These are passages from the chapter that grab me, and notes.
“LUCK IS THE RESIDUE OF DESIGN”
“Whenever you see a successful business, someone once made a courageous decision.” – Peter Drucker
“Have you ever had a brilliant idea – one that blows you away – only to have the people who can make it a reality tell you it’s not worth pursuing?”
Not too often; because most of the time I’ve already started the idea quietly without consulting others lol! This is a good thing but also a bad thing – it helps to think things through, take a step back, and consult with godly people and people who have paved a similar way.
“Starbucks was a retailer – not a restaurant or a bar, they [his bosses, the founders] argued. Serving espresso drinks would put them in the beverage business, a move they feared would dilute the integrity of what they envisioned the mission of a coffee store to be. They also pointed to Strabucks’ success. The company was small, closely held, private, and profitable every year. Why rock the boat?”
I can’t remember where I read this, but when there is a similar explanation to: “But we’re making so much money” it’s a sign that complacency is taking root. According to a friend of Greg McKeown – author of “Essentialism” – “success traps are harder to get out of than failure traps.”
“Jerry was shocked [from unhappy employees since the Peet’s acquisition]. The company he had founded, the company he loved, no longer trusted him. In the months that followed, his heart seemed to go out of it. His hair grew grayer. The company lost its espirit de corps.
The incident taught me an important lesson: There is no more precious commodity than the relationship of trust and confidence a company has with its employees. If people believe management is not fairly sharing the rewards, they will feel alienated. Once they start distrusting management, the company’s future is compromised.
Another important thing I learned during that difficult time was that taking on debt is not the best way to fund a company. Many entrepreneurs prefer borrowing money from banks because doing so allows them to keep control in their own hands. They fear that raising equity by selling shares will mean loss of personal control over the operation. I believe that the best way for an entrepreneur to maintain control is by performing well and pleasing shareholders, even if his or her stake is below 50 percent. That risk is far preferable to the danger of heavy debt, which can limit the possibilities for future growth and innovation.”
The principle that “equity is always more expensive than debt” has been touted quite often; and while that is true that it’s a larger cost and investment in some aspects – being choked to death in debt will also kill a company, or won’t even let it fly to begin with.
I believe it’s a case-by-case situation, and I need to be very wary of these cliches and sayings, and test it against a company’s unique DNA.
In my personal case, I’ve experienced both. When my partners and I bought the rights to develop The Halal Guys, debt wasn’t even an option for us (thank goodness!). We were a startup with limited restaurant experience as a team, and no banks nor investment firms were willing to look at us. So we had no choice but to raise money; and even though we had to take a smaller percentage – and to this day, we still haven’t taken a distribution and are focused on investor repayment and reinvestment – we’ve grown to nine stores (soon to be eleven); have grown to an $18 million a year company; we’ve built a staff of incredible people who believe what we believe and execute at a high level daily; we’ve built great relationships with vendors and investors who trust us and would jump over the moon for us – which lead to other opportunities; and our company is now valuable to banks and private equity forms.
“But because I saw what happens when trust breaks down between management and employees, I understood how vitally important it is to maintain it. And because I saw the harmful effects of debt, I later made the right choice to raise equity instead. These two approaches became critical factors in the future success of Starbucks.”
Something my old boss Dan Rowe at Fransmart said that came to mind when reading this: “Would you rather own 100% of 1-2 stores? Or 10% of 10,000 stores?” You can modify the percentages – but you get the idea.
“…mid-level managers and even entry-level employees become impassioned evangelists for risky, bold ideas. It’s important that managers listen to those ideas and be willing to test them and implement them – even if the CEO is skeptical.”
“To me, espresso was the heart and soul of the coffee experience. The point of a coffee store was not just to teach customers about fine coffee but to show them how to enjoy it.”
Quality isn’t enough – there will always be a competitor who can put that at risk; if you pair that with education, care, convenience, service, and other differentiating factors – you can iron-clad customer loyalty and insure your company’s growth.
“This is my moment, I thought. If I don’t seize the opportunity, if I don’t step out of my comfort zone and risk it all, if I let too much time tick on, my moment will pass. I knew that if I didn’t take advantage of this opportunity, I would replay it in my mind for my whole life, wondering: What if? Why didn’t I? This was my shot. Even if it didn’t work out, I still had to try it.”
I crave for this feeling. I want the feeling of passion that’s so impossible to contain; that consumes me day and night; that’s bigger than my fears.
“My close friend Kenny G later told me about a similar experience in his life. In the 1980s he was in an established band, with a secure position and income. (This was long before he became famous as a jazz saxophonist.) But he realized that he would have to leave the band if he was ever to find his own sound. Musically speaking, he went out and did exactly that. If he hadn’t, today he’d just be a saxophonist player in some little-known band.”
I think of two important moments in my life: My leaving college with only one semester left, to open a restaurant with absolutely no experience; and my leaving a decade-long career at Fransmart – a company whom I loved and was thriving at – in order to create margin to consult and do more projects that are true to me. Both have changed my life.
“Part of what constitutes success is timing and chance. But most of us have to create our own opportunities and be prepared to jump when we see a big one others can’t see.
It’s one thing to dream, but when the moment is right, you’ve got to be willing to leave what’s familiar and go out to find your own sound. That’s what I did in 1985. If I hadn’t, Starbucks wouldn’t be what it is today.”