Spend 2012 on the Right Side of the Haimish Line

After a break for the holidays and the birth of my beautiful daughter Eva Grace Tanner, I’m returning to my weekly blog with a renewed vigor for 2012.

I’ve been reading a lot lately and one of the more interesting pieces was a Mark Suster blog titled “Spend 2012 on the Right Side of the Haimish Line" in which he references this NYT article by David Brooks.

Brooks defines haimish as “a Yiddish word that suggests warmth, domesticity and unpretentious conviviality.”  The concept is that you risk crossing the haimish line into a less happy existence if you blockade yourself from normal folks.  Examples of doing this would include staying at super-private hotels, working solely from behind a desk, etc.  As I read these articles, I took the concept a step further by thinking about the professional consequences that would arise from boxing in one's experiences.  i.e. If you play golf exclusively at private and luxurious clubs, yes, you'll miss out on the congeniality of playing with weekend warriors who are making friends, drinking beers and playing for the love of the game.  However, if this same person is then responsible for addressing the challenges faced by these weekend warriors, they probably wouldn't do a very good job.  They'd be too far removed.  The challenges themselves would fall outside the false sense of reality that their experiences had created.  And thus, professionally, they'd be operating from the wrong side of the haimish line.  

As I went through this intellectual exercise, I thought a lot about the golf industry.  And I’ve thought a lot about this concept of the haimish line since as several interesting headlines and observations appeared in the first few weeks of 2012.

First, at the PGA Tour’s season opening tournament in Kapalua, Commissioner Tim Finchem announced the Tour’s commitment to raise $100 million for The First Tee this year.  Since 1997, The First Tee has been the sole junior golf organization supported by the golf industry and it operates on a $13 million annual budget.  And yet, despite The First Tee’s claim that they’ve had 4.7 million participants, there are less kids playing golf in the U.S. today than there were the day it was founded.  (2.8 million in 1995 vs. 2.5 million in 2010 - National Golf Foundation data.)  Instead of opening their doors and offering support/resources to other youth programs, industry leaders are doubling down on their single all-in bet.  That, to me, is a decision made from the wrong side of the haimish line.

Then, earlier this week, Finchem proposed a change to the Q School format. One of the great things about professional golf is that anyone can pursue their dream of making it on Tour. You don’t need to get drafted, you don’t need an agent, you don't need to be a certain age … you just need to pass through Q School, which is open to any good player. The new format would be a 3-tournament series that is only available to select Nationwide and PGA Tour players, thus eliminating the opportunity for college golfers, club pros and anyone else who’s been working meticulously on their game to bypass the mini Tours and go straight to the big leagues. The new format benefits existing tour players, adds three new tournaments and their corresponding revenue, and undoubtedly builds more prestige in the Nationwide Tour (which, perhaps coincidentally, is in need of a new title sponsor after this year). But nevertheless, it's a closed format. Derived from closed-minded thinking that, to me, comes from the wrong side of the haimish line.

On the flipside, Golf 2.0 has done a great job of identifying golf’s many challenges and it has the industry’s undivided attention.  Its presence is everywhere at the PGA Merchandise Show in Orlando this week.  The much harder and more important part is to now identify viable solutions and execute on them.  Nevertheless, I applaud the PGA for hiring Boston Consulting Group to provide them with a sobering analysis.  I also applaud them for recruiting the perfect person to lead Golf 2.0 in Darrell Crall.  These are all things happening from the right side of the haimish line.

Additionally, the PGA of America clearly has a new social media strategy on Twitter that is much more active and open-minded.  Historically they would only tweet well-manicured PR messages but now they’re engaged in an active dialogue with industry members, including retweeting criticisms and all.  I’m also a big fan of the hashtag they’ve been promoting - #growgolf.  These are smart, engaged decisions made from the right side of the haimish line.

All of these topics require further discussion and there are other smaller examples as well, but the point I want to get across is this concept of this haimish line.  The golf industry has been operating from the wrong side of it for too long.  And it’s understandable – industry leaders don’t pay for golf, probably haven’t experienced a six hour round in their professional careers and aren’t working shoulder-to-shoulder with the PGA Pro who’s folding shirts in the shop and struggling to get by.  It’s good to see that they’re taking steps in the right direction to understand and address the challenges being faced by golfers, industry members and the game as a whole.

With that, I have a challenge for everyone, myself included - let's make sure we spend 2012 on the right side of the haimish line.

Are COO's Really Needed?

Mark Suster wrote a blog last week about the role of COO's in startups and basically argued that they're not needed. You can read it here. He got such a strong flood of opinions in response (check out the comments) that he wrote a follow-up this weekend, which is here.

As a COO myself since 2006 of what for many years was a startup (and some could argue still is), and as an avid follower of Suster's blog,I found the discussion quite interesting. I don't want to argue the merits or lack thereof of Suster's comments but rather touch on a bigger issue. The one that I think Suster was really getting at.  And that is the role of building a management team at a startup.

It is well chronicled in the annals of entrepreneurship that success of a company is determined by the management team. Great ideas come and go, strategies change and competitive landscapes shift. These are all things that are inevitable. Successful companies aren't the ones with a great start out of the gate but rather the ones with the personnel to manage this ever-changing path and stay a step ahead of the others.

