It is Thanksgiving week, which is my favorite holiday of the year. Every Wednesday as @Smallbizlady I host #Smallbizchat on Twitter from 8-9pm. In honor of the holiday, I’m off this week, but I wanted to share some information about a great new book that just crossed my desk Raising Eyebrows: A Failed Entrepreneur Finally Gets It Right by Dal LaMagna(John Wiley & Sons, www.RaisingEyebrows.com). I thought it would bring a lot of value to you as small business owners to share this great interview. I am thankful to Dal, for sharing his successes and failures to help the next generation of entrepreneurs.
Dal LaMagna, author of the new book Raising Eyebrows: A Failed Entrepreneur Finally Gets It Right started his global beauty tools company, Tweezerman, with $500 in cash–and walked away with millions years later when he sold the company. In addition to being a supremely fun and entertaining read, the book offers essential advice and insights to entrepreneurs on financing a business idea, finding trustworthy partners, hiring and retaining talent, avoiding costly start-up mistakes, and building a socially responsible business that benefits everyone. Dal is also a major funder and active trustee of the Bainbridge Graduate Institute, which awards MBAs in sustainable business and a partner in HuffingtonPost.com as well as a popular blogger at the site.
Smallbizlady: Why, in the middle of the Great Recession, do you say there’s never been a better time for people with good ideas to get entrepreneurial?
Dal LaMagna: The American people are feeling it is time to take back our economy from the large corporations–particularly those who: (1) operate out of a mailbox in the Cayman Islands so they can avoid paying US taxes; (2) vacuum money out of their community; or (3) have CEOs who earn 400 times the average worker in the company. Americans now prefer to do business with their neighbors, and in some cases will pay a premium to do it. This is a great time to start a business selling a product or service in your community.
Smallbizlady: before you became a successful businessman, you claim you were a “serial failure.” Can you explain what you mean by that?
Dal LaMagna: Despite my experience and high-class education–I earned an MBA from the Harvard Business School–I could not seem to make any of my start-up businesses work. My friend Larry Jackson observed that I must have some kind of tragic flaw in my business disposition. I could argue that I was always underfinanced or a victim of bad luck. For example, a snowstorm dumped two feet of snow on Taunton, Massachusetts, the night I ran my dance called Christmas College Capers; it rained four weekends in a row the first month I launched my business of converting drive-in movie theatres into weekend drive-in discotheques the summer of 1969. Yet no sooner would it be obvious that my current venture wasn’t going to pan out than I’d get another “great” idea for a business venture.
Smallbizlady: What are some of the valuable lessons you learned from failing?
Dal LaMagna: I learned to be patient, and not overreach. I learned to do projects I could do with the money I had or could easily get. I was always a very organized person but didn’t focus. I learned to not get distracted by the numerous ideas I had to start other business. Most importantly and the reason why I made a fortune out of Tweezerman rather than just a good living, I learned how to empower my employees.
Some of the important lessons I learned the hard way are:
- If you are the first with a product, also be second. Ted Levitt, a famous marketing expert who was a professor at the Harvard Business School, said, “It’s best to be second first.” He explained that the first to introduce a new product or service spends all their time, money, and energy building a market for the new product. Another person comes along with fresh money and energy and an existing market to exploit. In my case with Tweezerman I was first AND second. I didn’t wait for someone else to come along and copy my product and sell it in another market. I did it myself. I made a different version of my very successful Slant Tweezers and sold it to the chain drug stores after the original Slant Tweezers was established in the professional beauty market.
- Have multiple sources. When you have a successful product, make sure you have more than one supplier. Even when my partners Mario and Rao built a factory in India to make our tweezers, I had other factories continue to produce it. Anything can go wrong with a supplier–they can close their business, there could be a flood, workers could close the ports stopping shipments from flowing…all these things happened to me at one time or another. Because I had alternative suppliers for my successful tweezers, I always could get them.
- Tell the truth and be humble. The best assets an entrepreneur can have is a reputation for honesty and humility. The reasons why should be obvious. Everyone I dealt with knew where I stood and why. I never lorded over anyone–especially vendors or my employees.
- Bail when necessary. Some new ventures can’t be saved. It’s essential to understand when that moment has arrived–before you get so far into debt that you can’t recover. Failure, as my mother always told me, is just a perception. Learn from your mistakes and move on.
Smallbizlady: How do you suggest someone go about deciding on the right business to go into?
Dal LaMagna: Tailor it to you. Make sure you want that life. I took over a restaurant and the more successful it became, the harder I had to work. I realized the life of a restaurateur is not for me. Are you passionate about antiquing? Fishing? Cars? Cooking? That’s a start. Now, think about what pursuing this passion might mean for your lifestyle. Think how you want to spend your day; where you want to live; whether you want to work with people or alone; in the morning or at night; on the phone or in the field, and so on. Going through this exercise helps you eliminate any aspect of your business that doesn’t create your preferred lifestyle and that could work against you.
Smallbizlady: You say it’s a myth that you need large loans or angel investors to get a business going. In fact, you recommend against these. Why?
