Panelists for Q&A

Name Firm Status Primary Services

Kathryn Steele

Wells Group 8a Construction

Victor Palma

ECOMM SB Environmental Consulting

Kevin Phillips

FPM HBZ Environmental Remediation

Gary Cram Cram Roofing SB ConstructionJose Morales

J2 Engineering SDVO / 8a

Construction , Environmental

Ed Von Dran Alpha Terra SDVO Environmental, StaffingKathy McGookey

Medina Consulting WOSB Environmental Consulting

LESSONS LEARNED FROM SUCCESSFUL SMALL

BUSINESSES Surveys and Slides by

Pat McMullen, President of MGS Construction and

Karen Stubbs, VP, Business Development, J2 Engineering

Before we get started….. About that Survey

25 firms, good cross section of all variables Data is confidential except panelist’s

comments Format

Recap results of survey Q&A with panel One-on-One as time allows

Slides with Much More Detail on Website http://same-satx.org/

“They Said It Best”

“Running a business is hard work ….be prepared mentally prior to taking the leap of faith”

Before you leave today…

Goal: Walk out with a general understanding

of how 25 diverse small businesses established and sustained success

Identify a few things you want to ensure you continue….. a few things you want to stop …a few things you want to start

About our respondents….

Age Range at Startup: 26-57 Years in Business: 3-23 years Experience Background: extremely

broad Geography: SW/SE/NE/Upper

Midwest. Lacked CA and NW

More about our respondents… 20 firms were once “Start Ups”; 5

were acquisitions of existing companies

No Super 8a’s ---we’ll explain later Size at start up and now

New Startups were 1-3 employees Buy outs were 6-50 employees Ranged from 7 to 450 employees

today

“They Said It Best”

“find an outlet besides drinking that can keep you sane and focused”

If there’s one flaw in this survey Startup success rate in our industry

is actually high (yes…it really is) but we only spoke to folks who were successful

Those who failed would have most likely added different perspective

We decided it was too awkward to interview those firms …de nile is not just a river in Egypt

Why Did They Start a Business

Positive: “Just wanted to do it” Negative: “Couldn’t stand working for

others anymore” Limited “Opportunity Driven” answers

but more personal for our sample population rather than coming together of market conditions.

Hidden Message…when you’re ready, there will be opportunity

How Did Startups..Begin

Most started out as Federal subcontractors; several began as commercial Prime contractors. No startups started as Federal Prime

New regulations drive New Opportunity: e.g. creation and expansion of SDVO brought new owners. And there are always new regulations e.g. 8(m)

“They Said It Best”

“Yes, you can hire family….you can also step in front of a South bound train…with my family, I’d rather step in front of the train”

Good Buy.…Buy Out

Most recovered investment in <3 years

Tended to grow much more rapidly when compared to ‘start ups’

Minimal ownership changes 5-20 years later

Beware: small sample population for above statements .

Was There One Outstanding Problem at Start Up

Of course….Money!!! All other issues vied for 2nd place And this is why we chose to not

include Super 8(a)s as they’re typically cash rich

Differences in Type of Services / Type of Business It appeared to us that all types of

businesses had similar experiences No major differences noted by type

of service However….

8(a) participants clearly benefited Construction firms had additional

challenge of bonding

“They Said It Best”

“it was hard at start up and I did some dumb things but, five years into it, this is the most fun I can ever imagine. This is my company, understand? I built this thing myself. I love being an entrepreneur.”

Lessons Learned at Startup… No one knew everything about

running a business, everyone had to learn a lot

Some knew very little at all Almost no one had it easy (2 out of

25) Almost all spoke about putting in more hours but no one expressed regret: but we chose successful firms

Lessons Learned at Startup… A lot of focus on understanding all

that was involved in building the business

For most, this was a more stressful time because of the uncertainty about surviving

Lessons Learned: at Start Up All of our firms survived start up They did through a various means Common threads

Hard work Passion Basic business sense

“They Said It Best”

“We are successful now because we established a good management and business plan and had the courage to follow through.”

Formative Years Overview

Years 3-5 were less about learning what to do and more about hiring staff, establishing relations, establishing business processes

Hiring the right people dominated most discussion at this period…..Comments consistently reinforced major point from Good to Great: you simply can’t outgrow your ability to hire and maintain the right people

Formative Years: Two Issues for Everyone

Need to focus…lots of opportunities but not enough time to chase every opportunity

Need to diversify ..New clients..New services

Formative Years: Major Transitions

“culture vs. growth” “letting go” Moving from doing work to being a

business person who is now responsible for leading the company and managing people and processes

“They Said It Best”

“People talk about the long hours and make it sound miserable. But then you try to buy their company and they scream….I’LL NEVER SELL MY BUSINESS..”

Predicting Success

1. Able to find and retain good people who “fit”

2. Owner learned to delegate 3. Developed relationships that formed

future of company…stopped bidding beyond those clients

4. Began to show financial discipline e.g. budgets

Predicting Success (cont’d)5. Most bought into strategic planning 6. Found “Sweet Spot”7. Found a “Good” Mentor

8a program was huge success for most (not all)

Mentors came in all shapes and sizes (e.g. individuals, agencies (SBA), companies, SDBO)

Mentors filled in the gaps and everyone has deficits in skill set

Start Up Period vs. Formative Years Seemed startup was more stressful

due to fear of failure. Future years often had much greater

problems but owners knew they could survive

It didn’t get easier….owners were smarter and had evolving support system

“They Said It Best”

“20 years later the most important lesson at startup is still the most important lesson….we need to always maintain our focus”

Just when you thought it was safe to go out…. Older well established firms had

many of the same challenges Still vulnerable to loss of key people More difficult to be flexible with ever

changing markets More pressure to maintain revenues to

support existing staff But they were clearly less vulnerable

There are plenty of resources …Resource Value MentionedSAME Networking, Training, ConferencesSBDC SBA Loan support, Business operations

training, HR consulting, NetworkingSBA Absolute for HBZ/8(a), Start up and

Expansion LoansPTAC GSA Schedule, Training, Bank Real help for someFederal/University/City SDBO

Some great source of help…size/relationship driven

Other Lots of other entities but no patterns

Darwin right again… The majority of our respondents

evolved significantly from initial services

Where services remained constant, other aspects of the business evolved (client base, culture, locale)

For some, no correlation of current services and clients to when they started the company

Lesson Learned: Need to stay flexible and continually evolve…or become extinct

“They Said It Best”

“Persistent is the key to success”

Glad I didn’t know then..

