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Intro: Welcome to the Smart Energized Entrepreneurs Podcast with JP Stonestreet, episode #9.
JP: In this episode of the Smart Energized Entrepreneurs Podcast, you are going to meet Rick Day. Rick lives in the beautiful sunny San Diego, California and he is quite the sailboat aficionado. He owns a sailboat company now, but that is not all his entrepreneurial journey has led him to do. He has sold two businesses, one of that was a sizeable telecom company and in this episode you are going to hear Rick talk about his experiences, his entrepreneurial journey and how he came to sell two companies. So, without further ado, let’s welcome Rick Day.
Thank you Rick for joining me on this episode of the Smart Energized Entrepreneurs Podcast, how are you doing?
Rick: I am well, I am well. Thanks for having me JP.
JP: You bet. I am excited to hear more about your story. We met at the New Media Expo and I sat down next to you at a lunch table and I think you were sitting there; there were few other people at the table. Nobody was talking and I quickly fixed that because I don’t like to sit at a table and not talk. So, you and I struck out the conversation and we got some of the other people talking and your story is really fascinating, you have been in business a long time, you own a successful business, you have own several I think, and so let’s talk about your story. Tell us about yourself and who you are?
Rick: Wow, okay great. It was a great conference and I am glad that we got that conversation going; we did that quite a bit. The short story is I got out of the Navy in San Diego in about 1985, so that kind of gives you an idea how old I am and I just decided – I looked around at San Diego and I went “Wow! This is a great place to stay, I am just going to live here and make my way” and so I went back to college, rented a room for my grandmother and went back to San Diego State University to finish my degree and I was working for a small company and just doing kind of redundant task, it was an assembly position, part-time, just working my way through college and one of my buddies told me that he had his own business and I was kind of intrigued by that and I said “What do you?” and he said “Well, I have an auto detailing business” and I didn’t know what that was, so I had to ask him and essentially it was just washing cars and he had set up a system for himself where he would go and go to people’s businesses, offices, their homes on the weekends, and he would wash their cars in their driveway, clean them, do a great job and he called it Automotive Cosmetic Maintenance, which is really fancy, but he taught me how to do it and I said “Okay gosh, I can do this” and that was probably the scariest moment in my business life was to go, “I am not going to work for somebody else, I am going to strike out on my own, I am going to start this car washing business and hey if nobody wants me to wash theirs cars then I can always go get another job.” So, that was the first one. I ended up selling that business to another student about three years later and it wasn’t a lot of money, but it kind of awakened that awareness in me that you can actually create a business, document it, put systems in place and then somebody else will come along and buy that, so that became kind of a cool thing, that was a milestone for sure.
JP: It’s great.
Rick: Yes, it was cool. So, then after that I started selling in the telecommunication space and in fact one of my auto detailing customers actually hired me and thought “Hey here is a bright kid washing cars, let’s see if we can put him to work.” So, I started selling computer systems and phone systems on the secondary market, might worked for a couple of other guys, but it was always straight commission. So, no salary or anything like that. You basically got paid a percentage of what you were able to sell and did that for about three years and one company went out of business and then another one I thought was kind of poorly managed and I thought “I bet I could compete in this business” and so that was in 1992 I struck out on my own and started my company which was called Daycom Systems at that time and I just rented a small office in the back of a landscaping firm because I couldn’t afford very much and it was just me, I was the shipping department, the receiving department, the accounting department and I was everything and so then I grew slowly until I could no longer keep up and had a lady, I hired a lady to come in and do the books for me couple of days a week and then I hired a kid to come in and pack and ship boxes and receive them and then I hired another sales guy and it grew and grew over 17 years and I built it into a 25 million dollar telecom business. We became an authorized dealer for Avaya, Large Business Phone Systems and we ended up with great customers across the country like Intel and Mutual of Omaha and Geico and we even managed Walmart’s corporate headquarters phone systems for them with six people on the ground there. In fact to my knowledge, those guys are still there. That was a great business, I sold that in 2009 right after the financial crisis and did make enough to retire off of selling that business completely, but it was a great exit and certainly don’t have to work for 5 or 10 years, so that’s kind of a nice feeling.
JP: Yes, that is nice. You started that business in an office in the back of a landscape company.
Rick: Yes, I could not even find an office that was small enough for me, so I went knocking on doors.
JP: Wow, that’s a great success story. I love that because you started so small. In my business, I had a business partner, we each started out of our home offices, which were really just bedrooms converted into offices, so that’s how we started our business and eventually we had about 15 employees by the time at the height of our business, we had an office and we had some remote workers, but it’s so inspiring for especially early entrepreneurs to know that you can start small, you don’t have to start in a fancy office or anything, you just start however you can start, whatever it takes, however you can afford to do it, that’s how you do it.
Rick: I completely agree. I mean the only reason I went out and got an office really was I actually would have preferred to work from my home, but I couldn’t get enough telephone lines into my condo because I knew that I needed three or four telephone lines because that was in the day of fax machines, you had to have one dedicated to your fax and I just couldn’t get enough phone lines and so I was looking for a cheap small space that was about the size of a bedroom and I found the landscaping firm. I said, “Can I rent that backroom from you?” and they said, “Sure whatever.” So, it was funny.
JP: That’s fantastic that the reason why you had to get an office is because of phone lines. Today, we just take that for granted. Things are so much easier today.
Rick: I made earlier reference to my age JP. So, you can imagine some of the technology that I have seen and I was one of the first guys in my office to have a computer. We were selling fax machines and I thought “Wow, I don’t know if this will ever take off” and then a year later we were wondering how we ever did business without them and we saw FedEx come into play, we saw UPS, e-mail and that. So, it has been an amazing technological journey to observe, I am sure you are well aware.
