Why Culture is More Important Than Capital

Attitude is the most valuable currency in today’s business environment and it is a key indicator of future success. Never before in history has innovation been so celebrated, encouraged, and ubiquitous. Leaders are everywhere.

A business is the orchestration of people serving a common goal. No surprise there. Establishing the success ecosystem – those who will advise, direct, recommend, and implement your ideas – means carefully choosing people who have experience, integrity, loyalty, and honesty. The first role of a chief executive officer or founder is to establish a corporate culture and communicate core values. More importantly, live by them and practice them. The practice is challenging and we jump on and off the horse depending on family, friends and finances.

In my perspective, too much cash is actually detrimental to the business when it comes to funding vs. revenues. There are enough examples of venture-backed dreams and acquisitions gone wrong. Why? Because capital destroys culture.

Angel funding and venture capital may be the motivation of my fellow entrepreneurs, but many of my well-funded colleagues struggle with the ideation of a product, the development of culture, and the financial integrity of the daily business. Plus an additional layer of mania to satisfy investors. No thank you.

I have two primary passions: operations and recruiting. I don’t have a perfect track record of either, product ideas or people. However, one of my hard-won secrets is that I protect my people, my business, and my values. I try to live with transparency and unfiltered honesty, mixed with humor, metaphors, and associations to ease any sting. Doesn’t always work as I intend.

I typically interview potential employees before introducing them to anyone within my company. This is an uncommon approach for many CEOs and may not seem scalable. However, this behavior allows me to carefully select the type of personalities that will amplify the business and enhance our ability to execute as a team. Chemistry creates culture.

Proudly, I’ve made six pivots in as many years. I’ve retained almost the entire original founding team (when this was written). We have never missed payroll, we have no debt and loyal customers. It has not been perfect and we have struggled, but we stand together and find ways to make things work. People are what make me get up earlier and stay later.

Here is what I have learned and what I do to maintain our core values:

Reciprocity

You must make the decision to regularly and publicly show gratitude to every person you encounter. This does not mean purchasing expensive gifts or dinners – it simply means showing genuine thanks. Most people are good-natured and generous until you are not generous and thankful in return. Choose random acts of senseless kindness.

The phrase my staff uses to elevate our gratitude to one other is “I appreciate you”. It’s the protocol now because I made reciprocity a part of our work ethic and company mantra. The more you give, the more you want to give.

Raising capital is a distraction, going public is a prison sentence

While it may be necessary for holistic ideas, preparing presentations that describe fantastical liquidity events for investors is a poor use of our mental capital and it attracts the “wrong people”.

Growing a business is about scars, not trophies. You need fighters with charisma, integrity, humility, attention to detail and most important of all, faith. Focus on providing value in what you sell and being genuinely interested in the success of others despite your own.

If you blindly follow the money, you may not like where your culture ends up. Be hungry, not full.

Products are not exceptional, people are

There are dozens – if not hundreds – of people behind every idea. Execution of an idea by your carefully selected team is the magic. Products with true business value are governed by the culture you created; magic creates unstoppable cultures. People first. Choose them well.

Tony Hsieh (RIP), Jeff Bezos, Elon Musk, Larry Page, Mark Benioff, Tim, Howard Schultz – true leadership and personal transformation. They have all gone from zero income to startup, to multi-million/billion-dollar organizations.

Entrepreneurship means accepting anxiety, competition, and despair. Setbacks occur daily and stress accumulates. The psychological price of entrepreneurship is already too high. Playing it safe, taking calculated risks while growing revenue organically, can result in happier and more rewarding business owners. Delivering products or services that generate profit and income without liability and debt is a true paradise.

This is the focus for my life and career, zero to profit. Or not.

Culture creates a business and happiness is not always profitable.

We are all a work in progress. Entrepreneurship is not science, it is imperfect and most importantly, it is rarely, exactly repeatable. I’ve never met an entrepreneur that followed their original business plan from beginning to end. Budgets change, expectations are reset and companies often pivot into new markets based on the economy, technological shifts, or simply the need to survive.

Culture is currency and attitude makes it profitable. Teach people to reciprocate, focus on and align with core company values, follow their heart and their gut instinct, and encourage them to be exceptional. The ultimate goal is to have a business grow with and without you.

Cultures survive even when capital does not.

Valuation of Your Business

A sustainable business also focuses on valuation which is the amount your company will potentially sell for over time. Your valuation is a formula that takes into account your assets, your profitability and your cash flow and that equation results in what your company might be worth in a one, three or five year period to another company.

