Don't Grow Too Fast
The Inventive Journey Podcast for Entrepreneurs
Don't Grow Too Fast
The Inventive Journey
Starting and growing a business is a journey. On The Inventive Journey, your host, Devin Miller walks with startups along their different journeys startups take to success (or failure). You also get to hear from featured guests, such as venture firms and angel investors, that provide insight on the paths to a successful inventive journey.
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my advice is going to be from the perspective of the entrepreneur who is bootstrapping their business and it is to crawl before you walk and vote before you run i think it's really important to uh to not grow too fast uh to you know to keep the keep this gradual pace uh because it's not just growing a business is about figuring out how you can sustain the business and every step of growth makes the stability of the business it reduces the stability of the business you have to grow into that larger business so that you are on top of it and you can then get to the next level [Music] everyone this is devin miller here with another episode of the inventive journey i'm your host devin miller the serial entrepreneur that's grown several startups and seven and eight figure businesses as well as the founder and ceo of miller ip law where we help startups and small businesses with their patents and trademarks if you ever need help with yours feel free to go to strategymeeting.com and grab some time with us to chat now today we have another great uh guest on the podcast steve uh pretty pretty or pretta is that right yeah rita close as i'm gonna get so um give you a quick uh background on steve so since the age of the 10 or age of 10 always wanted to be an entrepreneur um was a bit inspired by his grandpa that was a baker in budapest parents were both professionals and wanted him to become one as well and then went to college graduated came up the idea for a board game graduated got a job went to work for i think big bangs for a period of time and then put the board game aside um did that or worked for the big banks for about 10 years and then there was some downsizing that got let go with and best thing that could have happened to him in his own word so to speak got fired on friday and opened his business on monday had his clients that started to come in became a market leader and then hit got hit with the eu crisis a bit in 2011 so decided to come to the u.s um then uh got into or had someone that wanted to buy his business had a few things and when where went along with there uh came back with in a and came back and then did business coaching so with that much is a brief or quick introduction welcome on the podcast steve thank you devin great to be here but i mean you told my whole story so maybe we can wrap this up right here there we go we'll just leave on a high note and call it a day so no i gave a brief overview but now let's go back in time and talk a little bit about your journey and a little bit how you got started at uh 10 years old and uh getting expired with inspired with your grandpa is a baker and budapest okay so a small corrections it wasn't my grandpa it was my great grandpa so i never actually met with him but he was a baker in pre uh second world war hungary and he built uh you know it was a small business but it was like 20 employees actually just a week ago i got a picture from a distant relative of the whole uh team you know and in front of the office it's actually pretty cool so uh yes he was the entrepreneur and he became successful but then with the nationalizations after the war you know the family lost lost the the business and my my parents became professionals and i i always felt like uh that it was not gonna work in an office job where i'm constricted and and put in a box i was like this no limit existence i exist as idea where you basically you can make of yourself whatever you want um and and i had this board with my dear when i was around 21 years old when we had the change of the regime we went from communism in hungary to uh to a multi-party democracy and i just bought grim idea which was a version of monopoly for for communist countries and so instead of buying property you would nationalize and confiscate property from other other players so there were more ways of of losing losing your property and but this never took off because i got the job um i got a scholarship in the netherlands and i went to london to work there for for a few years with kpmg accounting firm and then i got back and got into banking and uh my entrepreneurial story starts when i was 35 years old and uh and i was you know i was running this mergers and acquisition department in this bank and we were just you know i took over this department uh maybe nine months previously and started to build up the pipeline and just when things were starting to take off the bank went through a softer summer and they realized that they needed to cut costs to make their make their numbers and they looked at the payroll and i was one of the higher player employees so they pushed me out and first it was a big big shock but within ours i realized that this was a huge opportunity for me because for the previous uh several years uh i you know i had to put my entrepreneurial plans on ice because i had this career so to say career uh i was well paid i was you know i was on this management track and the opportunity cost was too big for me to switch and suddenly the big fire from the bank the opportunity cost was gone and i no longer had to make this painful decision of putting my family at risk of not having this you know started coming in every morning uh every every month so uh so that was when i started running my business and uh and we had a good run uh one thing i'd like to mention around 2004 um i stumbled upon a book called the myth by michael gerber which i'm sure devin