JP: Yes, when I was a kid, we lived in the country and we had a party line, we had to share our phone line with three houses. It was three houses for one phone line. So, I like to tell that story because then I went on to start a successful web startup going from that. So, I totally understand that the issues with the phone systems the way they used to be, I am old enough to remember that.
Rick: Yes, for sure. I think the main message for people is that no matter what obstacles are thrown at you, you got to figure out another way when you are really dedicated to your purpose and you have really decided you are going to make this happen. You can’t let this little stuff; it seems like big stuff at that time, but figure out a way around it.
JP: Yes, you have to and we just take it for granted now and things are so much easier. The barrier to entry for starting a new business now is a fraction of what it was when you started that business.
Rick: Yes, I agree with you. I think what we have from the communications and marketing standpoint and social media, it’s there are so much information out there available and so much technology that’s available for free or near that that it’s really, really nice. Of course then your challenges become differentiation and you got to have a really great product and how do you stand out and tell a great story.
JP: Yes, you had those problems before, although I guess the playing field is a little bit more crowded now because the barrier to entry is so much lower. There are similar problems, but different.
Rick: I think that’s always going to be the case and I think you just have to be willing to learn and embrace it; to me that’s one of the reasons I went to New Media Expo, it was like drinking water from a fire hose. I really wanted to go there and learn about social media and learn what techniques are working for people and what aren’t and to learn about podcasting and how to put YouTube videos up and how to market yourself and so that was a big learning curve, but I really like that challenge.
JP: It is, it’s fun. I am pretty new to podcasting as well and that’s one of the main reasons I decided to go to New Media Expo was to learn just like that and I felt the same way, I felt like I was drinking from a fire hose most of that weekend.
Rick: Yes, I know for sure. So, I think we talked a little bit about the current business that I am involved.
JP: Yes, let’s talk about that next, your business that you are doing now.
Rick: Sure, yes. So this was kind of fun because right before I sold my telecom business and when I sold we were, like I said, about 25 million in revenue, I think we had 55 people in three states, so it was pretty well-developed enterprise and I bought a new sailboat, a new 40-feet Beneteau sailboat. I ended up becoming friends with a guy who sold it to me. It turned out that we knew each other from the Yacht Club and we were sort of the involved dads that were in the pool with the kids. You go to the Yacht Club, there are a lot of dads sitting around drinking beer and texting or reading the newspaper. They tell the kids to go off and play, but my business partner, Barrett and I, we were the dads in the pool throwing the kids around and playing and so, we had a lot of similar values and became friends over a period of couple of years and put the boat together and then I raised it and campaigned it and right after I sold my business in 2009, it was a pretty hard hit financial crisis that we had here and extended – I think it started here and went global, but if you can imagine the sailboat market and luxury goods really came to a dead stop. So, his company went out of business, the company that he was working for went out of business in June of 2009 and I happened to be in Mexico at a wedding and I get this phone call from Barrett and he goes “Gosh, Rick, I hate to bother you on a Saturday, but my company just went out of business” and I thought “Gosh, I am really sorry to hear that” and we were friends, so I wanted to hear him out and then I said “Barrett, what can I do to help you? Do you need references? Do you need anything I can do to help you with your résumé? What is your next plan?” He says, “Well that’s why I am calling you. I know that you just sold your other company and how would you feel about being my business partner financing the startup of my company and get an ownership position” and I said “Gosh, I am really not sure that it is the greatest time to get into the sailboat business Barrett, you know you guys just went out of business” and I said “Tell you what when I come back, we will sit down and we will talk about it” and so we sat down and we talked when I got back and I said “You know Barrett, we have to buy some boats that were leftover in inventory” and I said “Barrett, can you sell these boats?” and he goes “Yeah, I really can.” He goes “They are great boats” and of course I am a believer because I own one of them. So, Barrett and I put together a bare bones business plan, kept our expenses minimal and I think I had forecast that we would lose 80,000 bucks in the first four months and he ended up selling one new boat each month September, October, November, December of 2009 and at the end of the year, at the end of those four months, I tallied up all the numbers and I said “Barrett we just made 350 bucks,” so while it doesn’t sound like a lot of money, if you are looking at the negative a d, you go to 353, you are 350 bucks, that’s pretty good. So, I said “Let’s go blow it all on an expensive dinner and have some fun.” It was a great time and we started, our values were similar, he trusted my business advice, he is a fantastic sales and marketing guy and energetic and we have a great friendship and so here we are coming up on almost it will be five years in September and the company is doing well. We just opened a second office in Newport Beach, we are up to may be 10 people and I think we will probably do 10 million in sales this year.
JP: Wow, congratulations, that’s fantastic, and you went against probably everybody’s advice at that time by starting this business. When I started my dot com or when I started my first kind of successful dot com, it was right after 911 and everybody said I was nuts, get a job.
Rick: Oh yes, that’s right. I think it’s a well-known fact in the entrepreneurial world JP that if you have an idea and you want to go and pursue it, a lot of people and sometimes those people that are closest to you are really going to be kind of negative because they want you – number one, they may not be satisfied with what they are doing and they wish they had the courage to do what you are doing, like you do. Number two, I think they look at that and they really want the best for you, so they want you to be safe and secure and happy and they could be uncomfortable with you going out and taking those risks.
JP: Yes, that’s why I tell a lot of people that they are just trying to protect you and they are doing it the only way they know how, which is trying to discourage you from doing something they see as extremely risky, but if you have that entrepreneurial spirit, there is nothing anybody can say that’s going to change your mind and the truth is you might fail, may not everybody succeeds their first time or even their first few times, I failed several times, but if you want it badly enough, you will figure out how to make it success.
