Starting Your Own IT Company

Group 9:

Jennifer Mertens Marianne DoyleAaron JohnsonWillie McGarry

Executive Summary

This paper is developed to help individuals become successful entrepreneurs. First we define the term entrepreneur. Then we discussed the characteristics an entrepreneur should posses. It is important for individuals to realize what they are getting themselves into and for them to understand the statistics facing entrepreneurs. They also need to look at themselves and see what type of skills they have, and then determine which skills they need to refine and use when starting their business. Once they know they personally have what it takes to start a business, it is helpful to go through the checklist that we provided. They then need to form a corporation. We interviewed David Garthe and Harry Brumleve, whom are both from St. Louis, to give real life examples of entrepreneurs. We also did a case study on Red Hat to show a start up business on a much larger scale. We ended the paper with a comparison and conclusion.

An Entrepreneur is a person who organizes, operates, and assumes the risk for a business venture (2). This paper gives a various definitions of an entrepreneur along with definitions provided by entrepreneurs themselves.

Some people have the characteristics that make them a “good match” to be an entrepreneur. While other entrepreneurs’ characteristics make them “outside the norm”. A few “Good match” characteristics include a competitive personality, the desire to work for themselves, and are college graduates. A major deviation outside the normal characteristics is one in which the entrepreneur buys an existing business. Other characteristics are self-confidence, multi-skilled, innovative skills, results-oriented, risk taker, and committed (3).

The statistics that we provided are very important for entrepreneurs to understand. They need to be aware of how many entrepreneurs are successful and how many fail each year. They need to know what they need to have to be successful and the cities that are friendly to new businesses.

Entrepreneurs need to have various skills along with these characteristics. They need to be focused, have a vision, be leaders, be persistent and passionate, have technical skills, and be flexible (17). They also need to be organized, have a strong work ethic, have the ability to make good decisions, be trustworthy, determined, and healthy(11).

Once an individual knows that they have what it takes to start a business, they should go to http://app1.sba.gov/survey/checklist/index.cgi. This provides a checklist of everything they need to do to successfully start their business. Then they need to form a business strategy following the five elements that we provide. Once this has been accomplished they are ready to form a corporation. This is very simple. They can go to: https://www.sos.mo.gov/BusinessEntity/soskb/CSearch.asp?dtm=489884259259259. We then provided 31 tips to face your fears and start your own business. We also provided five things to do to avoid failure.

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According to John Thompson “Entrepreneurs can be found inside large corporations in the private and public sectors, championing change and making a difference” (1). It is important for managers to recognize that entrepreneurs are “championing change and making a difference”. This is important because they can utilize such people with such characteristics to make a change in their business. They need to tap into these resources to help their own business thrive. We will explore this in the paper through our two interviews with David Garthe and Harry Brumleve and then in our case study of Red Hat.

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ENTREPRENEUR, HARD TO DEFINE?

The word entrepreneur has many meanings, depending on whom you ask to define it. We thought the people with the best perspective would be entrepreneurs themselves. Bob Reiss is a successful entrepreneur and author of Low-Risk, High-Reward: Starting and Growing Your Small Business With Minimal Risk. As a small business expert Bob defines the word entrepreneur by saying,

“Entrepreneurship is the recognition and pursuit of opportunity without regard to the resources you currently control, with confidence that you can succeed, with the flexibility to change course as necessary, and with the will to rebound from setbacks” (5).

This definition encompasses how well rounded anyone with entrepreneurial status must be. The phrase ‘juggling act’ may even come to mind. Although all aspects of this definition are important, one key aspect is that entrepreneurs tackle challenges regardless of the resources that they currently control. How many times do you hear someone say that they would love to start their own business but they don’t have the money or the resources to make it happen? Many people have started their own businesses and been successful by starting from scratch. There are several success stories, such as Michael Dell who began his computer business from his own college dorm room (5). Those who have a strong enough drive to be successful at attempting a new business venture will find ways to gain access to resources they need by being creative. “Be creative in acquiring the resources you need to build and grow your business. Think outside the box and you’ll improve your chances of acquiring what you need to succeed” (5).

Linda Pinson is the author of a large amount of the SBA’s material on writing a business plan and creator of business plan software. As an expert on starting a business, Linda says,

“I have always thought of an entrepreneur as a person who starts a business to follow a vision, to make money, and to be the master of his/her own soul. Inherent in the venture is the risk of what the future may bring” (5).