you you read it and many of our listeners probably read it which is basically a recipe for how to turn a small business into a growing thriving enterprise well let me just dive in really quick because i just had one or kind of one before we lose that or go too far down the the um the whole or you know too far into the future when you so you're working for a big bank at the time and and you know that was a you know stable or a good job or you you know you did it for this ability for you know 10 years or so when you did get downsized i think one of the things that you said was you know basically you know you got fired on friday and opened your business on monday and you know how did you you know that's a pretty quick pretty quick turnaround to open up a business get it going and trying you know have clients follow you and everything else so how did you you know over that quick transition you know when you got or let go was to say okay i've always wanted my own business i'm going to do it now i'm not going you know rather because you could have also gone and applied to other jobs you could have gone and got hired from someone else you could have taken a bit of time or anything else rather than just and within the matter of a weekend opening up your business so how did you kind of make that decision that you're this was your opportunity to go chase down your own thing and get going on it well actually so i can i can replay the whole weekend for you if you want but the sequence of events was so i got my pink sleep or around 5 p.m on friday and i made some calls and my first reaction was uh and my team my team basically said hey we are with you if you're leaving and we're going to leave video and i made some calls and the first idea was to to basically the whole team to walk over to another bank and uh and it turned out that you talked to two banks through connections and turn out that they were not gonna be able to make a quick decision on this so this was kind of a pending thing and then in the meantime uh my second in command got summoned into the office of the the senior vice president who was my boss and basically they took my car they gave him my car they gave him my you know they gave him a big bump on his salary and essentially he was off from that moment he decided that he was not gonna leave so this idea was mute of us walking out as a team and uh then you know i had basically the weekend to figure out what i was gonna do and we had actually had four clients at the time in the department it was like five or five of us in the department and we had four clients and one of the clients was ready to walk over to me uh within within a matter of days and then the second client came over as well within a couple of weeks and i was i was a little bit pissed off with this whole firing so i kind of resolved to myself that i was gonna get the other two clients as well just to prove my point that they should have fired me and uh and and actually they also came over so by uh within six months uh both of the other clients came over and uh i got my little revenge but essentially all i needed was a computer i walked across the street a friend of mine land uh let him his apartment that was vacant for time being for like 100 bucks a month so i got started i called one of the computer guys from the office who i was friendly with and he came over and he fixed up my computer and i was off to the races so that's that's what that's what happened sounds like a very uh productive weekend or a productive few days so now now that you did that and and you know you were getting into you you know you you got the visit you know you got the business open within a matter of a few days got your first few clients you know and now you have the opportunity to kind of build your business or you know take that leap of faith and actually go out on your own how did it go for it was it a raving success and continue to build it from there was it the ups and the downs or kind of how did that go as you now were out on your own and running the business so the first thing was uh you know the first thought i had when i started the business was that all i wanted to do was to cover my salary so basically i thought okay so i'm not going to get this paycheck so what would it take for me to get just as much business so that i cover my salary so at least where i was before so we don't have to cut our lifestyle or anything like that and that was pretty quick so that happened uh you know within within a month basically and and then i thought okay so what do i do so maybe i need the real office not just this apartment maybe i hire someone uh you know i i took some subscriptions out so suddenly within a bit in a month or two my expenses started to beat it and i realized that my salary was not enough because i had to cover the expenses as well so within two months i realized that i had to actually double my salary as a like a revenue just to cover my expenses and then another two months later i realized that i had to triple it and it kept growing kept growing because the more things i did obviously the more uh the more i became a business not just not just the salary it was other cost to cover so that was the first thing and the other thing was that about six months into into the business i i basically burned through my roller decks i caught everyone i knew that i could have kind of enticed to become a client and then i realized that wow this is a new phase it's no longer personal connections now i have to figure out how i promote this business how i market my business and that was a big a big mine shaft mindset shift and i realized that if i can't do that then i'm i'm gonna be back uh in in a job within six months so i really have to break that nut and um and and basically i started calling people i started you know cold calling uh people and uh you looked at the newspapers and if there were articles