Rick: I couldn’t agree more, it’s just another obstacle, I remember when I was – I had been through a divorce and I was dating a girl and she wouldn’t even talk to me about the boat business. I told her what I was thinking about doing and she goes “You are absolutely crazy, that’s the dumbest thing I have ever heard” and she wouldn’t even talk about it and I actually through my diligence process, I went and I talked to a maritime attorney that I know and he just looked at me and he said “Do you realize what’s going on in the boat business right now?” and he just shook his head and he said “You are either crazy or you are going to be incredibly lucky” and I went “Well, I don’t know, I guess we will find out in a year,” but I had to take the chance, I like the boat, I had one, we live in a great city for that, you know the San Diego area is great for sailing and I think Barrett is one of the best guys in the business, he is just an awesome guy, so I went “Okay, good people, good product, good location, what could go wrong?” Well a lot really, but it ended up working out okay.
JP: That’s great, did you have any experience. You are a sailor, right? You have your own boat. How long have you been doing that?
Rick: Since I was about three. My earliest memories of sailing were on the East Coast in the Chesapeake Bay in Maryland and my dad had a little 16-feet boat and I just remember going on what I thought were these adventures which were really kind of just a trip into the next cove, but for some reason the sailing bug bit me and I sailed through high school, sailed it Florida State University, sailed it while I was in the Navy, took a break for a while and then got back into it in the mid 90s and so, it doesn’t seem like so long ago for me, but that’s you realize it’s 20 years ago. So, I have been racing and sailing for about 20 years, it’s kind of my main hobby.
JP: So, that’s great, you did something that you know and love, you got into a business that you knew something about and that you love doing.
Rick: Yes for sure. Like I said, Barrett is really good at the sales and marketing piece and I am happy to let him take the lead on this and he is the President, he runs the show and he has built a fantastic team of people which we both know is really, really important and I just kind of sit in the background and he and I talk daily. I go into the office on Wednesday, but quite often that office I find is so hectic with customers and vendors coming through and the banter and the fun stuff going on in the office, I have a hard time getting anything done, so I tend to work from home more.
JP: Yes, I understand what that’s like. We had an office with my company and I spent usually a couple of days a week working from home because it was too hard to focus in the office, so I totally understand that.
Rick: Right, right, right.
JP: So, what was the most difficult challenge that you faced either in this business or one of your other ones and how did you overcome it?
Rick: That’s a tough question. I think the toughest challenge in these businesses even just a startup business is for me was getting over that initial hump that initial fear, the first time you ever dived off a high dive or the first time you ever pedaled a bicycle without training wheels at a very young age, it was that leap of faith that courage that ability to take a risk and of course the more you can educate yourself about something and the more you can understand the market, the customers, and the products and all that stuffs, that’s great because you tend to minimize your risk and you tend to minimize your mistakes through education, but at some point you just have to say “I am going for it” and I would say that those were my scariest moments in all three of these businesses.
JP: That is the hardest part for most entrepreneurs is to take that first leap, the first step.
Rick: Yes, I think so. I remember in the early days before I started my telecom company, I told that I had worked at a couple of other telecom companies in the sales position and I had a mentor that I talk to before I decided to spin-off and do my own business and came to him and said “You know, I am really nervous about this and I don’t know anything about running a company, do you think I should work for a larger company for a while, work my way up through the management ranks, learn about how to manage a company and what it’s like to be a boss and to hire and fire and do all those stuffs?” and he said “No, I think you should just go for it.” He goes “You have got lot of energy, you have got a lot of ambition, you will figure it out along the way, you will make some mistakes, you will stub your toe, you will lose some money, but you will get a lot of stuffs right because you are a quick learner” and he goes “I think you are going to be good” and to have that mentor in my life in somebody who really encouraged me like that at that time really gave me a lot of confidence and I went “Okay, I am going to go for it.”
JP: Yes, that’s so important to get some sort of a mentor or coach and you can find free ones, you can find ones that you have to pay for, but it’s so important not to try and do everything yourself and not try and hold yourself to that level that where you think you should know everything and not be able to ask for help. The mentors are so critical. I have a mentor and a coach in my business.
Rick: I totally agree. There are so many people out there that have been there, done that and as you know, I have got a coach here in my blog business and I actually have a CEO or life coach that I talk to about other issues and so, I am a big believer in looking for that outside help and getting the best help that you can find. It makes such a big deal and even if it’s just to double check what you are already thinking.
JP: Yes, exactly. So, let’s switch gears and talk about your blog and you have already started podcasting or you are going to start?
Rick: No, I haven’t yet. So, what I decided to do was because South Coast Yachts, the boat dealership keeps me busy a day or two days a week, I had been volunteering at an organization here in San Diego called Connect and I was what they call an Entrepreneur in Residence or Volunteer Mentor and part of that was my desire to just reach back into the community and give a little bit understanding that I don’t have as much financial pressures I used to and then also I really wanted to develop my network of local people that I could benefit and work with and help each other so not only the companies that we were looking at that were coming through the Connect program, which I will tell you about, but also the other mentors that were there, so they were guys like me that had had some financial success, they were there to offer advice in their various disciples whether it was marketing, intellectual property, finance, management structure, raising money and so Connect is the organization in San Diego that essentially connects an entrepreneur that might have a new snowboard binding or new piece of software or a new diet service or any kind of product or service and they can come into the Connect Program and they can get the help that they need to sort of put their mind around the business plan to develop a good presentation and ultimately to prepare them to go out and raise money for their company if they want to pursue outside investors which a lot of these guys want to do. So, what I found through the volunteering process was that the people that were coming through, the entrepreneurs that were coming through seem to always be asking the same questions over and over and over again. In their early stages, it’s how do I protect my idea, how do I finance my startup, and then it gets into how do I build a sales team, how should I do my marketing, how should I build a team of managers, how do I learn how to hire the right people, how do I delegate, essentially how do I build a company? I thought okay, I have done this a couple of times. I did it in the small way with the auto detailing and then I did it in a bigger with Daycom and now with South Coast Yachts we are doing it again and it seems to be working and we are having fun and I thought I really can’t charge these guys. Number one, I am committed to volunteering, but if I could take some of the knowledge that I keep imparting to these people over and over and over again and put it on the web and by virtue of that reach a wider audience then eventually I could create a bunch of people that I can help. There are so many people out there that are wanting to start small businesses. With the economy being what it’s been and people getting laid off of big corporations, so I just thought it would be a really helpful thing to put some of the lessons that I have learned out there on the web for consumption.
