Wednesday, September 23, 2009

Norm Brodsky's The Knack: Good Resource for Entrepreneurs

I'm still reading and liking Inc. columnist Norm Brodsky's new book, "The Knack: How Street-Smart Entrepreneurs Learn to Handle Whatever Comes Up."

In the "Decision to Grow," Brodsky makes the following points:
  • Business is a means to an end. Entrepreneurs should do a life plan -- figure out where they want to be -- before developing a business plan (after the business has been in operation for a while). His point: growing a business through acquisition may not actually help you achieve your personal goals. (One friend expanded his store, which increased revenue, but he leveraged himself in doing so that he ended up making less money, after paying off loans and higher rents.)
  • When trying to move to the next level, don't assume you know all the factors that led to your success. It can be easier to understand what went wrong than it is understand what went right.
  • Before deciding to grow a business, make sure you know what you want to do and why you're pursuing growth. At one of my earlier jobs, the CEO met with different teams to let them know his plans for growing the business. I asked him why growth was so important, why not keep doing the things that had enabled the company to double in a few years -- which is great -- rather than push for even more growth. The result of the push for rapid growth:
  1. a lot of people from the "old days" mourned the transformation of the company culture.
  2. We pursued businesses we shouldn't have. (We went from Fortune 500 clients to pursuing dot-coms.)
  3. We saw a lot of churn in the clients we did sign. I remember one client that spent $35,000 per month for the first three months, and then stopped paying because they ran out of funds. Apparently, they thought the $100,000 PR budget would help them close another VC round within 90 days.
  • The agency ultimately survived, but personally, I am not convinced that growth for growth's sake always makes sense. It certainly not always in the interest of the customer.
  • Bigger is not always better. Small companies, Brodsky says, have some advantages over large companies.
Some interesting points to consider. Now I know that many still feel the recession, and that any growth would feel good. I'm saying this because I do think we'll see a recovery, or at least less of a decline. I'm sure some businesses will make the mistake of the last two recoveries, and grab as much business as possible, even if they can't manage it well. I believe in growth, but it's got to make sense for us and our current clients. Anyway, interesting chapter.

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