The ultimate guide to owning a successful business offers an insider's tour of the risks, rewards, pitfalls and opportunities presented by any business. Dozens of practical tips and rules of thumb for many different situations.
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Paul Hawken is an environmentalist, entrepreneur, and author. His books include Growing a Business, The Magic of Findhorn, The Next Economy, and Seven Tomorrows, coauthored with James Ogilvy and Peter Schwartz.Excerpt. © Reprinted by permission. All rights reserved.:
Something You Live to Do
When I started my first company in Boston twenty years ago, I had little interest in business. I was just trying to restore my health. Hindered by asthma since I was six weeks old, I had begun experimenting with my diet and discovered a disquieting correlation. When I stopped eating the normal American diet of sugar, fats, alcohol, chemicals, and additives, I felt better. I could breathe freely. When I tried to sneak in a hamburger and a Coke, my body rebelled. After a year of going from one diet to the other, I was left with a most depressing conclusion: if I wanted to be healthy, I'd have to become a food nut. I bid a fond farewell to my junk foods but then discovered that a steady diet of natural food was impossible to obtain without spending ten hours a week shopping at ethnic food stores, farm stands, Seventh-Day Adventist flour mills, Japan Town, and other distant vendors. The health food stores certainly weren't very helpful. For the most part, their idea of food included high-priced nostrums and vitamin formulas -- sold by women who wore nurses' uniforms and white hosiery that made their legs look slightly cadaverous.
Tired of spending so much time shopping, I started the first natural foods store in Boston, and one of the first in the country. In the first year of operation on Newbury Street, it grossed about $300 a day and I had fun doing it. The smallness of the operation allowed me to feel close to customers and suppliers. When the business began to grow and I had to spend more time behind a desk than behind a counter, I enjoyed it less. As the years rolled by, the company made money, lost it, hired hundreds of employees, bought railroad cars, opened stores and warehouses on both coasts, set up wholesale and manufacturing facilities, flirted with bankruptcy, and engendered a host of lean and hungry-looking competitors -- some of them friends and former associates.
Along the way I managed to commit most of the original sins of commerce. I overborrowed, understaffed, undermanaged, overstaffed, and overstocked. I managed to alienate most of my staff at one time or another, failed to delegate efficiently, and didn't know how to read the balance sheet. (I can read a balance sheet now, but I'm still capable of making these other mistakes.)
When I sold the business after seven years, Erewhon Trading Co. was grossing $25,000 a day. That was in 1973. I departed the country and took up the pen -- something I had always wanted to do -- in order to write a book about a community in Scotland. When I returned to the States a couple of years later, with an Australian wife I had met in Scotland, I discovered another reason to go into business for myself: I was unemployable. I had not held a salaried job in my adult life, had no college degree, and my experience in running a company was not deemed sufficient qualification for a position in corporate America. I didn't fill any job description. I checked the want ads in the Sunday papers but didn't find anybody who wanted me to start a business for them. Not wanting to go back to college to get a job description, I went back into business. In the parlance of the day, I became an entrepreneur -- again.
But only indirectly: at first I consulted and worked with companies in the food, publishing, and waste conversion fields, and I did three turnarounds for companies in deep trouble, one each in fashion, marketing, and energy. I wrote a book about the effect that individuals, as opposed to institutions, have on the future. After three years of free-lance problem solving, several friends and investors and I founded Smith & Hawken. That was eight years ago, and our office in Mill Valley, California, is where you'll find me today.
This book comes straight from those business experiences. When I started the natural food business in Boston, my business knowledge was scant. I did the best I could and began reading everything I could lay my hands on. I subscribed to The Wall Street Journal. It confused me. I read the major business magazines. Their Fortune 500 world seemed irrelevant. I sneaked into classes at the Harvard Business School. Their case studies were lunar in their usefulness to my enterprise. The more I searched, the more confused I became. The more exposure I gained to the "official" world of business, the more I began to doubt that I was in business at all. I seemed to be doing something entirely different. I get that same feeling today when I read most of the standard business literature.