JP: Yes, that’s great and I have been a mentor with SCORE for the past few years, kind of the same thing, I have a similar story really because I sold my company, then I started mentoring people who want to start their own company and then I thought, I heard a lot of the same questions and so I wrote my book about web startups and now I am taking it online, I blog about it, I am doing these podcasts about entrepreneurship, I am speaking about it. So, it’s very similar and it’s fun. It’s a lot of fun to help people after you have been through it. It’s fun to see people, their eyes light up when they start their business or when they have some success, so I totally understand why you are doing this and I am assuming you are having as much fun as I am.
Rick: Yes, for sure. Meeting you at the conference, it’s meeting guys like you that have a similar story to mine, it’s inspiring for me. I think you are well ahead of where I am on my blog, I have only published may be 15 articles, but I have about another 60 that I want to write and I have got a list and put together a schedule, so I am doing that once a week, but then one of the biggest things that I learned and check me if I am wrong, but the podcasting gives people an ability to consume that information in a different way and there are many, many people out there that commute, that have to drive to work, they like to listen to a podcast on the way rather than the same old morning talk show and so it’s so huge in my face right now that “Rick, you can’t just write.” Even though I love to write, I have got to record podcasts and I have got to do some YouTube videos because that’s what the customer wants. So, you have to let the customer drive the way you put your product out there, I think that’s true in any business.
JP: It is and you are absolutely right with the podcast and the YouTube, it’s such a richer medium than just writing. Some people prefer to read, so you are still going to have that audience of people who just want to read what you have to say. In fact, I pay a transcriptionist to transcribe all of my podcasts because some people would rather read it than listen to it, but there are a lot of people that want to have that rich experience, they hear our voices, they hear us laughing and it’s just is so much more intimate experience and I do the same thing. I put them on my iPod and listen to them in my car; it’s a great way to make use of otherwise useless time.
Rick: Yes, totally agree, totally agree. I will probably go the other way because I enjoy the writing and then I will probably just sit here at my mike and I will probably come up with a good intro for my podcast and then I will just read what I already wrote, but the important message for me is to embrace new ideas and new methods which we learned a lot of at NMX and to also understand that what your customer wants in the way they want to consume and it is really, really important no matter what business you are in and you better cater to it or you get left behind.
JP: Yes, that is definitely true. You got to do what the customer wants.
Rick: No question.
JP: What’s your most favorite part of owning your own business and being self-employed?
Rick: That’s an interesting one. I think when I first started I told you that when I was going to college, I was working at an assembly position and I wasn’t really cut out for doing this repetitive task stuff time and time again and a little quick story on that, I was actually working for a company that was making office partitions and I had to cut this long aluminum extrusions that became the frame around the partition, I had to cut them at 45 degrees at a precise length so that it would fit the various sizes of partitions and so I completed a whole pallet. The pallet was probably 4 x 4 square across the floor and probably 4 feet high of stacked aluminum extrusions and I had to cut them all and I finish, at the end of the day I was like “Oh man, that’s great, I am so glad to be done with that, I wonder what I get to do next” and they wheeled in another pallet for me and said “Okay, here is your next pallet” and I went “Oh, I just can’t stand this.” Really, I don’t like the boredom of the repetitive tasks time and time and time again and so owning your own business while there is risk and while it does keep you up at night and while things wouldn’t always go right, I love the variety, I love the energy, the enthusiasm, the sense of urgency that you operate with and I like making deals and making people happy and so, it’s fun for me to connect to the outside world that way too.
JP: Yes, I totally know what you mean about the repetitive. I worked at a check printer, a company that printed checks and I was on a printing press as a helper, the handyman right out of high school, I was still in college and I did it during the summer and Christmas break. I just stand at the end of the press and I had to take checks off of the press and put them on a pallet and that’s pretty much what I did, occasionally we have to change the roll of paper or clean the plates, but for the most part, I stood at the end of the press and I just put paper from one spot to another and I think at that point I realized that I just wasn’t cut out for that kind of work because I felt the same way, it was like it was never ending. That thing never shut off.
Rick: Yes, that’s right. It sounds like you like I when you are going to high school or you are working your way through college, you do what you have to do whether it’s working in a restaurant or washing cars or so many of the other part-time, working at the grocery store or something, but one of the things that I think is important is to always put your best into what you do. I had a friend of mine that I taught how to detail cars at one point and he said “I am not going to put everything I have into this because I know I am not going to do this for the rest of my life” and I said “Gosh, I don’t know there’s anything except breathe and your heart beating that you are going to do it for the rest of your life, you better put your heart and soul into this because you never know who is watching and you never know when an opportunity is going to present itself and if you don’t work hard and put your heart and soul into what you are doing, no matter what that is at that time, I think it’s easy to fall into mediocrity.”
JP: Yes, my mom always told me to work hard and be dedicated. I have always been raised with that mindset, so it’s a good lesson that you really do have to pour yourself into whatever it is you are doing.
Rick: Yes, no question about it.
