Friday, May 20, 2011

The Franchise Option

I’ve been asked to guest blog for the Franchise Business Review (FBR) and I just wrote the first two posts as I travel from Charlotte to LA.  Thus, my mind is thinking heavily about the role franchising plays in entrepreneurship - and it is huge. 

I haven’t talked about franchising much on this site so I’m going to repost my blogs for FBR here as they’re published.

I recently came across a fantastic book (hat tip to Mark Suster) called “Do More Faster.”  The book covers seven main topics in entrepreneurship through short stories written by founders and venture capitalists who are involved with TechStars.

One of my favorite vignettes is titled “Trust Me, Your Idea is Worthless.”  The key line in the story is: “Entrepreneurs (often) overvalue ideas and undervalue execution … one can steal ideas, but no one can steal execution and passion.”

This describes the value of franchising to a T.

I’ve heard many people say: “I want to be an entrepreneur … I’m just waiting to think of that big idea.”  With franchising, you don’t need it.  The “big idea” is already established.  Your investment is in a proven business model where your chances of executing well are strongly enhanced.  And, it’ll likely cost you less than trying to start something on your own.

As a result, the U.S. Department of Commerce has found that 90% of franchises continue operation after five years as opposed to less than 25% of privately owned start-up companies. (Stats here)

Why?  Because franchisors have a tried-and-true model in an established market with identifiable customers.  When you buy a franchise, you leapfrog the first several huge obstacles most entrepreneurs face.  At TGA, we weren't profitable for several years  ... but our franchisees are mostly profitable in their first year because they immediately obtain the blueprint we spent a lot of time and money designing.

The downside to franchising is that you’re one part of a bigger system so you’re likely not going to change the world alone … and you have to deal with the franchisor, who thankfully isn’t a boss but acts like an uber-protective big brother.

Franchising doesn’t guarantee success because it always comes down to execution.  A franchise provides the blueprint and tools to build a castle.  Ultimately it’s up to the franchisee to pick up those tools every morning, follow the blueprint and build.

If you want to be an entrepreneur, franchising is an immediate, viable and less-risky alternative to waiting for your big idea and starting something from scratch.  It’s not for all but is great for some, especially first time entrepreneurs.  I look forward to further discussing the topic on this blog and for the FBR.

Thursday, May 12, 2011

"Ready Fire Aim" & Fight On

I graduate from USC tomorrow with an MBA and it has me in a reflective mood.

One of the things I enjoyed most about the education was a dichotomy that emerged between my entrepreneur classes (of which I took a lot) and the rest of the classes. 

I’d sit in finance/operations/etc. on one night and focus on academic analysis.  I learned about Jack Welch’s philosophy on leadership, valuation based on DCF, supply chain management and so forth.

Then, I’d sit in an entrepreneur class the next night and focus on real-life execution.  Much of the academic analysis discussed in the other classes flew out the door.  Leadership?  “Build a team of people smarter than you.”  Valuation?  “What’s it worth to you?  That’s its value.”  Business analysis?  “What you think doesn’t matter – go talk to your customers and see what they think.”  I took many lessons out of these classes but they all surrounded a central theme – “stop talking and start doing.”

This dichotomy recently played out in a real-life setting.  I was meeting with a potential strategic partner for TGA Premier Junior Golf who is well-inundated in both the golf and education fields.  He said multiple times:

“How do you know your program is good?  Have you put your curriculum in front of the academic community on a university level for analysis and verification?  If not, you can’t tell me it’s good.  For all you know, you could be turning kids off to golf through a crappy program … it’s just that no one knows it yet because there’s nothing to compare you against.”

My response was: “We know it’s good because we’ve had 100,000 customers, of which approximately 40% are repeat.  We don’t need academic verification when we already have it from our customers.”

The reality is that we’d love to get our curriculum certified on many levels, but TGA wouldn’t exist today if we invested, at any point in the company’s eight year history, the hundreds of thousands of dollars required to do it.  Our philosophy, instead, has always been to bootstrap the business and get after it.  Start.  Get customers.  Test.  Make mistakes.  Learn.  Pivot.  Grow.

One of the best quotes I heard in a USC classroom came from Mark Suster, the well-known LA venture capitalist.  He said: “You have to create barriers that make it harder for people to come in after you, but it rarely comes from technology.  It almost always comes from the PACE of innovation ... the relentless pace that freaks your competitors out.” 
TGA has always been excellent at innovation.  That’s a large reason why, as our colleague pointed out, there is no one to compare us to even though we’ve been proving for eight years that a market exists for school-based youth golf programs.
I recently came up with an off-the-top-of-my-head analogy on this topic that I think would make my entrepreneur professors proud.  I was helping a friend with her business plan for a non-profit called Autism Assistance and I said:

 “You don’t need to create a blueprint for your entire castle right now.  Start by designing a simple and inexpensive dirt road that leads to a front door.  Then get it out into the real world and see if/how people use this road.  And then follow them.  They’ll design your castle for you.  You’ll just need to pay attention and put in the sweat needed to build it.”

“Ready Fire Aim.”  That’s the entrepreneurial spirit.  Academic analysis is good and important, but walking the path of happy entrepreneuring ultimately requires that you: a) get started; and b) Fight On.

Tuesday, May 3, 2011

Kickstarter - Sponsorships & Moore

After a weeks-long hiatus on everything except work and school, I thought it appropriate to re-energize this blog with some thoughts on Kickstarter.

According to their website: “Kickstarter is the largest funding platform for creative projects in the world.  Every month, tens of thousands of amazing people pledge millions of dollars to projects from the worlds of music, film, art, technology, design, food, publishing and other creative fields.”
According to a recent TechCrunch headline, it’s working – “Kickstarter, Two Years and 20,000 Projects Later: $53 Million Pledged, $40 Million Collected.”

I’ve received funding requests from friends/colleagues for projects that fit within this description, but what really got my attention about this company was a recent Fred Wilson blog post. 

Wilson told the story of how a professional golfer named Mike D is using Kickstarter to fund his journey on the mini-tours and create a documentary about it.  Wilson summed it up best by saying: “Mike is taking the classic big brand sponsorship model and crowdsourcing it with Kickstarter.  Awesome.”  He has raised over $13,000 thus far, which is almost double his minimum goal.

I think this is a great example of: 1) a golfer applying innovative thinking to the pursuit of his dreams; 2) a product being applied in a way that the company had no clue it could/would be used.  Great lessons for both golfers and entrepreneurs.

This story reminded me of Ryan Moore, the young PGA Tour player and 2004 U.S. Amateur Champ.  Moore parted with his club sponsors in 2008 and then signed a deal with a start-up equipment company called Scratch Golf in 2009.  The deal – Moore would play Scratch Golf’s irons/wedges in exchange for becoming a part-owner of the company.  Compensation was not cash, but equity.  Again, genius. 

The arrangement ultimately fell apart last year with Moore signing a deal with Adams Golf and losing his equity in Scratch, but I believe (and hope) he was a pioneer for more golfers to think in a similar way.  Certainly it’s a great opportunity for players to build equity in something other than their golf game.  It also injects an innovative spirit into the golf industry and provides a path for start-ups to penetrate and pivot around the “good ole boys network.”

I think these two innovative approaches to sponsorships are steps in the right direction and will hopefully pave more paths for golf entrepreneurs.