I believe that most people in new businesses, and some in not-so-new businesses, have the same problem. They don't feel connected to the conventional wisdom of the books, TV shows, video cassettes, expensive training seminars, and consulting services that compete for our attention. Much of the material is self-evident -- be honest, find a gap in the market, the customer comes first, hire well, and so on -- and other advice seems to be diluted from the experience of big businesses, as if a small business is just a flake chipped off the larger corporate world.
That leaves you and me out, but we are the people who run most of the businesses in this country, or soon will. According to David Birch, a researcher at MIT, using figures supplied by Dun & Bradstreet, there were two hundred thousand business start-ups in this country in 1965. We are now seeing a start-up rate of nearly seven hundred thousand a year. Subtract inactive companies, add in partnerships and sole proprietorships, and the total number of new businesses started in 1986 was over 1 million, almost half of them by women. The emergence of women in entrepreneurship in America is perhaps the greatest advantage now enjoyed by the American economy, which, alone among the world's economies, encourages this development.
Birch's studies show that these small businesses have been the driving force in economic growth and job creation in the United States since the mid-seventies. From oblivion, if not disgrace, to an almost hackneyed stardom, small business has come into its own in the last twenty-five years. Thirty-seven percent of all employed men and nearly half of the working women want or intend to start a business. The future of American business is standing at the threshold, not sitting in the boardrooms.
This movement toward new enterprise must reflect a certain amount of alienation of the work force from the conditions of their jobs. It is possible for the assembly-line worker consigned to tightening the bolts on the transmission and the office worker who processes medical insurance claims to work with pride and efficiency, but it's not easy to maintain that attitude. We were not created in order to spend half or more of our waking lives in such constricting circumstances, and we know it. Conformity within a large bureaucracy was the meal ticket for most people in the fifties, but I believe that the ability to strike out on one's own will be the most dynamic means of developing a "career" in the late 1980s and 1990s. This path will lead to the greatest job satisfaction and personal development. Knowing how to grow one's own business will be critical. The person who chooses to hide within some bureaucracy may be left behind.
This is a book about growing that business, with all that the term "growing" implies about paying attention to the world around you, learning from others, and changing yourself. It is based first and foremost on the assumption that you have within you the ideas, knowledge, and skills to be a good businessperson in some area. You know more about starting a business than you think you do. And you'll learn faster than you might think you can.
Much of what you will read in this book will not match up with the conventional wisdom (although you should read as many other books as you can; the more you take in, the more you will be able to distinguish convention from common sense). I will rebut some of the jargon and advice running amok today. For example, many experts say that young businesses go under most often because they lack sufficient capital. I believe that, for the new and growing business, too much money is a greater problem than too little, and I'll explain why in a later chapter. Some books claim that innovation and the entrepreneurial mind are "techniques" that can be learned from books or in a classroom. I don't think so. The innovative mind is nurtured by experience, not by textbooks.
This is not a how-to manual or a step-by-step guide to starting your own business. There are other books that are guides, and some of them are good. What is missing are books by people who are in small and medium-sized businesses and who intend to stay there -- straight talk about what works and what doesn't, and why.
All businesses involve such factors as cash flow, accounting, and marketing. These determine whether the business is allowed to carry out the larger function of meeting needs by providing goods and services. But these things no more describe your business than household shopping lists and errands describe your family. This book will discuss the structure and mechanics of business, to be sure, but always with an eye toward affirming your own common sense and intentions. I want to demystify, not with a set of dictums and executive summaries, but with a book that illustrates how the successful business is an expression of a person.
I do not arbitrarily restrict my focus to small businesses. Stewart Brand, publisher of the Whole Earth Catalog and the Whole Earth Review, was nosing around the Smith & Hawken offices when he came across the customer service principles I discuss in a later chapter. The principles are the work of our vice president, Lew Richmond. Write these up and publish them, Stewart suggested. The magazine piece based on them and titled "You Are the Customer, You Are the Company" was the most widely reprinted article I have published. The majority of the requests for it came from Fortune 500 companies, illustrating the fact that the needs of and differences among large, medium, and small businesses are less distinct than we sometimes suppose. Within the structure of every company or conglomerate are ten, fifty, five hundred, even a thousand units in the big business that function as small businesses, engaged in everything from shipping and manufacturing to planning, hiring, and custodial work. There's no reason why every department in a corporation can't be a well-run small business.