The fact that there are several ways to define the word entrepreneur proves that it may not be hard to define. The word simply carries more than one meaning, depending on the person who supplies the definition.

ENTREPRENEURIAL CHARACTERISTICS

Several studies have been performed to determine whether or not certain characteristics and personal traits are dominant in entrepreneurs. Studies have found, “Entrepreneurs come in all shapes and sizes, and many who don’t conform to the standard have been wildly successful at being their own bosses” (8).

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A GOOD MATCH

However, there are certain characteristics that have repeated themselves, making them common traits found in entrepreneurs. The following personal characteristics make someone a “good match” to be an entrepreneur: (8)

1. Children or grandchildren of immigrants2. Relationship with key breadwinner in the family is competitive3. Complete a college degree4. Get fired from several jobs—dislike working for others5. Risk taker6. Innovative

In addition, some of the most often found qualities in successful entrepreneurs are, “tenacity, leadership skills and the ability to adapt to unexpected developments” (7). Although these personal traits are important, some argue that those who do not fall into the “norm” also succeed at owning their own businesses.

OUTSIDE THE NORM

One of the myths about being an entrepreneur is that a person actually has to start their own company. One example that dispels this myth is buying a company. Simply because a person did not start a business from scratch does not mean that they do not deserve the title ‘entrepreneur.’ Owning a company is a very difficult job that takes the same entrepreneurial characteristics and skills as starting it from scratch. Keeping a company continuously successful can sometimes prove to be tougher than getting if off the ground. This notion also applies to inheriting companies or taking over for a founder, which is the second example. A person can even work within a large corporation, starting new ventures that spin off and be considered entrepreneurial (8).

LESSONS LEARNED

Even if you have what it takes to start your own company, it is very difficult not to fail. “An extraordinary high percentage of entrepreneurs fail in the first, second and even third ventures” (8). What makes the difference is whether or not a person has what it takes to get right back up off the ground and try again. Eric Krell, the author of Mastering the Entrepreneurial Life Cycle wrote, “Most entrepreneurs are highly familiar with failure. Can’t miss ideas flame out, investors bail out and, sometimes the money runs out before the revenue rolls in. Successful entrepreneurs treat painful setbacks as ‘lessons’” (7). This refers back to Bob Reiss’ definition of an entrepreneur in that an entrepreneur must be able to accept change and meet failure head on by reversing setbacks and turning them into successes.

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STATISTICS

Many studies have been conducted to provide statistical information in order to put numbers and figures to what is actually going on in the real world today. We decided to use statistical information to answer three of the most common questions people currently have about entrepreneurs and start-up businesses.

How many businesses open and close each year?

The following table is provided by the SBA and shows both the starts and closures of Employer Firms from the year 2000-2004 (10).

CATEGORY 2000 2001 2002 2003 2004New Firms 574,300 585,140 569,750 553,500e 580,900e

Firm Closures 542,831 553,291 586,890 572,300e 576,200eBankruptcies 35,472 40,099 38,540 35,037 34,317

Sources: U.S. Bureau of the Census; Administrative Office of the U.S. Courts; U.S. Department of Labor, Employment and Training Administration.e = estimate

From the table you can see that there was a rise in new firms in 2001 followed by a decline in 2002 and 2003. However, an increase is estimated for the year 2004. The number of firm closures also rose in the year 2001. In spite of new firms declining, firm closures rose tremendously in 2002. Even though the numbers dropped back downward in 2003, there were still more closures than openings. In 2004, the number of firm closures is expected to stay roughly the same as 2003. Besides a small rise in 2001, firm bankruptcies have stayed relatively the same over the five-year period.

What is the survival rate for new firms?

According to a new study, “two-thirds of new employer establishments survive at least two years, and 44 percent survive at least four years” (10a). These results were found to correlate to firms in a variety of industries. With a rate of survival less than fifty percent over a couple of years, there is much risk involved in not only starting a business, but also keeping it up and running as well. There are several factors that lead to a successful business’ survival rate. Many reasons a firm stays open include, “ample supply of capital, the fact that a firm is large enough to have employees, the owner’s education level, and the owner’s reason for starting the firm in the first place, such as freedom for family life or wanting to be one’s own boss” (10a). The survival and longevity of a business is highly dependent on the owner.