about companies growing then i gave them a call and and i managed to get clients and then we found um we latched on and by that time that was basically about six nine months later i had to employees or associates and at that time we there was a program that started which was the capital injection program it's like the sba an organization in hungary like the sba started this program of helping small to medium-sized businesses with with minority capital injection so we started working on this and we became very successful because we were one of the first teams that figured out how to apply for this this capital uh projects and we got quite a few clients and we closed a few deals so there was a really we had a really good run the last next year and then we had a big had to pivot because about 18 months into running my business uh around the end of 2004 the the the person who ran the department in this government-owned bank who were dispersing these laws he kind of uh i think it was a personal jealousy he was kind of my age and he went to college at the same time and we were in similar circles and he he was head of the venture capital association and i think he didn't like me kind of dominating these projects and making a lot of money uh you know and he he basically taught his team to to stop working with mb partners our firm so suddenly we lost our bread winning a product and we had to pivot and we we started doing uh trade m a uh you know selling companies to strategic uh investors at that time there were not too many private equity groups in hungary to sell these businesses so strategic buyers and and the first deal that we were going to do it was a stationary distribution company it's a nice little company they had maybe five million revenue a million dollar uh of profit and uh and we're very very excited they put out this teaser and we had a handful of uh businesses um making offers and one of them who signed a proposal they came over to do due diligence and the morning of the due diligence revoked into the company and the ceo called me in and he said steve we have a problem so what do you mean well actually the problem is that our warehouse is nearly empty even though we have a lot of inventories on our books but we actually don't have this inventory we only inflated them because they didn't want the bank to call the loan we are actually making losses as opposed to profits and uh unfortunately this guy is going to show up for the due diligence they're going to see a half empty warehouse so i just wanted to warn you so that you know this is that thank you very much these investors came in and it was the most humiliating experience i had you know basically had to confess that the the books are you know cooked and you know this company is probably not for them and they they already hired the accountants they were very upset with us so that was a big lesson for me to do my own due diligence when i sign a client up it's not enough to just take the money and figure it out what you do afterwards it's better to know who your client is and and that you don't not don't deal with groups that is and that is always good words of wisdom that you don't deal with crooks so so now you do that you do that and you know you build up the business you go through the ups and the downs and you hit the i think then at one point you kind of hit the uh the eu downturn right or the the eu crisis back in 2011. how did that impact things or how did you pivot or adjust or what did you know where did that send you send you along your journey so uh so yes so we had a good run and uh we in 2007 was the best year ever for us and i was very confident that you can you know double the business next year i had a bunch of people we got a lot of deals we had like six deals under due diligence in the summer and uh and then the eurozone crisis here and it was a shock because just a few years earlier uh maybe i'm confusing the two so we had a good run in 2008 we had this big dip and we recovered from it uh but it was really tough i had to downsize my team and and almost went out of business and then we recovered and then the eurozone crisis like another uh dip happened and we were down at the lake balaton which is like a big lake in hungary with my my wife and kids and on vacation and you're looking at the news what was happening and your banks were going out of business countries were going down the drain and my wife and i looked at each other and said are we going to wait for strike three we had the financial crisis the lehman induced financial crisis we have the eurozone currency crisis maybe there's a third one shall we wait for this or shall we make make a move so uh you know started researching options we looked at different countries in australia the uk canada eventually decided to come to the us and uh next next that was like late august september and then the next spring as we were figuratively you know packing our luggage to come over here i got this call from this guy called christian who was running a private equity group in budapest and he offered to to basically merge our businesses became partners become partners be become a merchant banking operation and to expand in the region and uh and i was very touched you know you know i was very impressed uh very happy that he thought about me to to to merge but i told him that listen uh we committed to make this move so i cannot be your partner however it's kind of good timing if you want to buy my business why don't you give me an offer so a week later i got this offer i got the email and opened it up and i could not believe what i saw so basically to summarize the offer it was that steve uh your business is worth zirch but i'm happy to buy your fancy furniture and your computers uh and i'll pay you a commission for all the deals that you have in the hopper but you you're the chief uh a cook and battle washer in the business