Enterprise Value, Exit Planning, Leadership

6 Things I Wish I Knew Early In The Business (Ok, Maybe Just 5)

things I wish I knew before starting my defense contracting business

It’s exciting to start a company.  Scary too.  But mostly, it’s exciting.  There are so many possibilities, and you have no idea where you will end up.  One of the worries I ran into when I was pursing my education and thinking forward on my future career was doing something over and over again, every day, for 30 years.  Knowing both my starting point and likely end point ahead of time,  I wanted more variety and challenge than that.  I didn’t always want to know where I was going to be going.  That uncertainty, I felt, was the seasoning on the dinner that was to be my career.

Starting your own business is the opposite of knowing.  There are so many paths that the market, the economy, your customers, your own skills and experiences, and luck will push on you that it’s impossible to envision even the mid points, let alone the end points.  Still, looking back on my own journey there are some things I wish I had known more about before I started down that path.  We did well and in all of these cases learned as we went.  And I think we learned well.  However, I do often wonder how things would have gone if we hadn’t always learned the hard way. On the Job training and the mistakes that come with that seemed unavoidable at the time, but would we have been even better off if we knew what we discovered in hindsight?  I think the answer has to be yes.  Below are some of the things I personally wish I had been better prepared for before taking the plunge of starting and shepherding a rapidly growing company.

“Why join the navy if you can be a pirate?” ~ Steve Jobs

It’s ok to have mentors.

You often hear how lonely it can be at the top. In fact it’s easy to roll your eyes and sing the whole, “yeah, yeah, whatever” tune. It is true though. There are many topics you will encounter when starting a business that it would be nice to have a sounding board for; a safe one that provides you with honest feedback and is invested in your success. Often your partners are so involved that that’s tough for them to be objective. They’re a conflicted audience that’s not always safe to confide in. Hopefully you do have many meaningful conversations with them, but there are some that just don’t feel right in that venue. Employees/Leaders are not safe for many hypotheses you might be considering. They will be eventually, but this often isn’t the case early on. That’s often not safe either. Should you confide in friends? Family? Yes. To a degree, but they often don’t have the context or the empathy to be a useful sounding boards. And they tend to take it more personally when you just need to vent.

So who do you turn to then? After all, you need to be tough right? You’re supposed to be able to make it on your own. Trust me, its worth it to balance tough with an openness to help from reliable sources. There were few obvious choices for me when the time came, and luckily I didn’t have to work that hard to find them. People are out there that have been through what you have, in your industry or in others, and they are willing to help. There are groups optimized to mentor CEOs and Founders, as well as individuals happy to be that safe ear. Find them and find them early.

“Never follow someone else’s path unless you’re in the woods and you’re lost and you see a path then by all means you should follow that.” ~ Ellen DeGeneres

Having good partners is important, especially in these 4 areas.

Your banking, legal, accounting, and insurance partners are going to be an important resource for you. Hopefully they will be more than vendors, which is why I use the word “Partner”. Finding people you can trust to get you the right products and solutions that will scale, people you can count on to not always choose what’s best for them (often at your expense), people that have seen companies like yours at your stage and how they grew, or people that have seen what helped them fail is a critical ecosystem for you. You don’t want a group of vendors that you have just to have. Pick the right ones that you can mesh with personally, and your business will benefit. As an added bonus, you will likely make some new friends on the way.

"The entrepreneur always searches for change, responds to it, and exploits it as an opportunity." ~ Peter Drucker

Recognize pivot points in your own company and the market.

Regardless of how good your business plan is ( if you even have one ), your company will not be the company you thought it would be.  Even after one year you may find that you grew into something different.  Your successes or challenges may push you in different paths.  The market may be the largest contributing factor to this, or your customers might provide that push.  Sometimes it just takes a while to really understand what makes you special and where you truly fit.  That’s part of the beauty and excitement of this career choice.

Take time out of your daily press to reflect on what that is for you. Don’t hold on with both hands to your initial view of that.  Be willing to change and pivot.  Embrace the things you realize you are great at, even if they aren’t what you originally thought they’d be.   All companies that have been around for a bit have this.  The extremely successful ones have had many slight pivots and adjustments that the outside world didn’t even necessarily notice.  When these companies recognize something they are doing as “special”, they double down and it becomes part of their secret sauce.  Find the balance between being pushed by the current in every direction and holding on too hard to an idea that isn’t really going to work for. It’s like what 38 Special said, “Hold on loosely, but don’t let go.”

Learn what kinds of people do you need in each wave of growth.

One of the biggest challenges and opportunities for companies that are rapidly growing is adding new people to the team.  Often leaders are the hardest category to grow.  As in many cases, I see ( and did ) things so incredibly tactically when I was leading a company like this.  Every move you make is fast and often just in time.  Every decision is, almost by necessity, made by a rapid tactical decision process that is evaluated in the moment.