What roles do women and minority entrepreneurs play?

While doing research on this question, one article I uncovered forced me to research this question even further. The article listed a set of six characteristics of successful entrepreneurs, with number six being male. The author states,

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“…there is evidence that women struggle to set up successful businesses. Women report significantly more difficulty getting funding than men trying to start up their own businesses, so it seems to be to do with barriers to entry rather than lack of ability” (9).

As soon as I discovered this I wondered, “What role do women and minorities actually play?”

This struggle for equality between women and men in the workplace has been around for decades. Women are constantly fighting for equal opportunity, equal pay, and equal respect, being stuck under the so-called ‘glass ceiling.’ Major progress has been made over the years but studies have shown that the reason more and more women are starting businesses is to get away from all of this hardship at the office. Studies have found, “66% of all home based businesses are owned by women. Today, 4.7 million women are self-employed in the United States. This represents a 77% increase since 1983” (6). This is remarkable evidence that is starting the belief that female entrepreneurship is the latest women’s movement.

Minorities also play a role in owning their own businesses. Studies show, “Of the 23 million firms in 2002, 6.9% were owned by Hispanic Americans, 5.2% by African Americans, 4.8% by Asian Americans, 0.9% by American Indians and Alaskan Natives, and 0.14% by Native Hawaiian and other Pacific Islanders. In 2002, minorities owned 4.1 million firms that generated 694.1 billion in revenues and employed 4.8 million workers” (10b). This data tells us that 17.94% of firms in 2002 were owned and operated by minorities. From all of the previous data, it is obvious that the role women and minorities play in owning businesses is far from small.

Top Ten Cities

Thousands of businesses are being started everyday all over the world. This brings up the question, “Where is all of this taking place?” Well, it is taking place everywhere, but through research, ten cities have been identified as hot spots to start a business. These ten cities are: (4)

Minneapolis Norfolk/Virginia Beach/Newport News, Va. Washington D.C Atlanta Miami Fort Lauderdale, Fla. Charlotte/Gastonia/Rocky Hill, N.C. Salt Lake City West Palm Beach, Fla. Orlando Fla.

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Even with all of the previous definitions, characteristics, and statistics, a business owner cannot be successful in a new venture without the skills to take that business somewhere.

Skills an Entrepreneur Should Possess

Entrepreneurs should possess a wide variety of skills. Most entrepreneurs are focused, have a vision, are leaders, persistent and passionate, have technical skills, and are flexible. Entrepreneurs need to be focused. If they are not focused they will not be able to reach their goals. In order for a business to survive there needs to be a vision. The entrepreneur must visualize what their business will be like in the future. They need to continuously change to stay competitive. Every business needs a leader; this is the entrepreneur’s role. They must lead their employees and motivate them to share their vision. It is hard to start a business; this is why an entrepreneur must be both persistent and passionate. They need both of these skills to get through the hard times and to succeed and grow. Technical skills are very important when starting up an information technology business. The entrepreneur needs experience in both business and information technology. Entrepreneurs need to also understand that the world is constantly changing, especially when it comes to technology. Technology changes rapidly, it is hard to keep up with (17).

Entrepreneurs also need to be organized, possess a strong work ethic, have the ability to make good decisions, be trustworthy, and be determined and healthy. Entrepreneurs must be organized. When they start their business they need to be especially organized. When a business is started the entrepreneur will have limited resources. These limited resources increase the entrepreneur’s need of organization. They need a business plan, financing, a market for their service or good, and a vision. To acquire these things the entrepreneur needs to be organized. This will also increase his or her efficiency at getting tasks accomplished. Depending on the type of business the entrepreneur may be the only worker or they may have a few employees. Either way the entrepreneur must plan to work hard or a lot of hours. Entrepreneurs are usually the “production staff, accountant and supervisor all rolled into one, which demands that people are able to stay on task and get the job done” (11).

Entrepreneurs are expected to make a wide range of decisions; some may be mundane while others may be complex. Entrepreneurs must be able to make decisions on the spot; there is not much room for error. Entrepreneurs, like any other businessperson, must be trustworthy. Customers and employees must be able to trust this person; otherwise their business is likely to fail. Entrepreneurs must build a bond with customers and employees. They need customers to be loyal and they need dependable employees. Entrepreneurs must be determined. If they are not determined their business is likely to fail. The entrepreneur is going to have tough times, especially at the beginning, and they need to be determined to get through these rough patches. Entrepreneur’s health is also important. They cannot take the chance of being sick and missing work. They need to have good stamina to continue and to work more than 50 hours a week.