you're you're the face of the company you do the marketing you're you know you're the ceo you've got all the investor connections you you get the clients so without you we don't have a business and and kind of he had a point he had a point it was very painful because i had been teaching all those companies how to make themselves viable so they can go and find an investor and then when it was my turn it turned out that the emperor had no clothes so it was very very painful and uh but then i started you know we moved here anyway and and i figured out that the problem was that i was not delegating i was not empowering my team and i stumbled upon on another book so i mentioned the e-myth which is kind of a management blueprint i called them i stumbled upon another management blueprint traction from gino vickman and i started implementing the tours and uh empowering my team and you know basically stepping back from day to day i was here in virginia and just uh going back every three weeks just to make sure everything's okay but my team took from me and and it was really excited and they re-envied it and within a year uh christian came back and uh he he told me that you know he saw that the business was working and my team was executing and i was not here and obviously it's it's more than just just a one-man show and and uh i managed to uh do a deal and sort business and and move over here now uh why it's important because this book that you saw behind me bible is about this idea of you know being caught with your pants down like i was with an unbiable business so i wouldn't want uh other entrepreneurs to live through that and there is a way to to avoid that it's by making your business viable so this book is about how to make your business viable no and i think that's that's awesome so a lot of what you've kind of learned from when you went to sell your business and they basically got told well it's not worth the whole lot other than the physical assets because you built it around yourself so much that you leave the business kind of shuts down to now this is how you set up the business so that it is viable that people can come in they can take over it and it has that value to it so i think that's great so now if you since you've done the book and since you transitioned there do you still run any of the businesses still do any of that or is it now primarily shifted over to more business coaching and in the the book or the book area yeah so when i came over here you know i started to set up an office so the initial idea was to continue the investment banking business here i had a couple of clients but i realized that it was a big client to build a business and no connections here whatsoever to build a business which is very transaction driven and very not every deal closes and it's a success different thing so i would have had to build quite a big machine to have some kind of a stability of cash flow so we decided not to do that and i started working with leadership teams and and i started implementing um the entrepreneurial operating system the attraction describes that i implemented in my business and uh and another management blueprints and bible is basically uh it gives you the framework to how to figure out what you need to do with your company to live your ideal life what it takes for you to get there so what is your magic number what is the value of your business whether you have to take your business and then implement a management blueprint like like traction like eos or the emf and orchestrate your business so that it's self-managing it's growing sustainably and it's profitable and maybe your business is already ready for you to harvest your magic number to do your ideal life but if not then the next phase phase three is to you know to instill value drivers in the business and then when you have grown the business to the appropriate value then how do you transition so how do you monetize your business what will be your role uh in the business or outside the business but in the business there are various roles an entrepreneur i've seen entrepreneurs you know being just a shareholder being a consultant working in the business actually without executive authority just doing the business or being an advisor or being a board member so that different roles and there are pros and cons for each so i talk about that and then i talk about the mindset of what it l what's the emotional impact of of letting go of your business and how does it feel and i felt it myself it was it was quite difficult because you it gives you status it gives you connections uh it gives you relevance and when it's gone then you suddenly just the soul you know a soul person uh not with not very much leverage so that's that's an interesting uh there was an interesting experience and and i've seen many entrepreneurs who didn't figure out their end game what they would do after the end game and and they suffered uh accurately and they bought the boat and the they went on the vacations and they realized they didn't like to be on the water anyway and the boat wouldn't start anyway because i hadn't brought it out of the marina for six months so it's not really a solution you have to have a compelling future beyond your business and figure that out first and then reverse engineer the buyability process well awesome well i think that's uh definitely a fun story to tell and in you know and a good journey as well some great advice well as we wrap up towards the end of the podcast i always have two questions that we hit on so we'll let's uh go ahead and dive on those now um so the first question i always ask is along your journey what was the worst business decision you ever made and what did you learn from it i think the first business decision was in in 2005 after i read the e-myth i got so excited i implemented e-myth in my business and then i got so excited about this whole concept of of