JP: Let’s talk about the business that you sold again quickly, did you have seed capital when you started that – when you started out the office in the back of the landscape company?
Rick: I did and I didn’t. I had saved about 5000 dollars and I knew that that wasn’t enough money to really start my business, obviously my rent was 300 bucks a month in that little office and I had phone bills and stuff. I actually approached my grandmother and I told you that I have been renting a room from her and putting myself through college and may be that’s another example JP of where she saw in me my dedication to go to college and to work and so she saw me get up everyday, ride my – I didn’t have a car, I rode my motorcycle whether it was raining or cold or whatever I did my work, I went to school, I came home, I studied at night, I was making straight A’s and of course I was 23 years old at this time, so I am a little more mature than a lot of college kids when they go in at 18, but I knew that this was serious business and I knew that I needed to get it done and so I think she observed me through that period of time. It was about two and half years that I lived with her where she was like “Wow, he is really dedicated, he is really making things happen” and so when I came to her and I had this idea of starting my own business, I said “I need to borrow some money” and she said “How much do you think do you need?” and I said “I don’t know, I probably need 25,000 or 30,000 dollars” and she looked at me and she goes “I don’t think that’s going to be enough I think, you better take 40,000” and she actually cashed in some of her retirement plan, loaned me 40,000 dollars and I put that into the bank, I paid her interest only on that for a year and she never had to ask me for my check, we actually wrote a little document between us because I always feel like that’s important when you are doing business with family and we wrote a little document and I said “Here’s your interest payment” and I delivered it to her on the first of every month like clockwork and then at the end of the first year, I had made enough cash during that year that I was able to write her a check for 40,000 and gave it back to her. So, she had some faith in me, but that was really a big deal.
JP: Wow and you were already in business when that happened?
Rick: Yes, I had started my own business, I knew that I wanted to do this business and we were mostly trading refurbished and used telephone equipment, but obviously the more capital you have, the bigger deals you can do and so I started off small, went and explained to her what I was doing and she said “Are you are doing okay?” I said “Yeah, I just need some more capital” and that’s when we struck that deal.
JP: Wow that’s fantastic. It’s nice to have a grandma who believes in you.
Rick: Anybody who believes in you – really it’s terrific. Another funny side story was I had during that process of that year I knew that I needed to get a bank loan. So, I asked around and I found this one small bank in San Diego and went through a number of different types of iterations, of loans, that I could get and finally I got myself a 20,000 dollar line of credit with the bank because they said “Why don’t you come back next month and let’s see how you are doing” and then would say “Why don’t you come back next back and let’s see how you are doing.” So, it took me about six months going back there and finally they go “Okay this guy is doing okay, he is making money, it’s not a lot, but he is growing.” So, they loaned me 20 grand and then when I paid grandma back, I went back to the bank and I said “Okay, I would really like to raise that line of credit up from 20,000 to 50,000, how could we work that?” and he goes “Let me think about that” and he said “By the way, my son just graduated college and I might send him by.” He goes “You are an up-and-coming entrepreneur; I can see you are a good business owner, I might send him by and you could give him some advice on what he could do for a job and what’s interesting.” Then what I began to realize is like “Oh man, so his son comes in and his son goes yes, so my dad says you might have a job for me.” Okay, I see how this is working and we all had lunch together, the banker dad, the son that graduated from college and I sat down at lunch and he sat there and he goes “Well, I think you might have room for my son to work for you, I would love for him to learn from you” and I said “Gosh, you know what – his name was Bill, I said Bill, I would love to hire your son, but I really can’t do it without an extended credit line for my business” and so we struck a deal there at lunch and I hired the son and he stayed with me for about three to four years and did a great job and I think he is still in business doing the same thing as a matter of fact, but I got my credit line increased too.
JP: That’s also little “quid pro quo” there.
Rick: It is helping each other is what you are doing.
JP: It is yes.
JP: That’s a great story, I love that story and that does show how important it is to forge those relationships with people. It doesn’t matter if they are bankers or not, just people in general, you have to forge those relationships because the banker invested in you because he believed in you because you stuck around for six months, you kept coming in asking for money. Eventually, he was like “Okay, this guy is serious, I think he deserves a loan” and they tested the water with 20 grand, which is nothing; in a line of credit too, it’s not the same as a loan where they just give you a check, line of credit is you use it as you go loan.
JP: That line of credit is usually higher interest rate. So, that 20 grand was an extremely low risk for that bank, but they trusted you enough, you stuck around there long enough to earn their trust and they gave it to you and then I am sure that by the time your relationship with that bank was over, you would have borrowed lots of money from.
Rick: Yes, completely, but I think you are right. The credit line is much different as you know and you have to fill up paperwork every time you want to borrow it and they have to check your books and make sure that you are doing the right thing and so rather than just – they don’t just put 20 grand in your bank account. That’s like, “Okay there is 20 available, but you have to borrow it on these covenants, on these conditions, and you got to meet those conditions or you can’t borrow it,” but as the business grew I was managing it and keeping my overhead low and those were the things that they were looking at.
JP: Yes especially after you have the line of credit you prove that you are capable of managing the money and managing your business and then they increase it with a little help from your employment offer, but they have trusted you, that’s the way it works. A lot of people are going there, people I talk to, “I need 100,000 dollars to get my business started.” It doesn’t work that way most of the time and one of the people I interviewed, she has a spa business and it took months and months and months of meeting with bankers before she finally got her loan and she ended up getting half of what she initially asked for, but she did get the loan, but a lot of it was just perseverance and sticking with it and going back and forging that relationship and building that trust and that’s what you have to do if you want to get money for your business.
