Not everyone can—or should—be an entrepreneur, but not because of the risks involved. Let me be clear: nothing in life is without risk. Relying on a job can be one of the riskiest things you do. In this chapter we’ll explore entrepreneurship; the risks, rewards, and challenges; what you can do to start becoming a better businessperson; and why it’s the most exciting “job” in the world.
If you are running your own company or trying to grow your business, you already know it can be an unpredictable and stressful way of life. If you’re considering starting out on your own, are you having nightmares about the potential risk? Are other people telling you not to do it? Do your parents, spouse, and friends think you’re crazy? I can empathize. I had an accountant tell me I wouldn’t make it. I even had business leaders tell me my plan for their industry was unworkable. But here I am, almost fifty years later, and the company I launched back in 1971 continues to grow every day, every month, every year. The thing is, you can manage risk.
Those people who talk about the risks involved in starting and growing a business seem to imply that having a job is risk-free—get a job, be set for life. Was that ever true? In reality, working for a company is not as risk-free as it might have been a generation or two ago. Cradle-to-grave jobs have gone the way of pay phones and Blockbuster Video stores. During the second half of the twentieth century, people focused on job security by working for large companies. Those kinds of jobs don’t exist anymore.
There’s an excellent example right here where I live in Rochester, New York. In 1982, Eastman Kodak had about sixty thousand employees; today it has fewer than ten thousand. Nobody knows with certainty where the next disruption is coming from. Couple this with amazing advances in technology, and there is a case to be made that being employed is the risky alternative.
Moreover, if you are fortunate enough to have a good job with a good company, you are always at the whim of a bad boss. Even if that’s not the case, your division could be performing well, but the company itself might enter a period of financial difficulty. There’s a lot of insecurity working for other people; don’t let anyone tell you differently.
One other thing: you can’t sell a job or pass it along to your heirs. Build a successful business, however, and it can provide income and security in retirement; not only that, it can outlive you.
Let me delve a little deeper into this whole risk thing. I admit, there’s always risk in business, sometimes significant risk, but that’s true of everything in life. When I first started the publication Bidders Guide, which I will tell you about later, I had a young family, and it was a risk. It was an even bigger risk when I left a good (but not great) paying job to launch Paymaster, and I certainly felt nervous about making the leap. But I’d thought it through, done my research, and determined it was a calculated risk.
If you feel starting your own business might be for you and you have a good idea, don’t be a wimp. Seriously, the dangers of owning a business can be minimized. The first thing you need is a complete understanding of how the business world operates, how companies work, what your responsibilities are when you head up a company, and finally what strategies work and which ones to avoid. That’s what this book provides, so read on.
What makes a good entrepreneur? Are they born or made? Some people can’t stop themselves from thinking in terms of business opportunities. For instance, if you’ve ever sat next to a food truck, eating your hamburger, and counted the number of patrons purchasing food and then multiplied this by the average amount spent and then extrapolated what the business owner would earn in a typical lunch period, you’re probably an entrepreneur. If you then went further and estimated the food truck’s operating costs and calculated its net profit, you are definitely an entrepreneur—even if you don’t realize it.
If, on the other hand, during your lunch break at a taco stand you ate your taco while dreaming of what it would be like to own a food truck because, heck, you love tacos, everyone likes tacos, so you think you could make a huge success out of it, you might want to reconsider starting your own business.
I was in Cuba recently on vacation and visited a cigar factory (I’m known for my love of a good cigar), and my first instinct was to ask questions: Where did they source their materials? What was their output? How many workers did they have and what did those workers get paid? I got a lot of pleasure figuring out the economics of that cigar factory, its profitability and sustainability. Whether it’s a local toy store, a restaurant, or any other business, the entrepreneur in me wants to see which businesses are winning, which are losing, and more importantly, why.
Natural entrepreneurs are curious. They constantly question and challenge business scenarios. They are always looking for an angle, a way to make things work better or introduce a new product or service. They are always thinking and planning.
I’ve always been entrepreneurial, not out of some genetic predisposition toward selling anything in particular but more out of a desire to have enough money to meet my lifestyle needs and those of my family, and to be independent.
When I was a kid my parents didn’t have money to spare, so I never got an allowance. If I wanted money to spend, I had to discover a way to go out and earn it. When I was about ten, I hauled a little red wagon around our neighborhood with a friend, collecting old newspapers. Once we had filled the wagon, my father would take us to the dump, where we’d get paid a few pennies for our efforts. It wasn’t much, but I liked the feeling of those coins in my pocket—they felt a lot like independence. That same wagon did double duty when, sometime later, I got a paper route delivering the Rochester Democrat and Chronicle.