systemizing business that i thought that i would start a second business doing the systemization so i started this business it i think the name was mechanized or the equivalent of it in hungary and i hired uh someone to run it and we you know put a lot of energy into creating this this template this program and and pitching it the at the same time it was not enough for me at the same time i also started a business brokerage operation because i was reading all these books about business brokerage and and i thought maybe there is uh you know there are a lot more companies smaller companies that can't afford investment banking maybe we can do a cookie cutter approach for them and that's going to be a high volume uh business and it's going to be very easy i thought easier to put the transactions together so i hired another person and we started doing that as well so suddenly i was running three businesses and the net effect was none of the new businesses took off because they were not quite the right idea neither of them and then my legacy business went down because i didn't pay attention i dropped the ball on it so essentially i lost two valuable employees one of them was an old friend that i had to let go it's very painful i had a high-flying employee who was one of the most promising ones who i appointed to run the brokerage and he got burnt out and he left so i lost him plus he started we started making loses in the losses in the investment banking business so it was a huge mess and it was just because i wasn't disciplined enough i thought just because one business is going well uh i kind of have the midas touch and wherever i get into it's gonna go as well and lost my focus and almost you know ran into trouble many managed to course correct but we lost time and attention and money and and good people as a result well i think but i think that you know that sometimes and i tend to even suffer with it a bit as well as i think a lot of entrepreneurs you have a lot of whatever appear at least and probably a lot of them are good ideas and things are exciting you catch a new thing you want to implement it you want to try some out start a new business and you know that can be great and lead to a lot of opportunities but if you get kind of you know the old saying over your skis or you get too far ahead of yourself and we get things to where you're too strapped on time you're not able to focus on the core of what you're doing and then it can actually you know have that adverse adverse effects as you is you touched on more entrepreneurs go bankrupt because more businesses go out of business because of indigestion rather than starvation so that's the indigestion suggestion that's fair so now now let's jump to the second question which is if you're talking to somebody that's just getting into a startup or small business would be the one piece of advice you give them um so i think there are two types of advice if this is a funded business so someone goes out and it's venture backed then obviously that's going to be different so my advice is going to be from the perspective of the entrepreneur who is bootstrapping their business and it is to crawl before you walk and vote before you run i think it's really important to uh to not grow too fast uh to you know to keep the keep this gradual pace uh because it's not just growing a business is about figuring out how you can sustain the business and every step of growth makes the stability of the business it reduces the stability of the business you have to grow into that larger business so that you are on top of it and you can then get to the next level and i think a big mistake is to grow try to grow too fast and and then you can run out of money you can run out of the ability to execute you you hire people who are not right right not right for your organization or for your seat so you get into all sorts of troubles um and you know jim collins has this concept of the 20 mile march and it talks about the story of uh 19 i think it was 1911 when or 1919 when the two explorer groups i think 1911 i think it was a 14. anyway there are two groups trying to get to the uh to the antarctics uh into the antarctica and one was uh scott who was a brit and there was a moons and a norwegian and the brit uh he basically uh when it was bright weather and good weather they would march 50 to 70 miles and when they had bad weather they basically stayed in their tent to wait for the bad weather to go away whereas amundsen he had this strategy of 20 mile mark so every day they would get out of that pant they marched 20 miles whether it was beautiful weather or terrible weather they would do that and they would stop and they would you know goof off do something else it was bad weather they would still make the 20 miles so that kept the team the kept the morale high and kept them progressing um and and they got there and back with food to spare while scott's team basically died they they reached the the antarctica they were second so they they didn't win the race and they they died on the way back 20 miles from the next food depot because they exhausted themselves i love that and i love that idea of you know basically you know don't exhaust yourself or you know if you are going at such a pace on the business and growing it or bringing people on or doing other things that you exhausted that can have a lot of that adverse so i think that that's that's a great advice well this is a quick reminder to people we do have the bonus question we'll talk just a little about intellectual property but uh for the nor or the normal part of the episode uh we'll go ahead and wrap it up and want to say thank you steve for coming on it's been a fun it's been a pleasure now for all of you that are listeners if you have your own journey to tell and you'd like to be a guest on the podcast feel free to go to inventiveguest.com apply to be on the show two more