Rick: You bring up a really good subject because I think when – and I am sure you have seen this a lot in SCORE and I have seen it a lot of Connect and these organizations that we help that overwork and the idea of an 80-hour work week for an entrepreneur is very much celebrated, idolized in the business world and if you pick you Entrepreneur magazine or you pick up Success or Inc. magazine, these guys – a lot of these people that you read about in these magazines, they are very successful, but they are also saying “Yeah, this is all I do, I sleep in the office and I start my work at 10 in the morning and I don’t finish until midnight or 2 in the morning.” To me that’s no kind of life and so, you have got to work your connections, but you got to be willing to start small and I see so many people now that come through and they are like “Well, I have got this new idea for a new sports accessory” and they go “I just need 200,000 dollars to get it started” and I am thinking “Holly smokes, that’s a lot of money to get started and you don’t even have any sales or customers yet” and this is right now just your concept on what you think is cool and they put together this really great presentation, but the fact of the matter is when you are raising that much money early in the game, you are going to give up a substantial amount of your company to get that capital to come in because then it’s the extreme risk, it’s the highest risk, that’s the riskiest place that you can be is before you sell something.
JP: Yes, not only are you going to give up a big piece of your company, but there is a really good chance that you are not even going to get any kind of money at all.
Rick: I agree. I wrote an article on my blog site about how I prefer debt to grow a business because debt is so cheap relative to equity and it really is true. You can borrow money at 6 percent today, you pay 8 and you are paying a lot, but you are not giving up any of the equity of your company and so, you really got to be looking at your business and how big and fast you need to scale before you decide to go out and raise equity because you are going to give away a substantial chunk and that equity person that’s coming into your business is now your business partner, so now you have somebody to answer to, that’s another whole story.
JP: Yes, you no longer are in complete control and they can eventually kick you out of your own company if they feel like you are not running it well enough.
Rick: It happens all the time, it’s the founder syndrome and the founder starts the company has a particular idea about a product, often times that product is never complete, it’s never ready to go in their minds because they are product people and they are thinking about “Well I am going to come out with the next best, the next better version and then I am going to come out, I can’t launch now because I want to do this one last improvement and then they come out again and say I got one more improvement before we go live.” The business side of me says just put something out there and see if people want to buy it, put it out there and then you can improve and then you get customer feedback and now you get customers telling you how you can improve your product and you are not just operating in your own little vacuum about what you think is cool, you actually listen to your customers and not only are they paying for the product but they are giving you free advice on what you need to do to improve it, that’s the best way.
JP: Yes, done is better than perfect.
Rick: No question.
JP: Yes, a lot of times we as entrepreneurs we think, although Steve Jobs said “People don’t know what they want, I tell them what they want,” but Steve Jobs is a little bit different than most people. Most of us mortals, we have to actually create something that people want and then adapt it to something that they really want, it’s a different process than most people are used to, most people are just saying “Well I want to be perfect, I want this to be completely done, I don’t want to launch a puzzle that’s half finished, it has to be completely done,” but a lot of times we can’t foresee what people are really going to want and the only way to really get that to get an understanding of what the market is demanding is to launch the bare bones functionality of whatever it is and then adapt based on feedback.
Rick: Yes, I think no question about that. Steve Jobs is not – like you said he is not mortal – unfortunately, we saw him pass away last year, but to work on products in your own vacuum to me is an extremely dangerous place to try to develop something and so I have always tried to look at – as I am looking for business ideas, I try to look at things when I am going through my daily life that frustrate me or that are slow or that I think why do I do it this way, why do I have to wait in this like, why does this work like this, I wonder if there is a better way, so I tend to try to look for a need and then try to figure out solution to that need because more often than not if I have that challenge, you have that challenge too whether it’s dropping off your dry cleaning or hailing a taxi or ordering food from a restaurant, we often times have the same challenges and if you can find a unique way to solve the problem, you’ve got a good business idea.
JP: Yes, it’s definitely true. “See a need, fill a need.”
Rick: Yes, no questions about it. I often said like with Walmart when we were managing their corporate headquarters phone systems there, somebody asked me “What are you going to do for them next, what other products do you want to pitch at them” and I said “I am going to go ask them what they need” and I am telling you what if those people had said “We are having the hardest time getting paper towels and that’s all, if you could get us paper towels,” an idiot would walk away from Walmart and go “Well I am in the telecom business, I am not going to get you paper towels,” I would have become their favorite telecom paper towel distributor.
JP: Yes, that’s awesome. I want you to think back to the very beginning of your telecom business days, and do you remember how you got your first five customers because I am pretty sure Walmart was not one of your first five customers.
Rick: No that’s correct. In the early days, we didn’t have a lot of marketing, in fact I don’t think we even had an website until probably may 1990 or so and the internet was just coming online, it was just a big deal, we had paper brochures and so I would get lists of companies and I would get magazines like Inc. magazine or Forbes and I would read about the 100 best small companies and I look them up, I call information, I would find out what their phone number was and I would start dialing – I called the Dialing for Dollars, I just started cold calling and if they answered the phone then it was likely that they had a phone, I am kidding, but if they answered the phone, I was like “Oh cool, what kind of phone system do you have?” and if they had the right type of phone system then I would say “Do you know I can save you money on parts and blah-blah-blah” and so what happened was over a period – during the period of time that I sold for other companies after I sold my detailing business and went to work for these other two telecom companies, I just developed long-term relationships with people over the phone and so by the time I started my business in 1992, I had some of these customers that said “Rick, we understand you are starting your own business and we have had this business relationship with you even though you went from one company to another, we kind of followed you because we like the way you do business, the way you follow through, the way you are reliable and we have got this relationship.” So, I was able to take some of those customers and convert them into my new company and not all of them, some of them were too big to take because I didn’t have the money to be able to fund the transactions, but when I did start to make some money, I called them up and said “Hey, if you go any small transactions, I am ready for you now.” So, it was always kind of one of those things that I never wanted to over-promise and under-deliver. I always wanted to be able to do the business I said I could do because that spoke to my reliability and dependability.
