something useful, something to show the real hardcore users that we’re constantly making things better.

It’s been tough this year to find time for LockerPulse.  From the very beginning of the year when a partner left the company, it’s been a very busy year for all of us.  Being shorthanded, learning new stuff, and handling Detailed Image’s growth hasn’t left a ton of time for LP. I’m not complaining – we’re all thrilled at how well DI has done this year – however that did place a limitation on LP.

Still, we’ve managed to accomplish a lot in my mind. We launched just enough big features throughout the year  (the ad platform, college sports, fantasy sports) and had just enough success (being featured on the Google Chrome blog, being a part of Toshiba’s app store upon launch) to keep the momentum heading in the right direction.

All the while we’ve been collecting data and making it really easy for our customers to contact us.  Next year when we make a big push, we’ll be armed with a strong existing user base, a lot of data, a lot of customer feedback, and confidence that what we’re building is valuable to people.  In short, we’ll have everything we need to make good strong business decisions.

What would have happened if we had more time for LockerPulse in 2011?  Or maybe even more money?  Would it have been this massive success?  Possibly.  Or maybe we would have wasted a lot of time and money and been no better off than we are today (or even worse off).  It’s impossible to know.  What I do know is that we wouldn’t have come up with some of the creative solutions that we did.  With the fantasy player tracking in particular, we solved problems in a quarter of the time with a quarter of the code because we had to, and the result was a more elegant solution than we would have released if we had six months instead of six weeks to finish the project. 

Having limited resources forces creativity, and creativity is generally a good thing.

The answer is pretty simple: we don’t.

I’m of the opinion that business do not fail because of anything that their competition does or doesn’t do.  They fail because of what they do or don’t do.  The second you start focusing on your competition is the second that you stop focusing on your customers.

You also become a defensive company. You’re reacting to what others are doing instead of being aggressive and executing your vision. They may have some advantages that you don’t, but you have some advantages that they don’t.  Being small and agile is a huge advantage…if you decide to treat it that way and not as an excuse.

Maybe most important is that your competitor probably has different goals than you do. They might have antsy investors. They might be in a ton of debt. They might be burning through more cash than they’re bringing in.  All of those things lead companies to make bad decisions. You have know way of knowing when this is happening.  It probably happens more often than you’d think.  And you don’t want to get caught up in copying those bad decisions.

A few years ago I reviewed Stall Points, an exhaustive study of why companies fail.  One of my big takeaways was:

Most companies don’t fail/stall due to outside factors.  In fact, of the companies who “stalled” (defined as a significant downturn in revenue growth) only 13% were due to “external factors”.  In short:  business owners who blame the economy, or claim market saturation, or the government for failing are usually full of shit.  Most of the reasons companies fail are because they have internal strategic or organizational issues.   Stop worrying about the economy or the competition and start focusing on making your company great.

The same goes for competitors.  They’re not causing you to fail. You’re causing you to fail.

Phil Libin, founder of Evernote shares a similar stance.  In his recent Entrepreneurial Thought Leaders talk at Stanford he said (59:48 in to the video if you’re interested):

But we do have a very specific philosophy about competition which is in all of my previous companies and in the companies that I’ve worked with or at in the past, we always had a list of our enemies, we always had like, oh, those guys, we always had like a list of people that like that’s our nemesis right there. And like we are going to crush those guys. We’ve always had that, one or two companies and it turned out it never mattered, never, not once – not once did the people that we focused on in the competition actually significantly play a role in terms of the success or failure of our company a few years later. It was always something else. And so with Evernote we decided explicitly – again because we are not that smart, it takes us three times to actually figure this out, we said explicitly we aren’t going to look at competition. We’re not going to look at it. We are not going to pay attention to it. Not because we are not threatened, of course we are threatened but because looking at it doesn’t help you, it doesn’t actually make your product better. The only way that you can win, the only way to increase your chances of actually succeeding is just to make a great product and you don’t do that by looking behind you. You do that by typing and looking at a screen. And so we don’t look at it. We don’t think about things that might potentially disrupt us. We do think a lot about partners and how we can work together and we have an API, we have about 7,000 partners. Many of them started as competitors but then wound up working in the ecosystem but ultimately the competitive threat I don’t think is in the top 20 threats to a company at this stage. And especially for of you guys, if you are thinking of being entrepreneurs, I think if you sort of lay out the possible things that can go wrong, that can kill your company, just like write them out in order of probability. The probability of your company failing because some competitor beats you is not in the top five. It’s probably not even in the top ten for early stage. And anything that’s not in the top five, like you don’t have time to think about it. So my advice is don’t even bother.

Now, this doesn’t mean that we don’t occasionally visit a competitor’s website to check what sales they’re running or how they’ve priced out a product. Or that we don’t pay attention to the industry as a whole.

What it means is that we don’t stalk their blogs, social media, and newsletters, and then scramble to change how we make decisions because of something that they announce. We have better things to do with our time.  We have our vision and our plan, one that we believe in, and that is what we focus on executing.