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Before You Start

Before any person prepares to start a business it is recommended to take an entrepreneurial test. There are various tests out on the world wide web that help people determine if they have what it takes to be an entrepreneur. The test that we used was: http://www.liraz.com/webquiz.htm#q10 (12). It consists of the following ten multiple-choice questions:

1) Are You a Self-Starter?2) How Do You Feel About Other People? 3) Can You Lead Others? 4) Can You Take Responsibility? 5) How Good An Organizer Are You? 6) How Good a Worker Are You? 7) Can You Make Decisions? 8) Can People Trust What You Say? 9) Can You Stick With It? 10) Can You Keep Records?

According to this test if you have the skills we stated above then you would be able to answer yes to these questions and would likely make a successful entrepreneur.

Entrepreneurs to-be should also check this website out before starting, http://app1.sba.gov/survey/checklist/index.cgi (13). “Owning a business is the dream of many Americans ... starting that business converts your dreams into reality. However, there is a gap between dreams and reality. Your dreams can only be achieved with careful planning” (13). This website helps entrepreneurs successfully achieve their dreams. It consists of seven checklists; identify your reasons, self-analysis, personal skills and experience, finding a niche, market analysis, planning your startup and finances.

Entrepreneurs must develop a strategy before they start. There are five elements of a strategy. They are as follows: arenas, vehicles, differentiators, staging, and economic logic. Arenas answer the question of “where will we be active?” Vehicles are the way we get there. Differentiators enable the entrepreneur to win in the market. Staging is the speed and sequence of moves. Economic logic is how the business makes profits. (14)

Deciding on an arena is one of the most important choices to make when developing a strategy. It cannot be too broad, it is best to be very specific. A business may have more than one market segment. When this is the case it is important to determine which segment is more important and then put more emphasis on that particular segment. Once the arena is chosen it is time to designate a vehicle to use to get there. Vehicles such as joint ventures, mergers, and the traditional internal development

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are often used. Businesses must differentiate themselves from the competition in order to win in the marketplace. According to Donald Hambrick and James Fredrickson,

“Achieving a compelling marketplace advantage does not necessarily mean that the company has to be at the extreme on one differentiating dimension; rather, sometimes having the best combination of differentiators confers to a tremendous marketplace advantage” (14). Staging is “the speed and sequence of major moves to take in order to heighten

the likelihood of success” (14). There is no particular sequence; it is up to the entrepreneur to determine what should happen first. Economic logic is important for a business to survive. An entrepreneur must know what their revenue goal is. They must have a clear picture of what their year-end financial statements will look like.

Once entrepreneurs know they have what it takes to be entrepreneur, gone through the checklist, and developed a sound strategy they are ready to form a corporation. To do this a person can go to https://www.sos.mo.gov/BusinessEntity/soskb/CSearch.asp?dtm=489884259259259. It takes only a matter of a few minutes and $150 to be incorporated. The hardest part to forming a corporation is deciding on a name. On this website the first step is to browse through all the existing corporation names to make sure that your name is not taken. After that it is fairly easy.

31 Tips to face your fears and get started

According to Suzanne Mulvehill “… the inner journey to starting a business is just as important as writing a business plan and getting financing” (15). In Suzanne’s article she addressed the 31 strategies to help motivate people to become successful entrepreneurs.

1. Say yes to your yearning.2. Start a journal.3. Write down your goals4. Visualize your success.5. Create and read affirmations6. Evaluate your beliefs7. Do what you love8. Do something different every day9. Act "as if.”10. Go out and scare yourself.11. Spend time in nature12. Accept all your feelings.13. Finish unfinished business.14. Get educated.15. Accept and believe compliments.16. Acknowledge your gifts.17. Give up excuses

18. Eliminate "I can’t’s.”19. Accept confusion20. Know there is no "right" time21. Start small22. Say no when you mean no and

yes when you mean yes.23. Resist self-judgment24. Stay out of overwhelm.25. Expect resistance.26. Answer your "what ifs.”27. Practice patience.28. Overcome the "not good

enough" syndrome.29. Ask for help.30. Trust your instincts. 31. Treat yourself with