There are several different reasons why you might want to know the value of your business, including selling it, merging with another business, tax or loan purposes, for estate planning, allocating the purchase price among business assets, establishing an estimate of the value of partners’ ownership interest for buy-sell agreements and more. Whatever the reason, it can be a challenging process to come up with a valid number.

Valuations might also be used to calculate stock options (aka, ‘funny money’). These are not publicly traded stocks, but rather, a metric for developing and managing ownership in the business. Some people want possession of more or less shares, which doesn’t mean much at the early stages of your business; stock options in this case are simply a metric for dividing business based on the principals involved. The only division of stock options should be to people who have invested money in the company (you do not want to give away the company at all, especially to outsiders). There are a lot of ways to do shares and ownership and contribute back, like sharing the success of your business into your employee base. However, early on, giving away shares and ownership in your business isn’t one that’s recommended.

Another developmental metric that will be used in the valuation process is insurance policies. All principals of your business should have what’s known as a Keyman Policy. This is good both for the company and for the families of the principals if someone is unexpectedly killed as a measure of fiscal protection.

There are various types of insurance policies that will be accounted for during the valuation process, such as a general liability policy, accidental death and dismemberment, life insurance on all principals and others. Ideally, your business will pay the premiums on these types of insurances because should they ever be exercised, it is the company that will receive the benefits.

A valuation requires a complete analysis of historical operation of the business itself as well as a study of the projected future for the industry, the economy and the competitive advantage of the company.

To do a thorough valuation is more than adding up numbers from different reports because it takes into consideration intangible factors that are not easily quantifiable. There are more than a dozen different methods of valuation, and the mastery of the professional actually doing the valuation has a tremendous influence on the outcome. In fact, to insure integrity in the number, many valuation professionals use more than one method and compute a weighted average to come up with a final number. The main thing to know is that it’s important to choose both a professional and a method that knows and applies to your industry to get a viable value. And you have to understand the method used so you can defend the end result.

In valuating your business, assets will be considered to see what you have that supports the value of your company. Assets can be a lot of different things including equipment, furniture, electronics, cash in the bank, the customers you have signed up for your program, consistent purchasers or the email list to which you regularly market and sell your company. An asset can also be the copyrights, trademarks and patents that you and/or your company holds; when you exercise to sell your business, the valuation professionals will look at all three of these as adding value to your business (and the more you have, the better).

Regardless of the asset, every asset you have depreciates on an annual basis. Your goal is to refill what depreciates and evaporates in your business to balance this natural shrinkage. This can occur through an existing customer with new opportunities and /or by using their referral network; other times you may need to seek a new customer to replenish that gap.

Historically, studies have shown time and time again that it’s easier to gain revenue from an existing customer than to create from seeking a new customer where you have a proven relationship. Certainly, it’s possible for you to have major wins but primarily ‘organic’ growth through referral strategies will produce more efficiently than cold calling strategies (although this depends on the type of company that you have and your marketing strategy). The big takeaway is that it is vital to create a foundation of strength such that from an external point of view your business would be seen as asset-strong.

Companies and venture capital firms buy or invest in people, patients, predictable revenue and potential, not products nor your pride.

You can have a great product that’s generating income but as soon the due diligence process evaluates the people and the values of your company, the deal could be lost. Toxic cultures taint many acquisitions and funding efforts. Respect and commitment to your employees comes first, your customers are next, everything else, is an extension of those those values that your business represents.

Perspective

“He who cannot change the very fabric of his thought will never be able to change reality.”

~ Anwar Sadat, Former President of Egypt

The Loneliness of the Long Distance Runner

You cannot build a business alone. A business is the orchestration of people serving a common goal. Establishing the success ecosystem of people around your business – those who will advise, direct, recommend and implement your ideas – means carefully choosing people who have experience, integrity, loyalty and honesty. It is not one person but a community of trust principals who may or may not have direct influence into your business. And, of course, you participate equally in this ecosystem, which is reciprocity in action.

The most significant part your people ecosystem at this stage of building your company are business mentors. You will have more than one mentor but start with a financial mentor who will talk straight and provide you examples. This mentor is NOT a bookkeeper, but an experienced Certified Public Accountant (CPA).

CPAs have examples of both very good and very bad companies and they focus on the numbers (the language of business). This mentor can show you exactly where the turning points and trends of business are because they have dissected the lifeblood (tax returns) of hundreds of businesses. They know the secrets, the shortcuts, the mistakes and the key performance indicators that you must know and have in place to be successful.