JP: …and your reputation, that’s the reputation you established. That trust, people follow trust and they liked you and that is a great lesson to learn is that people don’t like businesses, people like people that work for businesses.
Rick: Yes, no question about it and when you start talking about bigger companies, like I remember one time Intel asked me if I could do a particular project for them and I said “I want to look into it, but I really don’t think I can do that, I don’t think that I have the staff and the technology to be able to pull that off for you and do a great job,” and they appreciated it and they really, really did because they work in a big company, they don’t have time to mess around with a guy who goes “Yeah, yeah, yeah I can do it, that’s awesome” and then “Oh crap” when he hangs up the phone “What am I going to do now.” Right?
Rick: They want to know that you are reliable that they can rely on you because they got a million projects and they want to move on to their next project and so later when I did acquire that capability, I called them and then I said “Remember that one I turned down a couple of years ago?” and they said “Yes” and I said “I can do that now” and they believed me and then I got more business.
JP: Awesome, so basically what you are saying is that you got your first few customers because they knew you, they liked you and they trusted you and then over time you got a lot of your customers from cold calling, you basically picked up the phone and you called them up and asked them what kind of phone system they had and so that’s an important lesson for a lot of people that you can still call businesses if you are selling directly to businesses, there is no do-not-call for businesses. You can’t call consumers that much, but you can still call businesses and it’s still a great way to get especially your first few customers and if not, all of your customers.
Rick: Yes, I think that’s right and the other big thing is these customers, especially if they have a common product and if you are taking telecommunication systems or software or whatever you happen to be selling, often times there are associations of these users, so they all get together and they talk about how to use the technology better and how to get the most out of their investment in this technology and so I tended to look for the user groups or the user advisory boards and things like that and what I found was that these guys all talk and not only do they talk about their products, but they talk about their vendors and they talk about how their vendor takes care of them, they also talk about vendors that don’t do well, so you got to be really careful, but I would ask for references and referrals. So, as the business built and grew, all of my sales people were really trained to ask for references “Hey, if we are doing a great job for you, mention us to two other people the next time you go to one of your user group meetings, certainly it would be great and then I love to give you a discount on your next order with us if you will let them know or let me know that it was a referral.”
JP: Wow, so you gave a referral bonus?
Rick: Yes, you can’t get crazy with that stuff, but it’s like you are just showing your appreciation or you might send them one of your logo T-shirts or something or a coffee cup if they can accept gifts, but you got to ask for the references and you’ve got to keep turning that thing.
JP: My significant other, Amelia, she sells commercial lighting to national accounts like Guess and Gymboree and I can’t remember all the big names she has, but it’s really hard to get into those types of businesses because they usually have pretty established relationships and this weekend she is in Arizona at a big conference where they bring the suppliers together with the people who build these stores all across the country and it is basically like a matchmaking event that she goes to and I told her it sounds more like a retreat to me because they went on a jeep tour in Sedona and then went to a race last night and they have dinners and speakers and then eventually they get to talk to each other about selling stuffs, but they are building that relationship before they even bring up the subject of sales.
Rick: Yes, I think that’s a perfect example, you and I met at New Media Expo because we were both there with that common interest, so I think these conferences are really, really good and you just have to figure out where your customers are going and can you present there and can you participate in that in some way.
JP: Yes, and they are not cheap either. The New Media Expo, that wasn’t cheap. The ticket alone for me was 1100 dollars and then you got the travel and the lodging, but if you are serious about your business, you have to suck it up and do it, you just have to go for it and put it on a credit card if you have to because sometimes those tradeshows, especially conferences they can be the difference between success and failure, they can be the catalyst that pushes you over the hump and introduces you to that one person or that group of people that you need to get your business off the ground.
Rick: Yes, I agree, I think you did it exactly the right way to where you go to that conference then you pay your money, you want to get the most out of it, but you certainly can’t go there with your head down; you got to look around and just walk up to people and initiate conversation and all of a sudden you become that standout person and they remember you and I met you and then a couple of other great guys and one other guy asked me to do a podcast interview with him too so it was very exciting, I didn’t know that was going to happen, I didn’t expect that was going to happen, I just went open to ideas and wanted to learn as much as I could.
JP: Yes, I knew as soon as you started talking, I had to have you on here.
JP: Yes because you are one of those success stories, you have a successful exit, actually two successful exits, your carwash business and your telecom company and now you’ve got another successful business, you are the perfect person to be inspirational and to help energize the entrepreneurs that listen to this because it is possible and lot of it is because of your attitude and perseverance, you have positive can-do attitude and that, that goes a long way in business and in entrepreneurship.
Rick: Thanks JP, I appreciate that, I certainly hope that some of this is helpful for some people and I do believe you can go out and do it and I have done it and continue to do it, it’s what I am passionate about, I love it and I am just happy to make a contribution if I can.
JP: Yes, that’s great. You talked before that you had a mentor early in your career; do you have a mentor or a coach now?
Rick: Yes. I think I might have mentioned, I have a life coach, one of the things that I did mention earlier was that the same year that I sold my business in 2009, I also went through a pretty nasty divorce and so going from being a CEO with 55 people reporting to you in three states and a bunch of sales and big accounts like I have mentioned kind of on top of the world and that’s great and then you sell your business and then at the same time, you are a father, a dad, a family leader, come home, pat the kids on the head, they go to bed, you go check your e-mail, wife and all that stuff, I ended up getting a divorce, so it shows you how fast things can change in your life. So, six months later, I am living in a small apartment, I see my kids every other weekend, I don’t have the garage anymore that I used to have and my business is sold and I am trying to figure out what I am going to do next, so I hired a great life coach and she happens to be an MBA, she is an ex-banker from New York and was high up in banking and then she cashed it all in and then she became a Tai-Chi Master. So, she is a really interesting lady and so she has got the whole work side, she understands the professional side and the pressures that go there and then she also understands the peaceful and the balance side as well, so she has been really awesome for me and I probably have been seeing her for four years, once a quarter or so.
