Jay Goltz founded Artists’ Frame Service. Today, the business is the largest retail, custom picture framing facility in the nation.

The Street-Smart Entrepreneur

133 Tough Lessons I Learned the Hard Way

By Jay Goltz, Jody Oesterreicher

Addicus Books, Inc.

Copyright © 1998 Jay Goltz
All rights reserved.
ISBN: 978-1-886039-33-9

Contents

Acknowledgments,
Introduction,
Part I —- Start Ups: Starting Up without Throwing Up,
Part II —- Being the Boss: There’s No Such Thing as Boss School,
Part III —- Management: If You Want the Job Done Right, Be a Great Manager,
Part IV —- Customer Service: Getting Beyond the Hype,
Part V —- Marketing: What the Hell Is It?,
Part VI —- Finance: Paper Profits but No Money for Lunch,
Part VII —- Administration: The little Things that Can Kill You,
About the Author,
Index,

CHAPTER 1

Part I – Start Ups: Starting Up without Throwing Up

If You Don’t Want to Answer to Anyone, Find a Nice Cave

What I Used to Think: When you go into business for yourself, you don’t have to answer to anyone.

Nobody Told Me: When you go into business for yourself, you have to answer to everybody. You have to answer to your customers, your employees, your landlord, your neighbors, the IRS — everybody. You may not have to take orders and you may have more control of your destiny, but you’re accountable to everybody. There’s a long list of reasons why people go into business for themselves. They’re great salespersons, they’re natural leaders, they’re ambitious, they have highly marketable skills, or they have a vision. Going into business for yourself so you don’t have to answer to anyone is the reason least likely to result in success.

Lesson #1: Going into business for yourself is more responsibility than you can possibly imagine.

Great Ideas Can Be Hazardous to Your Health

What I Used to Think: You think it’s a great idea, your wife and kids think it’s a great idea, and your friends think it’s a great idea. It must be a great idea.

Nobody Told Me: You could come up with the most harebrained idea and find a dozen friends who would say it’s great. Why? Because they don’t know any better. Because they don’t want to burst your bubble. Because they admire your ambition. When you have an idea, discuss it with someone who has enough business smarts and objectivity to say with authority, “I don’t think that idea will work. Here’s why.” Or, “It’s a great idea. Let me tell you why.”

Several years ago I stumbled into the opening celebration of an ice cream parlor near my home in suburban Chicago. A corporate executive had opened the shop. He had planned for his wife to run the place until his retirement, when they would run it together. That night there was a big crowd of well-wishers. Everybody was smiling. The future looked bright. I went in there on a Saturday about a month later, and it was very quiet. The wife, husband, and their eldest child were working behind the counter. They looked disappointed but hopeful. I came back a month after that and found the wife working alone. The place was empty. I returned a few months later and found the windows covered with newspapers. The shop had closed.

I don’t know enough about the ice cream business or about the personality of this corporate executive to say why the business failed. But I do know summers are short in Chicago, and running a small business is a far cry from running a corporation. I suspect this guy’s friends and family told him the ice cream parlor was a great idea. But I doubt he thought it through very carefully either from a business or personal perspective.

It’s crucial to conduct a careful business analysis and make a business plan before starting or purchasing a business. It also is important to talk to lots of people, like the owners of similar businesses, potential customers, a lawyer, an accountant, and anyone else who can shed some light on what you might be getting yourself into.

Lesson #2: Behind every failed business are a dozen friends who said it was a great idea.

Have You Thought about Your Assets Lately?

What I Used to Think: Hard work is the surest route to success.

Nobody Told Me: If hard work is the key to success, most people would be successful. Leveraging your assets probably is as crucial to success as hard work. When I say “assets” I don’t just mean what you own. I mean anything you can use to your advantage. The kid who goes into business with his father may be leveraging his parentage. The guy who makes it big in sales may be leveraging his personality. The woman who opens a visiting nurse’s service may be leveraging her experience as a nurse and administrator. You can leverage anything, including who you know, where you’re located, and what ideas you have.

To get my business off the ground, I leveraged three assets: my best friend’s father had a picture-framing business, I was well versed in customer service from having worked at my father’s dime store, and I had a good head for math. The key to leveraging your assets is to take inventory of what you have. Some people do start from scratch, but they usually take longer to succeed than those people who use everything they have to fuel their ambitions.