TLC(Tender Loving Care)

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We found the items in bold particularly interesting and will be expanding on those. Starting a journal is a great way to keep a private record of how the entrepreneur personally thinks the business is doing. A journal is a great way to reflect on the good and the bad times. It will mean a lot more to the entrepreneur than financial statements do. For some people it is really hard to accept change. Entrepreneurs need to be ready to not only accept change but also to embrace it. People who want to be entrepreneurs but do like change need to start shaking things up in their life and get used to change. Accepting change helps people release their fears and they become more confident. There are times when people are afraid to do something whether it is something new or drastic, but they just need to suck it up and do it. New businesses do not thrive and grow if the owners just sit back and make careful decisions. The owners must be confident and take chances in order to succeed whether they are afraid or not (15).

Make sure any unfinished business is finished before a new business is started. Once a business is started it is harder to finish any unfinished business. Entrepreneurs need to make sure they not only accept compliments but they need to also believe them. Once they start believing the complements they will improve even more in that expertise. Entrepreneurs need to stop saying I can’t, replace that with how can I. This simple change would help them grow and learn. It is very important to know that there is no “right” time. Something will always come up. It is best to keep going as planned and take one challenge at a time. Entrepreneurs need to make sure when they mean no they say no and when they mean yes they say yes. If they cannot make a decision they simply say “I will have to get back to you.” Entrepreneurs should not give answers such as “I think I can do that” or “I will try” they need to just do it or don’t do it. Entrepreneurs need to conquer the “not good enough” syndrome. Before a person decides one way or another they need to sit down and look at the situation and plan. Then they will be able to make a decision either way (15).

Five Mistakes Entrepreneurs Make

According to Jim Stovall, “The best way to succeed is simply to avoid failure. Entrepreneurs fail for a number of reasons, and if these can be avoided, success moves from possible to probable and becomes likely” (16). There are five ways for entrepreneurs to avoid failure. 1) The first is to explore the three “Ts” time, temperament, and talent. 2) Entrepreneurs need to find their market niche. 3) Need to be financially prepared. 4) Need to realize they are no longer apart of a large corporation. 5) Realize the amount of time and effort it takes to succeed (16).

The Three Ts: Entrepreneurs must realize how much time it is going to take to accomplish something. They must then determine if they actually have enough time. The best way for someone to determine if they have the right temperament to start a business is to ask family and friends. Another way is to take a test that helps determine what type of job is best for them, such as a Myers-Briggs test. People often underestimate their own talent. A good way to overcome this is for them to ask a trusted

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friend our family member, one that they know will give an honest answer, if the confidant thinks the entrepreneur has what it takes to be successful. Once they answer the entrepreneur needs to believe them and follow their advice. (16)

Market Niche: Entrepreneurs need to find their market niche. When entrepreneurs think about their product they do not just think about what they like. They need to think about what other people would like, outside of their environment. This helps them find their market niche.

Financial Support: Businesses need financial support to survive. Businesses are continuously changing including the competition. Entrepreneurs need to ensure that they have enough capital to keep up with these changes to stay competitive.

Avoid the Corporate Mentality: Many entrepreneurs have past work experience in corporations. It is hard for entrepreneurs to make the switch from a job with various perks to job that they have to provide everything themselves. They are no longer spending the corporation’s money; they are spending their own money. They also need to get used to doing most of the work themselves, instead of delegating it to someone else.

Realize the amount of work and passion: It is hard to start a business and it is just as hard to sustain it. The work never stops. If there are any problems at all the owner has to be available to fix it.

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Interviews

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David Garthe – Garthe Corporation

David Garthe began his quest for entrepreneurship at the age of 22. After Graduation from the University of Missouri in St. Louis, David took his first job at Watlow Electric, Inc. where he worked in the accounting department and later the IT department. Eager to test his entrepreneurial skills, David founded his first company, (Logan Computers, after his son) which he intended to run in his spare time. It didn’t take long for David to realize that his first business plan was a little weak to compete with the large computer manufacturers like Gateway and Dell. So, he went back to the drawing board.

While David attended UMSL, he found part-time work as an IT consultant. Consulting gave David access to a variety of companies where he made many valuable contacts. Long after his last assignment, he was still getting calls from companies inquiring about his IT services. Having several associates who were also in IT, David hired them on a contract basis to fulfill the needs of these former clients. This was the beginning of David’s first successful company (Net Assist Temporaries), for which he left his current employer.