Dal LaMagna: I prefer to get right into the task at hand and not have to go around begging people to invest in my product or idea because I don’t have the funds to do it myself. Find something to do with the resources you have or can easily get. The less money you have to start with, the less likely you are to make common new-business mistakes, or as my mother use to say, “pissing your money away because you have it.” You won’t buy things you don’t need or pay full price for them. Or set up infrastructure than can wait until the business starts to grow.
I spent 8 years trying to raise a million dollars to make the movie Keepers of the Night. After 8 years I had nothing. I started Tweezerman, the global beauty tools company, with $500 in cash. Eight years later I had a company supporting a nice lifestyle grossing 5 million dollars.
Smallbizlady: What financial advice would you give to people starting a business?
Dal LaMagna: Be frugal. Don’t spend money unless you absolutely have to. Don’t invest in anything you don’t need. If this means baking cupcakes in the local church basement and delivering your signature pastries by bicycle to local stores–two dozen at a time–do it. Then take the money you make and put it right back into the business. When you need money, borrow it. You don’t want to sell stock at first because you will be giving away too much for an idea you know will work but your investors doubt. I used credit cards with Tweezerman, accumulating 45 of them and $180,000 of credit card debt before I finally convinced the bank to lend me money to pay them off. I didn’t start selling stock in the company until people saw how good my product was and how successful we were with the business.
Smallbizlady: When setting up a business, what are some ways to cut expenses?
Dal LaMagna: I am a big believer in finding free stuff. Many items needed to start and run your small business are available for free or next to nothing. Be creative. Use freecycle.com; ask friends if they have an old computer or printer; or visit a thrift shop for office furniture or office supplies. A hair accessories crafter I know gets all her leather for free from a backpack manufacturer that throws their leather scraps away. Don’t hire people until you a forced to. The first person you hire is the most difficult–remember, you need to keep him or her busy all week.
Smallbizlady: Once the business is up and running, what other financial tips do you have?
Dal LaMagna: Here are a few:
- Spend only 90 percent of what you earn, not 110%.
- Price wisely, so that if you have a product to sell, you will be able to charge the end user quadruple the amount it costs you to make it.
- Keep track of and write down every single dollar of your expenses.
- Produce a monthly profit and loss statement. Buy and learn how to use QuickBooks and this will be as easy as selecting a report.
- Implement a universal pricing policy upfront to avoid problems when you start expanding into chains and different user markets.
Smallbizlady: How about some “don’ts”?
Dal LaMagna: Here’s my cautionary advice for small business people:
- Don’t wait to close a deal. When you arrive at an agreement, close the deal as quickly as possible.
- Don’t overdesign your product. If you do, you’ll spend unnecessary amounts of money that could be used in more important areas.
- Don’t spend money unless you absolutely have to.
- Don’t hire people whom you don’t have a good “gut” feeling about.
- Don’t lie, no matter how bad things could be by telling the truth.
Smallbizlady: What are your policies for working with other people in business?
Dal LaMagna: Here is what I would advise:
- If you want a partner get two. Three people will always be able to get decisions made.
- Make your business work for everyone–your shareholders, customers, employees, suppliers, and the community in which you operate.
- Be 100% transparent with your workers about all company expenditures.
- Involve your employees in success–share in the profit, and make them part owners.
- Don’t blame others when things go wrong; seek solutions instead.
- Share company problems with employees–and solicit their help.
Smallbizlady: If you had to sum up your advice to prospective entrepreneurs, what would you recommend?
Dal LaMagna: Read my book, Raising Eyebrows: A Failed Entrepreneur Finally Gets It Right. I had made every mistake possible in business and the book covers them. Keep it simple. When I first started Tweezerman, I did nothing but focus on tweezers and selling them to cosmetic counters, one store at a time. Along the way, I got an offer to branch out and sell industrial tweezers to electronics manufacturers. Instead, I kept the focus on what I was already doing–and doing very well. If you can do one thing well, don’t dilute your efforts until you have been turning a large profit over a consistent stretch of time.
Smallbizlady: Is it true you were once a U.S. Presidential candidate?
Dal LaMagna: I ran for the US Congress twice on Long Island, once in 1996 and again in 2000. From 2001 to 2008 I worked as a citizen diplomat trying to end the violence in Iraq. Frustrated by my inability to get the truth about the Iraq War to the American people through our members of Congress, I decided to take my message directly to the American people by running for President. I spent the summer of 2007 in the Presidential primary in New Hampshire.
If you found this interview helpful, join us on Wednesdays 8-9pm ET follow @SmallBizChat on Twitter.
For more tips on how start or grow your small business subscribe to Melinda Emerson’s blog http://www.succeedasyourownboss.com
Great interview and solid business advice. Staying focused is so important!
Debbie—
Thanks for your comment. I love it when seasoned entrepreneurs tell it like it really was when they started their business. I believe Dal LaMagna did that in his book Raising Eyebrows, and I wanted to share his insights. I hope that my interviews grow the entrepreneurs who read this blog.
Continued Success,
Melinda