Lesson #3: If you’ve got it, use it, even if it’s just a great smile.

Putting the Competition under the Microscope

What I Used to Think: The best competition is no competition.

Nobody Told Me: Competition is one of the primary indicators of demand. If there’s no competition, there may not be a market for your product or service. If you’re trying to break into a competitive market, however, first do a competition analysis.

Location may be a vital factor in your success, whether you’re a retailer, wholesaler, or manufacturer. Governmental agencies, universities, think tanks, and even the company that produces the Yellow Pages publish information that may help you determine the best location for your business.

If you want to give your competitors a run for their money, you have to know their weaknesses. Consider posing as a customer to find out more about the competition — how they do business and who their customers are. Your business will have a better chance of succeeding in a competitive market if you provide better prices, quality, or service than your competitors. If the market is saturated, there’s nothing you can do to improve on the existing businesses, or they have unassailable competitive advantages, you might be better off getting into something else.

Lesson #4: It’s easier to steal a share of the market than to create a market.

The Money Pit

What I Used to Think: Your start-up costs are pretty straightforward.

Nobody Told Me: A little thing called negative cash flow can blow the lid off your business before you ever have a chance to make a go of it. One of the keys to a successful start-up is to begin with enough capital to keep your business afloat until it breaks even. One of the biggest mistakes people make with their start-ups is underestimating the time it takes for their businesses to be up and running. You have to hire employees, train them, and often replace them because they don’t work out. The time between starting and running the business can be weeks or months. Guess what, your new employees have to be paid during this phase!

That’s why you have to project what your break-even point is and how much working capital your business needs until that time. You’re going to lose money until then, and it’s difficult to raise fresh capital when you’re in a hole. It’s smarter to raise the capital on the front end, leaving yourself with a substantial cushion so that you don’t run out in the middle of the game. There are few things more heart-wrenching in business than blowing a successful start -up just because you ran out of cash. It’s like digging an oil well and running out of money for drilling when you’re two feet away from hitting oil.

Lesson #5: Starting a business is a money pit. Be prepared by having plenty of working capital up front.

Don’t Turn Up Your Nose at “Stale” Old Concepts

What I Used to Think: You have to come up with a new concept to be a business success.

Nobody Told Me: If you want to be successful in business, execute well. If you want to get rich quickly come up with a new concept. Most businesses aren’t born from new concepts, yet they make money year after year. Ideally, you should come up with a new concept and execute it well.

More often than not, however, I have seen hot new businesses that lose steam after a few years because they fall short in the area of execution. A business may come up with a new concept, have great marketing, capture the imagination of the public, and generate excitement about their product or service. They initially have little or no competition, so their margins are strong. Those factors enable the owners to rapidly expand their business. When other players step into the market, however, they have to shift gears. They no longer can coast on great publicity and have to focus on execution.

Execution has been the key to the success of my business from day one. I started my company realizing there was money to be made by better executing an old concept. My company didn’t reinvent the picture frame, we reinvented the framing business. We raised the level of customer service far beyond the industry standard and implemented systems to ensure that our customers not only received outstanding service but also excellent quality. I always am looking for that hot new concept, but execution has served me well over the years and will continue to be a factor in any new business ventures I undertake.

Lesson #6: New concepts are powerful, but execution ultimately determines how successful you are.

Price, Quality, Service —- Pick Two

What I Used to Think: You have to give your customers the best prices, outstanding quality, and exceptional service.

Nobody Told Me: No company can give the best prices, outstanding quality, and exceptional service and survive in business very long. Most successful companies usually give two out of three of those things in one combination or another.

Discount stores, for instance, provide low prices and good-quality merchandise. But the service is nothing to write home about. You just don’t find many well-informed or experienced salespeople at discount stores, despite what their multimillion-dollar advertising campaigns tell you. Discount store employees often are low-paid, part-time workers. Some discount stores are better than others, but their service rarely compares to the service you will find at a boutique or even a better department store. Federal Express, on the other hand, is an example of a company that provides excellent service and outstanding quality but not the lowest prices.

I’m hard pressed to name a single company that provides the lowest prices, highest quality, and best service. The key to business success is to provide two of the three. I always wanted to provide a high-quality product and exceptional service, but I also wanted my prices to be the lowest in town. I soon realized it costs money to provide service and quality, so I had to adjust my prices. I am not the cheapest framer in town, but my prices are competitive and, by far, I offer the best value. I am able to do this because I buy materials directly from manufacturers at a considerable savings.