This book is written for that corporate audience, too. Most of us in businesses large or small have the same problems and similar means at our disposal to solve them: energy, ingenuity, and common sense. Big businesses sometimes get bogged down in procedures, policies, and flow charts, but when the problems are solved as opposed to shuffled, I believe they're solved by people using their heads, not handbooks.
We must learn how to grow our businesses -- small, large, and small-within-large -- more successfully and more humanely. American businesses employ our people, maintain and raise the standard of living, and give us the technical and practical means to solve our problems. For the first time in my forty-year lifetime, people are standing up in large numbers and saying a simple and vitally important thing: Being a good human being is good business. And like no other endeavor in our lives, business impels us into the society at large, with prospects of betterment for all concerned. I don't believe that the explosion in entrepreneurial business in the United States is merely an increase in numbers or a measure of greed. This explosion also represents a search for more meaning in our lives.
Twenty years ago I couldn't have written the previous paragraph. That kind of thinking didn't wash. In 1967, business was suspect. "Dow Shall Not Kill" was a popular slogan of the antiwar movement. Corporate recruiters were run off the campuses of Stanford, Michigan State, Wisconsin, and other universities. Businessmen ranked low in polls of public approval. Most of this animosity was directed against the big companies, but small businesses were also implicated. The word "entrepreneur" was associated with opportunism rather than with the subtly different opportunity.
A few weeks after I opened my store in Boston a friend asked pointblank, "How does it feel to be an entrepreneur?" I was humiliated. Entrepreneurs were folks who sold T-shirts during papal visits or bottled water after natural disasters. They took kittens from the animal shelter and sold them as purebreds or they dyed sparrows yellow and passed them off as canaries. I suddenly realized why my father, a photographer, and my mother, a research assistant, had not been jubilant at my decision to open a store, and wouldn't even tell their friends what I was doing. Since we were recently arrived from England on my father's side, the English stigma about business still adhered. My venture confirmed for my parents that their second-born was a failure, and I thereby fulfilled the promise I had shown since early childhood. I thought of them often as I swept the sidewalk outside my store.
They weren't the only people who flinched at my decision to enter business. Former teachers struggled to maintain a calm expression when I told them I was a storekeeper, friends expressed concern about my "direction in life," and old girlfriends didn't return my calls.
All my friends were antibusiness. In the sixties the Vietnam war was viewed as institutional behavior in its purest form. Government and the military-industrial complex were held equally responsible. My store on Newbury Street in Boston, stocked though it was with the staff of life, might as well have been a weapons laboratory. At least that was the feeling I had. My sense of isolation became so acute I almost joined the Rotary Club.
Some of my friends, who had been appalled by my decision to go into business on my own, looked on matters in a different light some years later, when the first oil-related/recession struck in 1974-75. The liberal arts dream was tattered. English majors were looking for jobs and some of them realized what I had discovered: no institution in American life is freer to do what it wants to do than a business, and that includes creating its own jobs. I found out that there were hardly any rules governing business, and no regulations to speak of -- and my store required the handling of food, one of the most highly regulated of businesses. Despite the grumblings of businesspeople about government intervention and regulation, the fact remains that a business is the most unencumbered institution in the United States. The self-owned and -operated business is the freest life in the world.
I don't believe that the values of the sixties are the motive for entrepreneurial endeavor today. A lot of businesses are started in order to make money, big money, and the sooner the better. Some of the attitudes that seem to have settled into place in the era of Ronald Reagan -- greed being one of them -- are a far cry from my idea of good business thinking.
Although aware of this discordance, I believe that most, if not all, of the successful new businesses are operating with values that go beyond opportunism. In fact, I believe they're successful because they have a broader vision. Seeing the world around you clearly is a critical step in developing an idea for a business, carrying out that idea, and then thriving with an ongoing concern. Through choice, predilection, lack of education, impatience, or other causes, the entrepreneur lives, in a way, outside the mainstream. He or she is in the society ...
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