Want to Be an Instant Entrepreneur?
By Steven Rogers
You're a student on a college campus, and you have entrepreneurial dreams. Before you forge ahead, listen up: This is your professor speaking. As a chaired entrepreneurship professor at the Kellogg School of Management at Northwestern University, I teach students like you. And my message is that it's OK -- in fact, it's probably preferable -- to slow down and delay your entrepreneurial pursuits for a year or two after graduation.
I speak also from the perspective of having run my own company, Akar Corp., a collection of two manufacturers and a retail concern in the lampshade industry, for seven years in the 1990s. In fact, as a student at the Harvard Business School in the 1980s, I had attended for one reason: to acquire the skills necessary to launch a company. A classmate and I were rather cocky about this objective, foolishly ridiculing classmates as "sellouts" for pursuing jobs.
Flash forward to today. Having learned from the toughest teacher of all, namely experience, that building a business is grueling work, I now advise students that it's perfectly acceptable to put on a suit and go to work for a company that isn't their own. I tell them that it's a good idea to learn the ropes on someone else's time and someone else's dime.
VOICE OF EXPERIENCE.
Most students lack experience in one or more of the critical disciplines, such as management, sales, marketing, and finance, necessary to build companies. Moreover, they generally aren't adept at dealing with the continual vagaries of entrepreneurial life in the real world.
In my case, shortly after graduating from business school in 1985, I rejected an offer to buy a McDonald's (MCD ) franchise in Boston, because I felt the purchase price was too high. I had participated in the formal owner/operator training program for two years, learning everything about running a restaurant and franchising. Instead, I went to work for Bain & Co., the Boston-based consulting firm, to build a financial cushion and learn the applied science of problem-solving.
Then my wife and I moved to the Midwest, where we wanted to raise our family, and I launched my entrepreneurial dream by purchasing Fenchel Lampshade, a family-owned manufacturer. With two subsequent company purchases, I had formed Akar.
In my view, business is about being a generalist, with a wide range of experience, confidence, and competence, rather than pursuing a specific idea. I agree with most business specialists who argue that entrepreneurship is about being able to execute on a plan. My four years at Cummins Engine (CMI ), supervising union employees and negotiating contracts for diesel-engine parts, along with the two years each at McDonald's and Bain, had given me the confidence that I could operate a company.
At Akar, however, I soon learned that building a business was tougher than I had expected -- so tough that the Akar story has become a Harvard Business School case study. In an industry that was no more than $100 million, I wasn't able, as I had planned, to increase revenue through organic growth. It was hard taking business from competitors, and the number of potential retailers was declining.
Managing cash flow proved to be a monthly crisis. Collecting from customers was tougher by a factor of 10 than the discussions we had had in finance classes. Instead, I learned that collecting was related to the vagaries of getting and keeping customers, and the entrepreneur's expectations for those accounts. You may think you are assured an account, for example, only to get a call saying the customer is dropping you.
Businesses, in short, rarely operate according to plan. They are living and breathing organisms that change frequently. After seven years in business, my sales had reached a little less than $5 million and profits were solid, but I concluded that I wouldn't be able to reach my goal of building a $50 million company in an industry that wasn't expanding. Those years, however, had allowed me to live and learn the countless realities of entrepreneurship.
LESSONS FROM THE TRENCHES.
So, with the entrepreneurial experience under my belt and a Kellogg offer in hand, I sold my company and turned to full-time teaching, which I expected to do for a couple of years while I looked for another, larger business to purchase. This enabled me to find my true passion in life -- teaching entrepreneurship!
Therefore, as a professor and former experienced entrepreneur, I am not a sideline cheerleader for entrepreneurship. Please don't get me wrong. I absolutely love it. I understand that our country (and, indeed, our global village) desperately needs high-growth entrepreneurs, because they create jobs. I have said repeatedly that these people are my personal heroes and she-roes.
It's just that, as a professor, it would be something akin to malpractice if I were not completely honest about the difficulties involved. It is also my duty to downplay the romanticism of it. Rather than prodding students to become immediate entrepreneurs, I want them to be successful when they decide to pursue it.