I was thinking a lot about this the other day. What factors go in to making a “balanced” decision? What I came up with was what I’ve decided to call the CAG model:

Customers – what are our customers saying? Are they complaining? Are they asking for a feature?  Are we getting a lot of emails that could be reduced by improving how we do something?

Analytics – what does the data say?  Are we losing customers? Are customers searching our site for something we don’t have? Are our conversion rates lower than they should be?

Gut – what do we think is the best for the short term and long term health of the business? Can we maintain whatever we create?  Are we creating more problems than we’re solving? Is there something else that’s more important to us? Does this decision help or hurt potential future initiatives?  How does this affect our current and future employees?

Not all decisions we make are weighted 1/3 each, but for most big decisions we’re giving quite a bit of weight to all of the above. For instance, it’s rare that we make a decision solely based upon our gut without investigating the other two.

This is probably one of the best reasons I’ve found for having partners.  There’s no way that I could make sound business decisions by myself at anywhere near the consistency that we do as a team.

Generally the person who brings up the idea has the most jaded perspective. If I deal with a ticked off customer and I see a way to fix a problem, I’m likely going to prioritize it higher than Greg or Mike might.  Their job is to ask questions like “how often do we see this problem?” and “is this more or less important than fixing other problems?”  Generally we’re able to come to a consensus pretty quickly, and if we aren’t there’s always an action item – say to collect more data or run a test – that will help us revisit the situation in the near future and make a good decision.

This process isn’t rocket science. I’m sure most good businesses do something similar, either consciously or subconsciously. Yet I think it’s critically important in helping us maximize our upside and minimize our downside when it comes to making most business decisions.

Yes, in the past I have gotten bored.  It’s usually when I’m in between projects, or when I’m working on a project that is long and tedious (and well, boring).  Sometimes projects that are necessary to scale a business aren’t very sexy.

I think the natural tendency of someone like myself is to then get excited about something.  Of course I have a lot of ideas.  The great thing about how we’ve structured our company is that I don’t need to go outside of our business to test out my ideas.  I don’t need to hide it from my partners.  As long as I got my work done, I was free to do projects like Music-Alerts and Z.ips.ME.   And I’m more motivated to get boring work done when I’ve got something exciting to work on later in the day. It’s a good way to get the “bored” out of your system.

Heck, LockerPulse was born in some part because Tastefully Driven was on it’s way to being closed and I was, to some extent, simultaneously bored with what I was working on and excited about the idea.   It just happened that my partners were really excited about the idea as well and it became more than a side project.

This inherent freedom is why I’ve never thought about leaving.

This hasn’t happened lately though.  If I do get a business idea, I add it to a Google Doc that I have, and then I forget about it. I think it’s because I’m really excited about almost everything we’re doing right now.  That boredom is nowhere to be found.  Detailed Image is having a great year.  We’ve done some exciting stuff, and we’ve got some exciting stuff in the pipeline.  Hiring, training, company culture, and everything else that goes in to growing our team is a whole new challenge for me, one that I’m putting in a lot of effort to be good at.  And LockerPulse is just full of potential.  Great things have happened this year and we’re just scratching the surface with a site that I already extract great joy from simply as a user.

What’s made 2011 so special is that after a record-breaking March, April was essentially even (slightly less revenue, slightly higher profits because of less promotions), and then May came along and somewhat unexpectedly blew them both out of the water! While all of this was happening, we had a slew of manufacturer mishaps that created a ton of extra work on our end, and my partners and I each had a comedy of personal issues all arise at the same time. Because we were so busy, we were often in the warehouse on our scheduled days off, and using the late nights and early mornings to get whatever work done that we could. I can safely say that this has been the craziest few months I’ve ever known while running a business.

And while it’s definitely been a bit stressful, the stress associated with growing is not nearly as stressful as wondering where your next paycheck will come from, something we all remember quite vividly. The stress is also lessened by all of the good things that have come out of the past few months aside from the increased sales. It’s great to see everyone working together “selflessly” – chipping in wherever and whenever it’s necessary, doing whatever is necessary. It’s great to see our systems scale, and to fix the minor things that didn’t. It’s great to see our employees step up their game and keep their cool when things are changing every five minutes. And it’s great to see everyone joking around and having a good time together, even on what could be perceived as a rough day. I think that says a lot about the quality of people we have on our team.

Personally, I found myself stressing most about not being able to get to the development projects at the rate that I’m normally used to. That’s when I stop and remind myself that right now we’re reaping the rewards of all of those projects from 2007, 2008, 2009, and 2010. I mean, the goal of any project is to, in one way or another, bring in more sales. So when that happens, and my day is temporarily filled with more day to day operational stuff, it’s difficult to be too upset about it! We’ve got the right plans in place to hire in the coming months, and there’s almost no way some of the crazy random stuff will happen all at once again, so hopefully by next Spring we’ll be able to easily handle another wave of growth.