When I was fifteen, I often hung out with a friend, Dick Chesler, at the local bowling alley. Bowling was big in those days, and the local North Park Lanes was humming every weekend. If all the lanes were busy, patrons had to take a ticket with a number and wait their turn to pay for a lane when one became available. Our active, make-a-buck-any-way-we-can minds realized we could offer a service to anyone willing to pay a few dollars to get a lane sooner. Just ahead of busy periods we would arrive and surreptitiously take a number of tickets. When the number on one of our tickets was close to being called, we’d offer it to new arrivals who were facing a long wait for a lane—for a price of course. Eventually the manager noticed what we were doing and threw us out, but for a while it was a profitable small-business enterprise. Even back then I saw the value of identifying a need and the benefit of offering everyone a good deal, while making a little money for myself.
Over one busy Christmas period I worked for the US Postal Service. That’s where I learned what it was like to have an eight-to-five government job. I was given a route that was supposed to take eight hours. When I finished by noon on my first day, I expected my manager to be impressed, but instead he was insistent that the route should take eight hours and that I must have missed some houses. I assured him I hadn’t. He in turn, with a serious, almost threatening stare, made sure I understood that he did not expect to see me back before five. From that point on, I spent my afternoons hanging out with a friend. That was my first and last federal government job—getting full-time pay for half-time work. It’s no wonder to this day I have little confidence in the government’s ability to manage anything efficiently and cost effectively.
Not everyone comes to entrepreneurship naturally. For some it is less about being fascinated with the way businesses operate and more about a desire to bring a product or service to market. For others it can be born out of necessity due to being laid off from a job or being stuck in a boring, dead-end career. Increasingly, seniors are turning to entrepreneurship as a way to supplement their retirement income.
Still others have entrepreneurship thrust on them, which reminds me of my early days in Paychex when I invited personal and business friends to join me in the venture. Looking back at my seventeen partners and franchisees, none of them were what I would call natural entrepreneurs. It was interesting to watch how some adapted well to the cut and thrust of business and others lacked initiative and self-motivation.
This disparity would prove challenging when I decided we needed to go through a consolidation process and incorporate into a single business, whereby partners and franchisees all became shareholders. I had some people who had opened several new branches and others who had not expanded at all. The latter seemed to enjoy the fruits of our success a little too much and were more concerned with their golf handicap than with growing the business. These varying levels of ambition were taken into consideration when shares were allocated, much to the chagrin of some of my colleagues. More about that later.
I offered my best friend, Gene Polisseni, a chance to become my business partner in Paychex right from the outset, but he turned it down. He was running a tire store in Rochester at the time, and he couldn’t see the potential of a payroll processing business. He is a case of someone who simply didn’t have the entrepreneurial gene (pun intended).
As Paychex expanded and the number of partners and franchises grew, there he was, my best friend, watching it all from the sidelines. I was running out of decent territories and partnership opportunities, so I attempted one last time to bring him on board. I called him and said, “Okay, Gene, here’s the deal. I want to come over to your house on Sunday evening and I want you and Wanda [his wife] to listen to my pitch. Make sure the kids are out of the house—I want your undivided attention. Can we do this?”
He agreed, and that Sunday I laid out the opportunity as clearly as I could—the company dynamics, the financials, the salesmanship, the product, everything. I told them they should move to Cincinnati, Ohio, because it was the best market I had left, a territory that included Louisville and Dayton.
The presentation took me a full three hours—I was serious. I knew it would be an uphill battle as Gene loved Rochester and was very active in the community, not to mention he had four children and Wanda to consider. It took them a few days to mull it over, but he called me and said, “Yeah, we’re going to move.” That was in 1977; financially he did well, but if he’d been less risk-averse and joined me when I first asked him in 1971, he would have become far wealthier.
You have to assess a business opportunity for what it is. You don’t have to love the product or service; you just have to recognize the potential.
Being an entrepreneur is hugely rewarding, but make no mistake, it’s hard work and there will be times when you’ll be backed up against a wall and you’ll feel like giving up. Don’t.
I remember being close to giving up once, in the early days of Paychex. It was a Fourth of July weekend, and we’d developed new software so that we could run our own payrolls instead of relying on my old employer, EAS, to process them. I’d been assured the software would be ready for the long weekend, but when the time came, it wouldn’t print checks. To put this into perspective, if we couldn’t deliver payrolls, workers would not get paid and our credibility would be destroyed; everything we had worked for would be lost.
I’d already canceled my arrangement with EAS, so I had to go back to them and ask for assistance. Thankfully they sent a couple of technicians over to our offices to help us out. I think the senior management at EAS may have believed our dream of striking out on our own was just that, a dream, and that we’d be back using their services the following week. Of course, that never happened. We all worked through the night and managed to complete the payrolls, but it was too late to mail them, so we had another major problem. We had to call in any and all friends to help, and we got the payrolls to our clients any way we could, by car, motorcycle, whatever we could think of at the time.