From my own entrepreneurial experience, I've compiled six lessons that fledgling campus entrepreneurs might want to consider before taking the plunge:
Your chances of success with a campus-launched business are very, very slim. To let megafounders, such as Gates (MSFT ), Jobs (AAPL ), and Dell (DELL ), persuade you otherwise would be like attempting to become an NBA player straight out of high school because of the success that Kevin Garnett has had. As my colleague, Professor Lloyd Shefsky, says: "Open a business as a student only if you think you are the next Bill Gates or Michael Dell. Otherwise, get more business experience first." For every Microsoft, there are at least 10,000 entrepreneurial failures.By Steven Rogers
From my experience at Akar, I cannot say enough about the difficulty of managing cash flow. When accounts are unpaid, your company takes a hit. Moreover, accounts are usually pulled unexpectedly, meaning you can't easily recover. That's the real world thumbing its nose at your plans. Cash management is the difference between a company's life and death; it is a skill especially worth honing at a company other than your own.
As I've mentioned, businesses are messy; there hasn't ever been one that met expectations. That's because the real world gets in the way. You want to sell sweaters, for example, and you've designed the sweater to die for. Only the weather turns hot, and no one is buying sweaters. So much for your business "plan."
Students might be familiar with the professorial admonishments to avoid lying, stealing, and cheating.
Did you know that it's you and not your idea -- even if yours is the ultimate better mousetrap -- that gets companies off the ground. An "A" entrepreneur with a "C" idea stands a better chance than the reverse. There is an old adage in entrepreneurial circles "that the investment is in the jockey, not the horse."
This one is a killer. Many of the nation's best business schools don't teach salesmanship, perhaps because the skill smacks of "trade school" training. Don't be fooled. Sales are central to your business. An entrepreneur must learn, even if the first experience is at a flea market, how to sell to customers at a profit. Selling isn't hanging up a corporate shingle, nor is it developing, marketing, or shipping a product -– that thinking was the downfall of many a dot-com dream.
DREAMS AND REALITIES.
Campuses are wonderful places. Colleges and business schools alike offer environments that nurture impressionable students with entrepreneurial dreams. All around are eager peers, supportive professors, and an aura of excitement about the possibilities.
What they don't offer, however, is entrepreneurial reality: that the odds are heavily against the student founder succeeding. To beat those odds, you need to take a different route, or at least understand what you will encounter if you nonetheless persist. As a student, how can you best prepare for your future entrepreneurial endeavor? Consider the following steps:
• Take as many courses in entrepreneurship that are offered by your school. Primary consideration should be given to courses in finance, sales, and organizational behavior.
• Participate in your school's entrepreneurial internship program. Instead of taking a summer job with an investment-banking firm, become an intern with an entrepreneurial firm. It is well worth sacrificing compensation for the great experiential learning experience.
• Participate in your school's entrepreneurship clubs and programs, including attending conferences, panel discussions, and guest speaker presentations.
• Pursue jobs that will allow flexibility in job assignments. If you have no experience in finance, go to a company where you can get a job in that area to strengthen that weakness.
• Continue to improve your management, interpersonal, and leadership skills. If you have never managed people before, become a coach of a little league baseball or basketball team. Learn how to manage people toward a common goal.
ONE STEP AT A TIME.
So, students, let me release you from any feeling of obligation to become an entrepreneur during, or immediately after, your school years. A survey of entrepreneurs who did not succeed found that they attributed their failure to "lack of training and too much on-the-job training," which is quite expensive due to the common occurrence of mistakes.
Be wise and slow down. Believe it or not, you are much younger than you think. The entrepreneurial opportunity and your interest, if you are sincerely committed to becoming an entrepreneur, will be there when you are truly ready.
Steven Rogers, 47, is the Gordon and Llura Gund Family Distinguished Professor of Entrepreneurship at the Kellogg School of Management at Northwestern University. Professor Rogers teaches Entrepreneurial Finance at Kellogg and is the Director of the Levy Entrepreneur Institute. Prior to joining the Kellogg Faculty in 1996, he owned and operated two manufacturing firms and a retail operation in the lampshade industry, eventually bundling the entities under the name, Akar Corp., and selling the combined company. Prior to becoming an entrepreneur, Professor Rogers worked at Bain and Company, a Boston-based consulting firm, Cummins Engine Company, and UNC Ventures, a venture-capital firm.
Entrepreneur's Byline comes to BusinessWeek Online readers courtesy of EntreWorld.org, a resource for entrepreneurs that is sponsored by the nonprofit Ewing Marion Kauffman Foundation.