Demand for this product grew rapidly as word got out and companies were eager to tap into a talented supply of IT technicians. Soon, David was receiving more requests than he could satisfy, so he ran ads in the local newspaper to find more talent. This gave David another great idea: why pay for advertising in the paper? Why not host a website where IT professionals can go to look for work? Already having skills to build such a site, David was well on his way to his next entrepreneurial endeavor: CareerConnection.com.

CareerConnection.com was a free website where companies could advertise job opportunities, especially in the IT industry. The business model for this site was centered on selling additional services to the subscribers, like more prominent advertisements or searches for other jobs within that company. This site was an immediate success, attracting many companies (several Fortune 500) looking for talent. David operated this site for several years until increased competition from other sites like Monster.com took most of the business.

Once operational, CareerConnection.com required very little maintenance and allowed David to concentrate on his next idea. This is a common theme with him: always looking ahead to the next idea. Gravyware.com was David’s next website and was inspired by David’s brother who always called him “Davy Gravy”. Gravyware.com offered two primary products: a web-based resume database and a web-based job-listing database. Both products were configurable, off-the-shelf software packages. In addition, Gravyware.com offered installation and support services.

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In 2000, David founded Garthe Corporation, where he operated various websites. The primary business plan included operating play-for-free gaming sites and gaming news sites where casinos could advertise to potential customers. Clients were purchasing advertising space and paying per hit on each website. This plan was David’s most successful entrepreneurial venture to date and remained so until after the “dot com” bust. At this time potential clients were beginning to demand restructured contracts wherein the website operator (Garthe Corporation) assumes more risk. These risks include only collecting payment when there was proof that the client (casino) received website-referred patronage. This behavior virtually ended the advertising-based business model for websites and so, in 2004, Garthe Corporation sold its gaming websites to an entertainment company that operated fantasy sports websites.

After the advertising-based business model began to fail, Garthe Corporation rediscovered its history of bringing people together when it opened ConnectMe.com. ConnectMe.com was a gaming resource site that brought casinos and gaming professionals into a market where they could easily advertise and find suitable matches. This site is another testament to Garthe Corporation’s ability to seek out a business need and create products to satisfy it. This website was operating successfully until recently when legislative risks out-weighed the monetary benefit. Already launching its next site (MySpace.com) Garthe Corporation will surely have another hit on the way.

David attributes the success of Garthe Corporation to its constant evolution. During this interview David stated, “One thing doesn’t last forever, as too many people seem to copy your good idea and pretty soon the market is diluted. You need to constantly change, or improve your product so it is more appealing to the customer.”

David stated that starting the business is the easy part, but keeping it going is often much more demanding. Though he often puts in 70 hrs a work week (against the advice of his friends), he still loves being his own boss. David is always working hard to make certain that the project/service he is offering is what his customers want. He says “You should be able to describe it in one sentence.” He spends almost 50% of his time marketing to current/potential clients. The other 50% is split between admin/accounting (15%) and project execution (35%).

David has several suggestions for upcoming entrepreneurs. (1) Find a good accountant. An accountant can protect you from unknowns about the IRS and save you money in places you may not have thought about. They can also guide you through financial planning. (2) Use any attorney to help incorporate your business. In addition to using these resources he listed 8 things that a person needs to be a successful entrepreneur:

1. The ability to work hard (and often).2. The ability to read people.3. The ability to listen to your customer.4. The ability to plan for financial security.

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5. A good business plan.6. An absolute love and belief in what you are selling.7. Humility with customers (never think you are smarter!)8. Accountability.David is 33 years old and lives in Ballwin, Missouri. David’s father was an

electrical engineer at Boeing for 37 years and his mother’s primary job was raising children.

While David’s parents provided a stable supportive environment, he always looked up to his two grandfathers who were both entrepreneurs. One grandfather started a gas distribution company and owned several gas stations. The business is still in the family and run by David’s uncle. His other Grandfather was one of the 5 people that started MCI, the communications giant. Though no longer with the company, David recalls that his grandfather had a vision about technology that influenced him from an early age.