For this group….ignorance was bliss Most said they’d do it again but it

would have been more stressful if they knew the risks

Seemed they had a sense of the basics (bring work in, do the work, manage the business) and learned from there

Lesson Learned: no one path

Differentiating yourself

Surprise Finding : Nothing new under the sun. We anticipated more complex answers. We kept hearing the basics: Quality,

Responsiveness, Best Value, Integrity Lesson Learned: though getting to

success can be difficult, understanding what you have to provide as a product/service is fairly straightforward….do good work

Lessons Learned: Accounting Software

Purchase Proven software that readily and seamlessly interfaces with government software and make sure you can handle job-cost accounting.

DO YOUR RESEARCH, you don’t have time or money for shortcuts

Start simple (QuickBooks) and move on Buy software that is government auditable Buying the software is easy, training staff is

major task

“They Said It Best”

“the most painful thing I did was save money on a bookkeeper when we started the company. It costs us about $15,000 in about 6 months to fix her mistakes.

Oh but we saved about $600 in salary. Dumb, dumb, dumb move”

Lessons Learned: Hiring a Bookeeper

MOST IMPORTANT person we hired Relevant experience to your industry

is critical. Most know one or a few industries….but must know yours

Make sure they understand federal work

Experience with your business and software

Lessons Learned: Hiring a CPA

Best move was when I hired my CPA as our CFO

Get references, make sure they are familiar with government accounting

Use someone sensible, not a hot shot An absolute must but ….must

understand your industry and federal work

Invaluable, taxes can impair the entire business picture

Lessons Learned: Hiring Staff At times we needed to step out and hire

people before the work is actually booked Don’t rush, check references, background Once you hire, difficult to fire so we used

temp agencies to try them out One of the more stressful actions is

terminating someone, especially if it’s a good person who is simply wrong fit for job

Lessons Learned: Involving Family Never – you cannot fire them Don’t..that’s it don’t do it Don’t unless you must Can be beneficial Very personal decision Not a problem for us, but not

recommended for all Large % of respondents used family!

Lessons Learned: Working with Banks Imperative, can not grow with out a

line of credit and working capital Find one that doesn’t charge

excessive fees for online bill pay and payroll options

Always work with two until you find the one who is most helpful and trustworthy

Lessons Learned: Working with SBA They are your friend and an

invaluable resource Can be the key to your success but

don’t believe everything they tell you Difficult getting certified, very

successful relationship afterwards SBA can be like a university when it

comes to training and education resources

Lessons Learned: Securing Bonding

Life blood, must keep them happy Talk to people in the industry, find out out

how they like their Surety company Do it before you need it They were the key to our success. Bonding

company should be confident in your abilities to bid correctly and then finish the projects on time /on budget

We secured a relationship with insurance broker before bonding was required which made it easier

Lessons Learned: Contract Admin Hire the best qualified personnel to do

the job At time challenging; some slow

responses can lead to lack of work Start knowing this early, ….it gets hard

as you grow Have a qualified person, who

understands contracting, this will save you from getting in trouble and it will save money

Lessons Learned: Procurement Mistakenly thought this was an easy

hire…dumb move. Must have procurement staff that are

well versed in understanding and conveying to other departments and managers what we must do to maintain contract compliance with government contracts.

Life blood of company …must have a handle to survive

Lessons Learned: Business Development No one sells the company better than the owner The client wants to see the owner Attend SAME events Placing this above short term profit was key to our

success We did it first class and it paid off Beware of BD types – some look better on paper than in

reality No one will care for or sell for your business better than

you Right person will make the difference between success

and failure You cant sell and do at the same time

Lessons Learned: IT Systems We are successful by contracting only what we

need Fast changing sector needs to be kept up to date Cannot afford to reinvent the wheel Consult trusted and proven source for IT

solutions as you grow Hire a dedicated person when you get the

chance. If it is down, you are down Get a system/server that can support people

working remotely We did it first class and it saved us money

Lessons Learned: Quality Control Do not cut quality control out of a

project- ever Without this you might as well close

shop and do something else Cant have enough of it. Ever You cannot take it too seriously, ever. As owner, QC is your responsibility Essential, a company is known by its

product and experience

Lessons Learned: Safety

Always number one. Give employees empowerment to stop work in unsafe conditions

If you are not safe, you will not work for the federal government

Essential /Priority One/ No short cuts Develop procedures Do it the right way which is the safe

way

Lessons Learned: HR

Write or buy a very detailed plan and have all employees sign off on it upon hiring

Recruiting, hiring, retention and termination are learned skills; much information is available for them

Comply with all hiring rules and keep current labor law posters properly posted

Lessons Learned: Taxes

Pay them on time! Move the money out of your operating account each payday.

Thinking you can delay paying your taxes akin to saying you’re only going to eat one piece of chocolate…nobody eats one piece of chocolate.

Somewhat surprisingly we found the IRS was willing to work with us when we met face to face and were proactive.