Accountants are not advisors – they are historians. Let’s repeat that for impact – do not listen or take advice from an accountant on the strategic direction of your company. DO use an accountant for proper examples as to how to maximize inflow of money and reduce expenses. (We love accountants and do not recommend sending a cat into a dog fight by asking them for visionary direction!)

Key Point: The language of business is accounting. Do not let ideas or fantasy determine how you will build your business. Everything you do will take longer, cost more and require more people than you expect at the outset. In the end, it is the numbers that require first consideration. This is how success in business is measured. And, it may seem counter-intuitive, but the more tax you pay, the more successful you are, so get used to paying taxes. Even more, actually enjoy paying taxes as a celebration of your success.

Authentic Leadership is a Daily Practice

Think of yourself as someone with a unique perspective but not unique gifts as many were born before you with the same qualities and similar background. Instead, the reason that people remember a particular individual is based on their personal and authentic power. This type of presence cannot be bought, adorned or assumed – it is earned through consistency, integrity and honesty. You are only as powerful and as humble as your mind creates and as the world perceives.

Authentic power is also not in any hurry – just as you cannot push a river, you cannot rush true power. If you find yourself surrounded by people who are always frantic and insist on your immediate decision, that is a red flag. Applying pressure is a sign of weakness and potentially signals that you are being manipulated.

In fact, the speed at which people move is a direct reflection of their life, lifestyle and personal integrity. Slow and steady may not win the race, but it does reveal who is certain about their power position. And it also makes the race last a very long time which, in business, is really what matters – sustainable revenue and profit for an extended period of time.

Interestingly enough, authentic power can only be experienced in the now because yesterday is a memory and tomorrow is imagination. The present moment is where power lives. If you tell yourself stories and make decisions from your past, rest on yesterday’s achievements, or make decisions based on assumption, projection or judgment, you are living from what was rather than what is today. Functionally, that is the equivalent of driving your car forward while looking over your shoulder.

Throughout the process of creating your business, you will discover that your life is filled with first-time meetings. Abandon all initial judgment as you will gain insight into people only by exposure and continued experience. Pay attention to the impression you make on others as that is your power point in creating a positive connection. Being your best is always a good thing; being transparent about your vision and skills is better.

Key Point: Avoid talking about yourself and your background as a new general habit. Ask questions, be here, be now and be attentive to what’s actually happening in every situation. This means no cell phones or emails while you maintain eye contact and active listening. It can be difficult to develop this skill and to practice it consistently but it is one that will serve you well.

Authenticity As Irrefutable Power

The place to begin thinking about your your business or company is actually from within – because your business will eventually weave who you are through its operations, systems and corporate culture.

To that end, your corporate culture needs clear guidelines from which to make decisions and take action. You must know and define your core operating values for yourself as you build the company, cultivate relationships and set the foundation for your business.

 

Your core values do not come from your ego, which is a conglomeration of conscious and unconscious values and beliefs that represent your assumptions about how life is supposed to be… rather, your core values determine the choices you make, the actions you take and the life and business you create.

 

An interesting point of information about values is that we often live by the values we inherited from our parents, authority figures and childhood socialization. The irony is that we who have grown up in a culture where freedom is prized above all else are often operating from unconscious or assumed values from someone else. Very few people consciously choose their values, much less build a living for themselves and others based on them.

 

To know your values, look around you right now – what do you see in the choices you’ve made and the lifestyle you now live? More importantly, is that what you want for your business or is this moment an invitation to go beyond where you’ve been to create something new?

Run To, Not From

As you are grow your business, make sure that you are going toward something instead of running away from something. All too often people see the development of a business as a way out of a job or financial pressure; the reality of business is that it’s much less forgiving than your current situation. If you want to look good in business but not go to the trouble of actually being good in business, consider another career path. Entrepreneuring is an investment of everything you have to give to it – and it’s not about what it looks like on the surface.

Thinking like an entrepreneur pulls you forward and makes you feel good; thinking you will be escaping something and looking over your shoulder at the proverbial boogeyman will pollute your thinking.

Perhaps more significant is that you must realize that you cannot escape yourself. You are creating your experience and everything counts – everything. Authentic power demands that you take responsibility for what you create on every level as an expression of your personal integrity. Who you are, what you stand for and how you create must be in congruence with positive strength; it becomes your beacon to call in resources, relationships and opportunities that match that frequency. If you are growing a business based on fear or a negative state, you will be transmitting a ‘tainted’ signal and, ultimately, will have a broken business.

