Guest post by Rosalind Resnick
I was sitting where you are now. My partner and I had just started a little company called NetCreations. Back in 1995, we were just a two-person Web design firm operating out of my house in Hollywood, Florida. I was a journalist who had just written a book about doing business on the Internet. My partner, Ryan Scott, was a computer programmer and video game designer. I like to say that he was the guy who could make anything and I was the girl who could sell anything. We were a great team.
But quickly we realized that our clients needed more than just Web sites - they needed a way to get people to visit these sites and persuade them to shop and buy. So, after months of trial and error, we discovered a way to make that happen - by building a database of Internet users who had voluntarily "opted in," or given us permission to send them targeted email messages about products and services that they liked. And, best of all, we let them get off our lists at any time! Instead of spamming them with junk mail, we sent them mail that they really wanted - and our clients' response rates went through the roof!
But just because we had invented a great product didn't mean that we knew how to build a great company. We had every problem that you could imagine. Because we didn't know how to manage people, we had constant turnover. In fact, back in May 1998, all four of our employees quit the same day. And, because we didn't know much about accounting, our bookkeeper embezzled $22,000 from us - even though I was signing all the checks! There were tech problems, customer service problems, you name it!
But we had a hot product and, if you've got a hot product, the market will forgive you for just about anything. In the fall of 1998, the dot com market exploded. All of a sudden, there was Amazon and Buy.com and a dozen different online pet stores clamoring to rent our lists of targeted, permission-based email addresses. Our sales took off, and, pretty soon, the word got out - email marketing was the place to be. Before long, big guys like DoubleClick invaded our little marketplace and our biggest reseller raised $9 million in venture capital and became our biggest competitor overnight.
In early 1999, we had a choice - get big or go home. We were a tiny company - only about 20 employees at the time working out of our one-room office in SoHo. But we were proud and stubborn. And my partner and I were not about to let anybody come in and eat our lunch. So, instead of selling out to a competitor, we decided to fight back. We hired a small investment banking firm in DC - the big New York banks wouldn't touch us - and we took our show on the road. I went from never having raised a dime of outside money in my whole life to raising $43 million in three weeks. The day our stock started trading, our little company was worth $300 million. Three months later, at the height of the dot com craze, we were worth almost $1 billion.
Now, I wish that I could tell you that this was the happy ending to our story, but, of course, it wasn't. As all of you know, the capital markets began to pull out of the Internet business in April 2000, and, despite the fact that we were a real company with a real business model making real money, many of our customers were dot coms that depended on venture capital to survive. So, as our customers cut back their advertising, our sales began to slip and, by September 2000, it was clear that we were going to miss the earnings estimates that the analysts had set for us when the market was so hot the year before.
What happened next seems like a blur. When I announced that we were going to miss our numbers, our stock plunged by 50% in one day. To save our stock price, I put together a deal with DoubleClick, our arch-competitor, to acquire our company for $191 million stock for stock. But, a week later, DoubleClick announced that it was going to miss its numbers, too, and its stock price plunged, dragging down the value of our deal to about $50 million. As a result, some disgruntled shareholders hit us with a class action lawsuit, accusing me and my partner of self-dealing and all kinds of terrible things. Worst of all, DoubleClick was going to replace me as CEO.
But, then, just as it looked like things couldn't possibly get any worse, we had an amazing stroke of luck. Out of nowhere, an Italian publishing and marketing conglomerate called SEAT Pagine Gialle made an unsolicited offer to acquire us for all cash. Turns out that SEAT had bought a controlling interest in a French direct marketing company that had wanted to buy us the year before. So, on Feb. 15, 2001, we closed a deal with the European company for $111 million cash. My partner and I, who still owned about 75 percent of the company's stock, each walked away with roughly $40 million. I stayed on as CEO of NetCreations until last December.
So what's the moral of the story? If you want to be cynical, you could say that it's better to be lucky than good or that we just happened to be at the right place at the right time. But, in our case, I think it was more than that. The bottom line is that we were the market leader and we were making money, and, despite the market downturn, our company still had value. And that's why we were able to walk away with our heads held high and some serious money in our pocket. And, by the way, NetCreations is still alive and kicking at our original office at 379 West Broadway.
But I'm not here today to bore you with stories about the past. The dot coms are dead, and they aren't coming back. I'm here because I've started a new company, Axxess Business Centers, and our mission is to help entrepreneurs like you start your own businesses and, if you already have a business, to take your company to the next level. We offer one-on-one counseling, business plan writing, workshops, seminars, support groups, how-to books - basically, everything you need to get started and keep on going. To be honest, I only wish that Axxess Business Centers had been around to help me out when I was starting NetCreations seven years ago!
As an entrepreneur, I honestly don't believe that entrepreneurship can be taught. It takes talent, drive, persistence, and the willingness to make lots of mistakes and to learn from them. As I used to tell my staff at NetCreations, if you don't know where you're going, it's impossible to get lost! But, having said all that, there are a number of things that you can do to maximize your chances of success so that, hopefully, you can avoid all the mistakes that I made the first time around!
1. Don't assume that you can turn love into money. You may be a great cook but a terrible restaurateur! That's why you need a business plan to provide a roadmap of where you want to go!
2. If you can't come up with a great business idea of your own, buy a franchise. Most small businesses fail within the first five years - the odds are much better with a franchise that's been road-tested by somebody else!
3. Don't fall in love with your business. Decide on an exit strategy even before you begin! The worst mistake you can make is selling your company six months too late!
4. Plan for the worst case scenario. Everything that can go wrong with your business undoubtedly will. From time to time, your employees will quit so make sure that every process is documented and every employee is cross trained!
5. Prepare to work the 24/7 shift -- at least, until you start making money! You'll have plenty of time to sit on the beach once you've made your millions!
6. Keep your own books -- or else your bookkeeper will rob you blind! Now, I swear by Quickbooks, and I reconcile my bank statements religiously.
7. Answer your own phone and email. That's the best way to find out what your customers really think of you!
8. Hand out business cards like candy. It's the cheapest form of advertising there is!
9. If you need to raise money to help your business grow, get it from a bank, not a venture capital firm. VCs want to sit on your board and take a piece of your equity. All your banker wants is a tax return showing profits and prompt repayment of your loan.
10. Don't hire a professional manager to run your business --until you've figured out how it run it first!