Try to blend in more strategic thinking into that rushed process.  Don’t just think about this wave of growth, think about what skills you will need in the next wave if you keep up this pace.  We tend to hire “many hats” people when we are under pressure and using this tactical mindset, when we really need true experts for the next level of growth. As a founder or CEO, you likely have been wearing 15 hats.  Good for you.  As you make it through waves of growth, don’t look for clones of yourself that can help you spread the work around horizontally.  A strategic process would include more verticality in its thinking, getting people deeper in their expertise who wear fewer hats. Early-stage companies cannot afford to think that way.  Consider though that, that will have to change at some point, and you are the one in charge of recognizing that point before you need that pivot.

"I think each person, if you're a CEO, the most important thing is to have - to me, is to pick people around you that aren't like you, that complement you. Because you want to build a puzzle; you don't want to stack Chiclets up and have everyone be the same. And so I believe in diversity with a capital D." ~ Tim Cook

What are the types of things that drive enterprise value long term? Things that damage it? And when should you start thinking about that kind of stuff?

I never thought about this in the first few years, and I hardly thought about it at all in the first ten.  That was too late and poor planning on my part.  It’s ok to think that your exit is years away and to not want to think about it.  You want to focus on building the best business you can, and when the day comes, it comes.  I have total empathy with that mindset.  I like it in a way.  If you go into the adventure of starting a business thinking, “My only goal is selling for a lot of money as soon as possible,” you will not likely build something that interesting or with as much value as you could.  That said, it’s never too early to be educated on what types of exits are likely available to you, and at what stage they become realistic.   Familiarize yourself with the impacts to your team, your partners, your customers, your culture, and to YOU in each of these paths.

Personally, I had an oversimplified understanding of our options.  When it became obvious we needed to start looking at changing up the game with new strategies, including some that bring in outside investors or even a buyer, it took many missteps and stumbles to really learn what was best for us.  That took a couple years.  Luckily, we had that time to learn and make mistakes along the path and eventually find the right one.  If we hadn’t had the luxury of that time, it could have been ugly.  So make a plan to learn.  Learn the players, the vernacular, the processes, and the options.  Don’t make a career out of it.  You have to run a thriving company.  Just be sure you take the time to pick up an understanding along the way and use it to keep a framework of where your company is going in mind.  And yes, it’s a constantly evolving framework that you will drive, not something you have share with some outside board of directors every quarter.  It can be nice being a private closely held company, but have a plan for when you will not be, even if it’s decades away.

what I wish I knew before I started my business

A big part of this education is having a realistic view of what your entry value is and what the drivers are, both good and bad, for that value.  Maybe it doesn’t matter to you today and that’s fine.  It will some day.  The decisions and strategies you employ now will have large impacts on that future.  Too many times we kick the can down the road and say “that will be a good problem to have.”  Would a better approach be to not have the problem as part of that statement?

Every company has different considerations when it comes to value, so it’s difficult to summarize a gameplan here. There are some high-level considerations for defense companies though.  Using your size as a small business, or a status designation such as 8A, can be tremendous tools to accomplish high growth.  The federal government is famous for their small business programs and elements such as the SBIR and OTA programs.  Use these.  They are excellent shortcuts.  They will, however, impact that valuation and provide a negative force on your value later.  So consider that, and plan around it.  Don’t always take the easy button approach just because you can.  Have some thoughts on how you transition away from that built into your long-term plan.  It’s impossible to transition that story in less than a year, so you need to be thinking about it all the way.

There are many dozens of things that can impact an eventual exit or even an event where you bring on additional investment.  It’s critical to start understanding these things before you execute your tactical plans every day.  If you, as the leader, have a framework of understanding, you can guide the leadership conversations and strategy in a way that won’t be to detrimental to the future.

This leads me to my last and most important thing I wish I knew.

It’s ok to have mentors.

Ok. I know, I repeated the first one.  Well, that’s because I really mean it.   Exit and valuation strategies, education, and conversations are the hardest parts of the job.  And they’re where you need mentorship the most.  Think about the content of these conversations.  The early-stage thoughts on these items  can be very uncomfortable to add to your normal leadership conversations and meetings.  Everyone will incorrectly think all you care about is the exit.  That’s not a good message.  It’s not a true message either.  Find safe sources for learning and brainstorming outside those channels.  Find people not vested in whether you exit or not so it’s a completely unconflicted, no strings attached relationship.  You’ll thank me 😊

"In times like these, it is good to remember that there have always been times like these." ~ Paul Harvey, American radio personality

Starting a Defense, Aerospace, or Intelligence business is a journey. If you have questions, or are looking for a mentor in this space, give High Stakes Partners a call. We can’t promise you we’ll be the right fit, but we might be able to help you find the person that is.

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