The entrepreneurs who have ‘made it’ each had their mistakes along the way; they just don’t talk about it because they are focused on their present reality. They lost money, had big snafu’s, disasters, hardships and some have even cheated to try to get ahead.

However, they consistently share one thing in common – they were persistent regardless of failure. Whether by genetics or conditioning, people are predisposed to be optimists or pessimists. As an entrepreneur, you must know how you are wired so that you can consciously choose your strategies to remain persistent. This is actually one of the real incentives to become an entrepreneur, because the light of authentic power will clearly show you what’s out of integrity.

Being a Good Communicator

One of the most essential skills required for business success is to be a high communicator. Essentially, communication means transmitting a message, the other person receiving it and confirming their understanding back to you and, likewise, understanding the messages being transmitted from that other person to you.

Communication is the exchange of our ideas, our path to understanding other people’s perspectives and our ability to solve problems. The act of communicating happens on three levels: verbal (spoken words), non-verbal (body language) and paraverbal (intonation, cadence, volume and pace of speech). Since it’s actually impossible for you to NOT communicate (at the very least through body language), it’s a good idea to develop your communication skills in order to say what you mean.

The best business people are strong communicators, demonstrating emotional intelligence as well. Emotional intelligence is the ability to perceive both your own feelings and emotions as well as those of the people around you and using that information to inform your thinking and taking action. This is a huge field of study that is impossible to convey here; the point is that you cultivate your mastery of your ability to communicate and connect with others as a personal skill for business success. By relating well with others, your success ecosystem can flourish.

The Core Trinity of Decision Making

In Michael Gerber’s book, The E-Myth, he describes the Entrepreneur, Manager and Technician. The Entrepreneur, Manager, and Technician will all make decisions using different input but the entrepreneur tends to take more risks and makes decisions more quickly. Bijoy Goswami’s book, The Human Fabric, describes a less clinical definition of the same trinity using the Relator, Maven and Evangelist. Both of these authors have outlined a very important concept – the trinity.

The point here is that there are three individual personas that make up a decision-making core team. Just as a stool with three legs, your core power trinity becomes a stable foundation for the growth of your business. You cannot and should not build a business without all three divergent and complimentary personalities.

You can explore the persona definitions from these brilliant authors on your own but it comes down to creating a system of decision-making based on the vision, potential and reality of the business. Your business is a promise and these three individuals ensure that promises are kept regardless of human factors, weather and acts of God. The very simple system of having these people in place is that you ask questions about the business in unique ways. Which of these statements describes you best?

  1. I will share and promote the promises we can make to strangers and friends and be a constant provider of ideas and opportunities.
  2. I will determine if the promises are capable of being fulfilled with our resources and at what price.
  3. I will manage the promises the business makes until they are completed and the customer is satisfied.

Knowing you cannot be more than one, which one are you? When making decisions, are you knowledge-driven, relationship-driven, or action-driven? Decisions are where the business gets real so you must have a system by which you can make them solid and well-rounded and your core power trinity achieves that.

Developing a Core Team and Making Decisions

To develop a method of business decision-making, look to your core team. Rarely can a successful business be built with only one person; two people create a situation of polarity. There are “sides” to decision-making when two individuals unite to find a solution.  If you haven’t yet found your core team of three, consider adopting what we refer to as the Divine Decision.

For example, let’s say that you have a critical decision to make about a business opportunity. You narrow your choices down to two – you proceed or you reject the proposal. If you and any of your partners, principles or core decision makers cannot come to a united decision, then you all agree to leave the judgment to the Divine Decision. You find the nearest coin, choose a side for each position or decision point, then flip once. Decision made.

Now that may not sound reasonable or easy. It is neither. However, when you adopt a method of chance and divination for making decisions, your mind becomes more rational. For dispute resolution, this is a practice that goes back thousands of years. Sigmund Freud explains this more eloquently: “I did not say you should follow blindly what the coin tells you. What I want you to do is to note what the coin indicates. Then look into your own reactions. Ask yourself: Am I pleased? Am I disappointed? That will help you to recognize how you really feel about the matter, deep down inside. With that as a basis, you’ll then be ready to make up your mind and come to the right decision.

Ideally, a third person can break ties or be a mentor who understands the dichotomies of doing business as well as the personalities actually involved. Each person within the core team will have a perspective and needs which must be addressed. So, while the decision process occurs in twos, three people are required to effectively make decisions that need a complete perspective or holistic view of the impact and potential outcomes. All parties must agree to decisions; the unity created from decision-making matters. And once a decision is made, universally detach and embrace.

Note: Your team can be made of up more than three. 😉