JP: That’s great and a lot of the successful entrepreneurs that I talk to have coaches and/or mentors and it’s so important. We talked a lot about this in my last podcast interview about how important it is to have someone external to use as the sounding board and kind of a guide.
Rick: I think so. I think anytime you get into a situation where the stakes are high and you are not really sure what to do, you need to seek that outside help. Often times, friends and family as we discussed are not the best place to go. I knew that actually before I sold Daycom, my telecom company, I knew that I wanted to grow and I was becoming frustrated with the business because I couldn’t figure out how to grow. I had tried expanding into other geographies and that wasn’t working very well. I had tried different product lines to bring to a new set of customers and that wasn’t working very well. Some of the things that I did try worked very well like services and maintenance, but overall I was sort of feeling stagnated like I just can’t figure out how to get that double digit growth going again and that’s frustrating for a person that likes to grow things and so I put together an outside board of directors which is very rare in a small privately held company and I brought these guys in and I said “I am going to give you a little piece of the equity, I am going to pay you quarterly for the meetings, and I would like you to advise me” and in my particular business, I needed a sales and marketing influence, I needed a finance or an operations influence, and I needed a technical influence, guys that not only could they advise me, but they also had connections out in the market that might bring me more customers, might bring me financiers, and they basically came in and they said “Okay, we are going to clean up the financials, you have been spending a lot of money trying to grow in these other areas, which haven’t been successful, we want you to stop that” and they really guided me through this process and the idea was that I was going to clean up my financials, make the company nice and profitable and then go out and raise outside equity, sell a piece of the business, bring in some big money and then go do some acquisitions and acquire other companies like my own so that I had a bigger company and during that process, our financials got really cleaned, we executed on the plans, I listened to my board and we got pursued – because our financials were so good, I ended up getting pursued by three other companies that said “Wow, we really understand things are going well over at Daycom” and so I had a couple offers on the table to buy the business. So, getting that outside help was great, doing what they said was even better and then being open to other possibilities was also key to them.
JP: Yes, that’s a great lesson. You can’t expect to do everything on your own. It’s so important to get that outside advice.
Rick: Yes, no question about it.
JP: So, we have time for one more question and then we are off.
JP: So, the last question is what is the most important piece of advice that you can give to an entrepreneur or somebody that is just thinking about starting their business?
Rick: Wow, okay. This kind of dovetails with what I would like to do on my next blog post anyway, the one that I am going to be writing this afternoon and my brother was over last night, we were just talking about it and he said “What do you think are the key ingredients that some people become really successful with and some people just don’t put it all together?” I said “Well, first of all I would say you got to have desire, you got to really want that and I don’t mean wanting the big yacht or the airplane, I mean wanting to make a difference, solve a problem, get it out there as much as possible, wanting to build and grow a business, that’s what you got to want, something like that and you got to figure out what that is.” Number two, “You got to have a strategy, you got to think about what you are going to do and how it’s going to work and put together the moving parts and this is not going to all come to you by the way on a Saturday afternoon in an hour; it’s going to be a process of two to three weeks, sometimes months as you kind of put this plan together and talk to people and study the market.” Number three is the scariest thing that’s where the courage comes in, that’s where the risk comes in “You got to be willing to push the button, you got to be willing to step out and go okay, I am going to do this and I am scared, but I am going to do it anyway and you got to go for it.” I think number four is action – constant action. It’s one thing to want something, it’s one thing to put together a great plan, but once you step off the dock, so to speak, and you say “Okay I am doing this” then you got to keep the action, you got to keep it moving and it’s got to be focused and I think that’s kind of the last point is avoid distractions, stay on your path, you are going to have a lot of opportunities that come to you, you are going to have a lot of people that want to work with you because they see somebody who is energized and headed in a certain direction and people gravitate toward that energy, it’s amazing to watch, but stay focused on your goals and say no to things that don’t align with those goals, that’s what I would say, those were the big five for me.
JP: It’s great. So, if somebody wants to read this blog post once you have it posted, where would they find that?
Rick: Oh great, thanks for asking. The website is called BusinessByDay.com and of course it’s a play on my last name, but it also goes back to what we talked about earlier and having that life balance between work and play and vacations. I am a big vacation guy, I love it, I think it reenergizes you. So, I included that and actually I let some of my friends and some of my potential audiences name the blog because it’s really all about them, right?
JP: Yes, that’s great, I love that name and I will put a link to that on the show notes page for this podcast as well.
Rick: Oh great. Well thanks pretty much. I am looking forward to it and I hope I can share this podcast with my followers on my blog as well.
JP: Well, that would be great. This has been a great interview, I really enjoyed hearing your story and talking to you Rick.
Rick: Thanks JP, it’s been a pleasure and I look forward to a long relationship with you and having fun in this new media world.
JP: I know next time I am out in LA, I may have to drive down and get you to take me out sailing.
Rick: I would be happy to. It’s a passion.
JP: That would be awesome.
Rick: Yes, I look for any excuse to sail.
JP: Great. All right, thanks Rick.
Rick: You bet.
I am going to take Rick up on that offer to go sailboating, you better believe it. That was a long and informative and educational podcast episode, hope you enjoyed it as much as I did. Until next time, this is JP Stonestreet with the Smart Energized Entrepreneurs Podcast.