I interpreted Suster's point as being that it's important to have razor-sharp focus with your employees and ensure that investments in employees are producing maximum returns.  His assertion is that COO's are like Chiefs of Staffs to the CEO - and in a startup, is that really necessary when you need folks focused on sales and marketing, product, engineering, business development and finance?

I agree in principle with Suster's point while at the same time defending my title of COO as being accurate.  In a young company, all employees wear several hats and mine include corporate strategy, franchise development and operations management. COO fits that job description better than "VP of Sales or Franchising or Business Development." And I think that’s the thing with the COO title – there isn’t a clear-cut job description and the roles look differently from company to company.

So are COO's really needed? Well, it depends. When it comes to your startup, I encourage you to look hard at the duties you need as opposed to hiring based on preconceived notions of the titles you need. Then hire accordingly.  Some of you may need a COO while others may not.  The key is to invest in employees who have job responsibilities that provide the greatest return to the company. And at the end of the day, titles within a startup are mostly inflated and don’t make a lot of sense anyways. It’s the job function that counts.

Given the importance of management teams and the reality of limited funds and resources at a startup, it's imperative that you get your initial hires right. That, I think, was Suster's point ... And as a COO, I agree with it 100%.

"Invest in Lines, Not Dots"

Mark Suster is a prominent 2x entrepreneur turned Venture Capitalist in Los Angeles who came up with a concept that will stay with me forever – “invest in lines, not dots.”

I had the pleasure of hearing him discuss this philosophy in a USC classroom last year and thankfully he wrote a blog about it that you can read here.

So what does it mean to invest in lines instead of dots?  Here’s a loose translation of how Suster described it in that USC classroom:

“An entrepreneur sends me a business plan.  That’s a dot.  A month later they let me know that they’ve secured their first customer.  Another dot.  I see them at a networking event a few months after that and they tell me a major player is moving into their space.  Dot three.  A month after that they tell me how they maneuvered around the major player and are back on track with their projections.  Dot four.  Then, a little while after that, they tell me about a significant strategic partnership they just formed.  Yet another dot.  And so forth.  After a while, all these dots turn into a line with a clear trajectory.  Invest in the lines that are rising quickly.”

Now, this concept is seemingly obvious and one that we all intuitively practice on a daily basis - but there are three things that make it truly valuable to me:

1. It’s transferable to many aspects of business.  For example, when hiring/promoting employees, analyzing growth opportunities, expanding into new markets, exploring strategic partnerships, etc. … “invest in lines, not dots.”
2. It’s also transferable to many aspects of personal life.
3. It’s a great reminder to be patient, conduct ample due diligence and avoid impulsive decisions.  “Don’t get too high when things are going well or too low when things are going poorly,” as my Dad often told me.

There are three things that I think are worth adding to Suster’s description … goals, if you will, to implementing this philosophy well:

1. Get enough dots to form a consistent line.
2. Be sensitive of the time function – you don’t want the dots to come in a burst, and you don’t want them to have too much time in between.
3. Create your own dots – don’t rely on third party sources (and their natural biases) to create lines for you.

So whether you’re researching a new idea, running a business or potentially committing money/time/resources to anything else in your life – I encourage you to follow Suster’s advice and “invest in lines, not dots.”

Good luck and happy entrepreneuring.

(You can read the original version of this blog, tailored to the franchising world, on the Franchise Business Review’s website by clicking here.)

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.

Anatomy of an Entrepreneur

My two favorite VC bloggers wrote on the topic of management teams today.   Both are worth reading.  Fred Wilson’s “AVC” post is linked here and Mark Suster’s “Both Sides of the Table” post is linked here.

I talk to aspiring entrepreneurs on a daily basis as the person responsible for selling franchises for TGA.  I also talk to existing entrepreneurs daily as the person responsible for then training and supporting these franchisees.  Thus, I work with folks before they start their business and I work with them afterwards.

Seeing the entrepreneurial process from this wide of a spectrum has given me a good idea of what indicators in the “before” stage lead to success/failure in the “afterwards.”  Astute franchise candidates often ask me about these indicators and my conclusion is the same as Wilson’s, Suster’s and most others who live within the entrepreneurial world:

Great businesses are made by great people, not great products. 

From my perspective, past business experience – especially in sales, project management or business development – is invaluable.  Industry experience doesn’t matter much at TGA due to our franchise model, but it is very important for businesses starting from scratch.

Ultimately, though, personality and tenacity sit atop the importance list.  Entrepreneurs who are smart, personable and hungry usually figure it out.  If you read Fred Wilson’s blog, note the story about Airbnb and Obama-O’s.

The reality is that “experience” can’t serve as an entrepreneur’s alarm clock.  It can’t work past 5pm for them.  It can’t keep them from throwing in the towel when things get tough. It doesn't put up road signs when the business requires a new direction.  It can’t pick up the phone and call their potential customers.  It doesn’t build their relationships.  It can’t keep them motivated long after the initial adrenaline of starting a business wears off and the grind sets in.

Before I had any entrepreneurial experience, I thought about start-ups almost entirely within the context of the “product.”  I’ve since learned that almost all start-ups are forced to modify, pivot and overhaul their product multiple times.  Thus, in my opinion, the question of “will the business be successful?” is really about whether the management team is the one capable of navigating these choppy waters.