Slide Show >>
Serial entrepreneur Ruth King has owned seven companies over the past 25 years and admits making her share of silly mistakes. King, 49, who still runs the consulting business she started in 1981, Business Ventures, as well as BusinessTVChannel.com, a Web-based television service aimed at small-business owners, wants to help today's entrepreneurs learn from the mistakes that she and countless others have made.
Her book, The Ugly Truth About Small Business: 50 Never-Saw-It-Coming Things That Can Go Wrong, and What You Can Do About It, (Sourcebooks), presents 50 stories from business owners across the country.
These true tales of "entrepreneurial terror" range from losing 25% of a company's business in one day to opening a hotel just before September 11 crippled the travel industry. "This is a book about reality," says King. "There is no fluff in this book. It is true, honest, heartfelt stories of people willing to share."
The ugly truth about entrepreneurial endeavors is that "sometimes the American Dream can be a nightmare," says King. But life, and business, do go on. She recently spoke with BusinessWeek.com reporter Jeffrey Gangemi about bumps in the entrepreneurial road and how to cope with them. Edited excerpts of their conversation follow:
How did you research the book?
I have always wanted to write this book. I've faced the terror of being an entrepreneur. I had a situation where I lost $1.6 million, $800,000 in investments, and a partner in the same day—and I still started my sixth business.
To get the [stories] for the book, I sent an e-mail to the top 250 Chambers of Commerce in the United States. Then the stories just started pouring in. It was amazing. The book is my story and the stories of 50 other entrepreneurs. I knew that I wasn't the only one going through this and that these stories needed to be told.
How is the book structured?
The first part of the book is the stories themselves, and the second part offers critical survival strategies, as well as commentary on the realities of dealing with business partners. I also provide the seven most common myths about owning a small business.
What did you learn from writing the book?
One gentleman in the book had all of his company's money entrusted to one bank and one banker. One day, the banker told him to take his money out of his accounts and that his lines of credit would be frozen by the end of the week.
The man had payroll due that Friday and saw his entire life—all of his businesses, everything—go down the tubes. Because of that story, I now have two bankers. It provides me a security net in case of unforeseen circumstances.
I also included a story about the Environmental Protection Agency, which had a program for refrigerant recycling and recovery mandated by the government. A lot of companies built at least part of their business around the machinery and disposal techniques required for the process.
On July 1 of a particular year, the government decided not to enforce the mandate anymore. One business-owner lost all of her business and had to lay off 134 people in one day. It took her 10 years to come out of it and pay everybody off. This taught me two lessons—be careful when contracting with the government, and don't put all your eggs in one basket.
How can entrepreneurs deal with such a sudden hit to their business?
You go sit on a rock and cry until it's over. Then you dust yourself off and decide what you can do today to stay alive. This is a critical moment. If you think emotionally, you're not thinking rationally. You have to find the quickest way to get rid of the emotion and then start attacking the problem.
In your book, you outline 15 critical survival strategies. What are some of the most critical ones?
There are a few that are particularly important. You have to learn to deal with your emotions. If you're emotional, then you need to have an outlet. I use running as my outlet. If I've had a really rotten day and get on the treadmill for about 45 minutes, I don't care about the day anymore. It really does get rid of the stress.
There's a woman I profiled in the book who would go outside and pull weeds to deal with stress. Other people would get on the phone and talk to a friend who would just listen to them. One woman literally got in her car, put the top down, and drove away screaming her head off until she got through it. The other most important lesson: Patience is absolutely critical.
You have a chapter in the book about working with partners. What are the main lessons?
The most important thing is to devise a great partnership agreement. Negotiate it before you start the business, while you're still friendly. Another lesson to learn is that it's important to get to know your partners' spouses. During stressful times, such as when there's a cash flow crisis, the spouse at home may be pressuring the partner to quit and get a regular job. For a successful entrepreneurial endeavor, everyone needs to buy in, including spouses. Stress at home and at work is too much to handle. Also, friends make lousy partners.
What are the seven greatest myths of small business operations?
1) The product is so good it sells itself. Your customers are not going to find you unless you get out there and tell people why they should buy your product.
2) [You can] start your own business to get rich fast. I say, if you make a profit your first year, it's a gift.
3) The perfect partnership: I have the concept and the bank has the money. Banks are in the money-spread business. You go to your family and friends first, because they're the ones that are going to take risks. Banks don't take risks—they do interest-rate spreads.
4) I'll give the customer a discount and make it up on the next sale. If you start discounting, as a general rule, customers will expect the same price next time.
5) If my competition can sell it for that price, then so can I. No way. You have to know what your costs are.
6) My employees are my friends. You can be friendly but you can't be friends.
7) I will have more free time and I won't have to answer to anybody. You have more schedule time, but not as much free time. Most small-business owners work harder for themselves than they do for someone else, because they're enjoying it.
Click here to see the slide show.