A lot of framing companies with low prices have gone out of business because their service stunk or their quality was poor. The market has to support whatever combination of price, quality, and service you are willing to provide. There are discount food chains that thrive and discount drug stores that fail. Why? Because success for them depends on whether their low prices generate enough business to make up for their smaller margins.

That’s why when you start your own business, you need to analyze the market, your personality, your assets, and a dozen other factors before deciding what combination of price, quality, and service you want to provide.

Lesson #7: Two out of three ain’t bad when you’re talking about price, quality, and service.

Get to Know Your Local Pawnbroker

What I Used to Think: If you have nothing, you have nothing to lose by going into business for yourself.

Nobody Told Me: Unless you’re independently wealthy, have wealthy parents, or have an investor, it’s difficult to make it through the start-up without putting everything you own on the line. I’ve never heard of banks making loans without collateral. I’m surprised by how many people think banks will hand money over to you for nothing but your signature and X amount of interest.

At a speaking engagement, I told the audience, “Banks don’t care about your hopes and dreams. They want collateral.” A person in the audience raised his hand and said, “You’re wrong. I just went to my bank and borrowed $25,000.” I said, “Really? Do you own a house?” He said, “Yes.” “Did you sign for the loan personally?” I asked. “Yes,” he answered. “Well then,” I said, “they’re using your house as collateral.” He looked stunned.

Another time, someone I met at a business conference told me that he borrowed money to buy a multimillion-dollar business, even though he had limited assets. I wondered if he knew something I didn’t, until we met again a few weeks later. He casually mentioned that his wealthy father co-signed his loan.

Like a lot of business owners, I had no one to loan money to me, provide equity, or even co-sign my loans. I was reluctant to take on an investor or partner. I had nothing but a small amount of savings and had to put up everything I owned as collateral for loans. If your business fails, you could lose your home. If your business succeeds, it’s not like you just pay back the loan and that’s the end of it. If you want to continue growing your business, you probably will have to take out additional loans. It’s not uncommon for business owners to take on tremendous bank debt and, in some instances, to borrow all the way to the wall.

Lesson #8: If you want to start and grow your business without investors (including Dad), be prepared to hock everything, including your class ring.

Your Grocery Bagger Might Be a Better Person to Go into Business with Than Your Best Friend

What I Used to Think: There’s no better person to go into business with than someone you know, like, and trust.

Nobody Told Me: I didn’t give it much thought when I went into the framing business with a friend. I just knew that his father was doing OK in framing, that my friend and I got along well, and that I didn’t know what else to do with my life. My friend dropped out of the business shortly after we started, so I don’t know whether the partnership would have worked in the long term. I’ve observed a lot of partnerships over the years, however, and found there are some common denominators among both those that succeed and those that fail.

Most people go into business together because they’ve been friends since kindergarten, or, you know, “I like to cook and you like people, so we’ll open a restaurant. I’ll be the chef, and you’ll be the maitre d’.” These partnerships are frequently doomed because the people involved fail to consider whether their talents and abilities are complementary or whether they possess the necessary skills to run a particular kind of business. Sometimes one partner brings more to the table than the other partner. As the business becomes more successful, the more valuable partner may realize he/she is the one who makes it work and may begin to resent it. The less valuable partner seldom agrees that he/she is not pulling enough weight. It can get very ugly.

Partnerships that begin as strategic alliances, on the other hand, have a better chance of surviving. The partners get together because their combined talents and abilities are likely to ensure the success of their business. Corporations merge to create healthier companies, but when it comes to the small business sector, you find people forming partnerships because they’re best buddies. Sometimes you even see three or four friends starting companies, and that really is a joke. By the end of the first year or so, it’s a safe bet the partnership will be down to two people.

There are some people who say, “Never have a partner. It’s the worst thing in the world.” I disagree. Many partnerships fail miserably, but there are wonderful partnerships that result in successful businesses because the partners have formed strategic alliances.

Lesson #9: Going into business with friends just because they’re your friends is like betting on a horse just because you like its name.

(Continues…)Excerpted from The Street-Smart Entrepreneur by Jay Goltz, Jody Oesterreicher. Copyright © 1998 Jay Goltz. Excerpted by permission of Addicus Books, Inc..
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