Harry Brumleve: Driven to Consulting

Harry Brumleve is 32 and is from Ballwin, Missouri. He graduated from The University of Missouri-Columbia in 1998 where he received a BA in German and a BS in Computer Science. His first job was with G.A. Sullivan. They were an IT company that was later bought by Avanade. He worked with them for two years before he started looking for a company willing to pay more for his skills. He took a job in Chicago working on telephone exchange systems with Tellabs. They offered him the kind of money he was looking for and the opportunity to move out of state.

The job with Tellabs did not work out for Harry. After he helped them achieve their immediate goals, they gave him a severance package citing cutbacks as the reason for his dismissal. He found himself living in Chicago with no job and no plans for the future. An opportunity arose for Harry to work on projects for Cambridge Business Partners. They were a consulting group for Novell. The job was promising, but it required him to move to Germany. He understood that this was a great opportunity, and in 2001, he moved out of the country.

While at Cambridge, Harry had to opportunity to work on Commerce Logistics Architecture for Novell. Twenty percent of the world’s logistic dollars spent use this architecture and Harry felt this was the first big project he was able to work on. It was this project that strengthened his desire to stay in the IT field, since he finally felt he was contributing to something important. He enjoyed working with Cambridge but after two years he began to miss the states. Harry decided to move back to the states, so he took a job with the documents company DataServ in St. Louis. It was this move that would ultimately lead him to become a consultant.

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Harry took the job at DataServ, a document archiving company, so that he would have a job once he moved back to America. He felt the job was repetitive and that it did not take full advantage of his abilities. He also knew that he did not want to through the process of looking for another job with another firm. The two years in Europe had shown him the kind of work that he wanted to do. He wanted to help companies solve their problems by giving them fresh, new perspectives. He began to realize that he could not accomplish this with a big firm. Harry felt the big companies often lost direction in accomplishing goals. He wanted to be part of the solution and not part of the problem.

In 2003, Harry started Jet Engine Consulting with a friend. They had not intended to form an “official” partnership, but they decided it was good idea to show confidence in their business projects. At this point, they did not have a constructed business plan. Their partnership mostly did work for the National Parks Department, and they were comfortable in the work they were doing for them. Harry and his partner made money, and they were living free of the corporate environment.

Harry and his partner felt they wanted to branch out from their work with the National Parks Department. They realized it was in their best interest to construct a business plan. After figuring out their goals and their direction, they agreed on a two part business plan:

– Consulting: A partner and himself Invest time and effort Produce superior customer service Solve people problems Help companies become more efficient Create a name through good PR

– Product: Enterprise Service Bus “Incubation period” tied into consulting Work out the bugs Develop a relationship through product Consume product and make money Let mature and take to market

In the first part, consulting, they wanted to build their consulting business so that their name was something they could trade on. They wanted to eventually build their own software and they understood that a good consulting reputation would gain them allies in the market. It is with this that they took on a service industry view of the IT market. If they went above and beyond their customers expectations, they would create repeat business that could also generate opportunities through word-of-mouth advertising.

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They wanted to help companies solve the kind of people problems they had seen while working for big firms. They adopted the philosophy that they were not going to be afraid to turn down jobs in order to do great work for their current clients and that they would continue to give added support to clients that used their completed projects.

They truly desired to create and implement their own software. They hoped that be developing relationships with clients, they would find businesses that would allow them to implement their ideas in real world business scenarios. This would allow them an “incubation period” for their software so that they could work out any bugs. They would then be able to “consume” their product to make money. They would continue to support their product and build new relationships through software implementation. Their ultimate goal would be to eventually take the product to market so that it could be acquired.

Unfortunately, in 2005 Harry’s partner decided he wanted to dissolve the partnership and move out of state. He wanted Harry to make him a monetary offer for his portion of their developed software. Harry decided he was not going to pay for something that was not completed and scrapped the project. He was going to find new endeavors and start from scratch. Harry took a six month consulting job with Accenture in 2005. They needed help with their eDemocracy software, and he needed a steady job while he decided what his next step was. He has recently begun developing what he considers “very progressive” software that could change the way companies do business.

Harry has his own view on it takes for a person to become a successful entrepreneur:

“An entrepreneur must understand that their career should be a Humanistic one. They should be in the business of solving people problems. They have to understand that there is no such thing as a one time deal and they can’t be afraid to turn down jobs to ensure the best possible service for their customer.”