things is listener one make sure to click subscribe in your podcast players so you know when all of our awesome episodes come out and two leave us your reviews so new people know how to find it or the awesome episodes as well last but not least if you ever need help with your patents trademarks or anything else just feel free to go to strategymeeting.com and grab some time with us to chat and we're always here to help so now with that now that we've had your journey we always got to make the fun transition of where you had to switch switch gears our bed and talk a little bit about intellectual property so with that you know um i'll turn it over to you what is your top intellectual property question yeah so my question is uh whether it's possible how it's possible to trademark a common use word in the english language so specifically the time of my book i know that as far as i understand book titles cannot be trademarked but but words sometimes can be trademarked so for example the i mentioned the attraction the book the attraction word us word might manage to trademark protraction word even though it's not a product it's title of a book um there's other ways to use they use the traction verb but it's i'm not clear on how they use it or how they made it so anyway so long long question what are the ways of turning a common use english word into a trademark without having to necessarily have a product with the same name yeah so there's a few a few things to unpack so i'll try and hit on those i mean generally for a trademark a trademark has or whether it's a word whether it's a logo whether it's the name of a product or anything else it has to be tied to a goods or services that you're offering and so in other words you have to be selling something with that you know using the mark you have to be providing a service so you can you know whether it's a plumbing service car wash attorneys anything else you know whatever it is but it has to be tied with the goods and services because really what trademarks are intended to do is to associate a goods or services with uh with the the source be a source identifier so in other words i know when i see coca-cola that it's going to be sold by the company coca-cola and i know that with that i know who's selling it i know what the quality is i know where it's coming from and you know so that's identifying the source of who's buying it so when you get into trademarks that's really the first step you have to do and so the problem you get into is we talked a little bit about a book is if you knew the name of a book it doesn't necessarily identify who's selling the book right if i use the word and you know you have your book in the background buyable it's a great name and it's a great brand but no if people aren't going to look and think okay the name of that book indicates that here's a person that's selling it or here's a you know the source of the goods or services similar to you know now there's always an exception you know you can do as an example harry potter as a brand they built you know a series of books multiple books they build out a whole brand around the book such that now when people hear harry potter they think okay it's not just a name of a book but it's a whole name of a series i know what is going along with it i know there's previous books i know it's going to be sold by this and so you can build it around a book but it has to be almost more of a series otherwise generally it's hard just to do it as a name or a title of a book the other thing you can look at is you know if you take for instance stephen covey which did the seven habits of highly effective in you know people he built a whole franchise around that but was really out of not just a book but also you know he took what each of those habits were and he built seminars and webinars and trainings and certifications and all those things and so while it was kind of centered around the book initially it branched out to goods and services so now when you hear the seven habits of highly effective people you don't just think of the book but you think of all the things that come along that and all the marketing and the branding and everything that came with that so generally you're looking at a trademark it's you know generally it has to be identify the source of goods or services it has to be tied to something that's in commerce whether it's a good or a service and then the other thing when you look at a trademark as to whether or not it's a trademarkable term is it has to be something that's more than merely descriptive meaning if all you're doing is you know if as an example if you're going out and you wanted to open up a fruit stand and you're going to sell the or the the fruit apples and you named your fruit stand apple well you can't you wouldn't be able to trademark that because everybody describes the word uh the fruit apple as an apple and so people aren't going to think that that's a source of identification now if you go out and start a consumer electronics company with the word apple it's not going to be merely descriptive because people don't typically call a smartphone apples because it has nothing to do with the word apple so those are kind of a few things as you go along or the few basics of trademarks with the really the idea of it has to identify a source of goods and services that you're selling and then you have to do something that's not merely descriptive so with that that's going to we'll wrap it up for there and if you have any other questions on uh intellectual property patents trading marks or anything else whether you or any of the listeners feel free to go to strategymeeting.com we're always here here to chat and answer questions i'm always here to help and uh with that i wish the next leg of your journey even better than the last and thank you for coming on the podcast thanks devin it was a fun to chat with you thank you