I remember that period well; it was hectic and stressful. I lost something like ten pounds and didn’t manage to get home for seven days. I looked a mess. I’d been sleeping on the floor of my office. I was toast—burned toast. But when I walked in the door, my then-wife, Gloria, took a long look at me and said, “You can’t quit. Just keep putting one foot after another.”
It was good advice. We stuck with the plan, took one day at a time, and survived the crisis. I’d like to say that was the only major crisis during my thirty-plus years as CEO of Paychex, but I’d be lying. Running a business, any business, means challenges, some expected and others that come out of the blue. It comes with the territory. It’s an old aphorism, but it’s true nevertheless: if you can’t stand the heat, get out of the kitchen.
Talking about kitchens, as I mentioned earlier, several years before I founded Paychex, I started a business publication called Bidders Guide. I gathered all the advertisements calling for bids on public contracts from local newspapers and then sorted them by product category and placed them in the guide, which was published three times a week. The publication was sold on subscription to companies that wanted to ensure they didn’t miss any selling opportunities.
I was married with two children at the time, and we were struggling financially. I remember Gene came to visit one day. He walked into the kitchen and opened the fridge, and when he saw it was empty, he took us all out for dinner. He was a good friend, and to this day I wish he had been with me from the beginning of my Paychex adventure. Maybe that day he found our cupboards bare was in part to blame for why he was reticent about leaving his job at the tire store and joining me at Paychex. He’d witnessed how tough setting out on your own can be.
I sold Bidders Guide a short time later, and the $3,000 I netted was the seed money I used to start Paychex. Recently I ran into the new owners of the guide and am pleased to report that after fifty years, it’s still going strong.
Regardless of how you became a businessperson, or where you are today in business, you can improve your business skills and become a better entrepreneur. I often meet people who for one reason or another have a business idea and want to launch a new enterprise, but they are not there yet in terms of business acumen. Maybe that’s you. Perhaps on an entrepreneurial scale of one to ten you consider yourself a five. That’s good; being honest with yourself is the first step to success.
To become a ten, you need to understand what makes businesses successful; you need to know what you need to know. You need to be intimately knowledgeable about your industry. Being successful as an entrepreneur requires comprehensive knowledge of the workings of your business, your product or service, your market, and your industry. Sure, you can employ others to do the stuff you may not be skilled at or enjoy doing, but that doesn’t mean you don’t need to fully understand every aspect of your business.
My childhood entrepreneurial activities aside, there are many reasons I became a lifelong entrepreneur. The most important was the potential of unlimited earnings and personal and economic independence. I also valued the freedom to choose the people I wanted to work with and those I didn’t.
In my opinion, the benefits far outweigh the drawbacks. Ask yourself if you like the idea of being your own boss, setting your own course, creating something new. Are independence and freedom important to you? Do you put a high level of importance on creating something that may well outlive you? Would you like the satisfaction of knowing you are contributing to the economy, providing employment for a great number of people, and meeting the needs of so many customers? I always have.
You can choose whatever industry you want and whatever product or service you want to sell, with one caveat: you need to know an enormous amount about your industry and what you are selling.
Finally, entrepreneurship offers you the potential of unlimited earnings and the ability to create the lifestyle you desire for yourself and for your family. In the end it’s about having ultimate control over your life.
Too many wannabe entrepreneurs have no idea what running a business entails; even worse, they have little to no idea how to assess whether their business concept has a chance of getting off the ground. People come to me all the time with business ideas, looking for investment and mentorship, but the vast majority don’t get past the two guys I have who screen the business proposals I receive. A good, or even great, concept is not enough.
Personally, I look for two things when considering whether a business has a chance of success. First, I want to see that the business owner has worked in the industry. They have to possess intimate knowledge of their market, their product or service, and their customers—they have to be familiar with the environment. Second, an entrepreneur needs to possess a sense of reality. Too often passion overtakes common sense. Too often entrepreneurs have an inflated opinion as to what percentage of the market they can realistically expect in the first few years. I’ll deal with this topic in more detail in chapter 7, “Lead, Follow, or Get Out of the Way.”
I also assess a person’s attitude. I can help them become a better entrepreneur or businessperson, but I have to see passion, commitment, and a little humility—a willingness to learn.
Not all entrepreneurs run their own businesses; some are entrepreneurial employees. These are people who don’t just do their job to a level that satisfies their bosses but take it upon themselves to make the company as successful as possible—in a sense they take ownership. When I was running Paychex, these were the people I sought out and encouraged to come and work for me. I’ve met this special breed of person when buying anything from tires and cars to computers; they are entrepreneurial by nature. Some ended up working for Paychex, and others came to me later with business ideas in which I invested. I helped them make the transition from working for someone else to working for themselves. I have always found these types of people worth investing in; they give me a good return not only on my financial investment but also on the time I spend mentoring them.