Harry currently works 35-40 hours a week in the consulting field. He spends his evenings, approximately 30 hours a week, developing his software. Harry is single and lives in the Central West End area of St. Louis, Missouri. He owns the townhouse he lives in drives a brand new car and is able to travel for recreation 4 to five times a year. He expects to achieve his current software goals in five years.

18

Case Study

The Men in the Red Fedora:

Red Hat was created by two men who had the courage to try something new. In 1992, Marc Ewing graduated from Carnegie Mellon University (18). His intention was to work on software development for UNIX systems. When he discovered that a UNIX workstation would cost him $10,000, he realized he had to find an alternative way to develop his products. This is how Marc Ewing discovered Linux (18). Ewing found programming with Linux easy, since it would run on his home computer. During the process of developing his program, he began spending more time updating Linux and less time on his projects. He decided to drop his other projects and focus solely on creating a better Linux distribution system (18).

Bob Young discovered Linux through his love of a free market. At the time, he was running his own UNIX distribution company called the ACC Corporation. He even published a magazine that was devoted to UNIX systems (18). In 1994, Ewing released is first version of Red Hat Linux (19). Bob Young bought 350 copies of the 500 that Ewing had intended to produce, and it became obvious to Ewing that there may be a future in Linux development and production (18). Bob Young wanted to be in the business of developing and selling Linux. Marc Ewing wanted to continue to develop Red Hat, but he did not want to have to worry about all of the “business stuff” (18). It was a perfect time for these two entrepreneurs to merge their endeavors.

In 1995, Bob Young bought Ewing’s company and merged it with his own (19). He decided to change his company’s name to Red Hat Inc. This is the same year that Ewing is able to complete and release Red Hat Linux 2.0 (19). Red Hat Linux quickly became the number one Linux brand name in the market. The initial success of the product prompts Young to open a corporate headquarters in Durham, North Carolina to better focus their sales and administration functions (19). The next two years will see Red Hat become an important player in the computer market.

Red Hat took a big step in becoming world known when, in1999, they formed a partnership with IBM (19). Through this agreement, both companies would aggressively develop Linux and attempt to challenge Microsoft’s market position. It is also in 1999 that Bob Young decided to take Red Hat public. It is the eight-biggest first-day gain in Wall Street history (19). Bob Young is named on of the top ten entrepreneurs of 1999 and Red Hat announced their intended expansion into Japan. In November 1999, Red Hat acquired Cygnus Systems and became the largest open source company in the world (19).

2001 would see Red Hat finally gain the clout it desired. Bob Young’s hopes would be realized, and software companies all over the world would develop opinions on this upstart company. This is the year that Microsoft CEO Steve Ballmer would label Linux an intellectual property destroyer while Red Hat releases its software manager for

Red Hat Network which provides security alerts and bug notifications to its users (19). Sun Microsystems would call Linux a “better NT than (Windows) NT” and announce that Solaris is Sun’s use of the Linux system (19). In 2001, Amazon.com filed a report with the SEC that they were able to cut their technology expenses by $17 million dollars by using Red Hat software (20). This would be the first instance of major cost savings provided by Red Hat’s Linux platform.

The next three years would see Red Hat finally post a profit and eclipse Sun Microsystems’s share price. Red Hat was able to acquire AOL’s Netscape software, and a survey in 2004 showed that Red Hat ranked among the top ten software companies in gaining IT dollars (19). This year, Red Hat entered into an agreement with IBM and Sony. This agreement called for these companies to buy up Linux patents in an attempt to keep open source free. These companies feel that open source is the future and that it needs to be protected from those who would exploit it. They also felt that open source is the only thing that can “challenge Microsoft’s dominance of the market” (20).

Young the Entrepreneur:

It is important to understand that Bob Young has never considered himself a “computer guy.” He was a businessman who supported the free market concept, and he was always looking for new opportunities. Linux caught his eye when he saw that this operating system was developed by everyday people who were looking for new ways to accomplish tasks. Young is credited with taking a product that was essentially free and finding a way to market it through added support.

Bob Young recently resigned from the Red Hat Board of directors. He has gone on to form his own publishing company that focuses on helping small companies lower their printing costs through new innovations. When asked why he left Red Hat, Young simply made it known that he was looking for a new challenge and that he had done all he could for the little company he had started (20).

Conclusion:

While each of these entrepreneurs ventured into unique markets, they did so armed with several common tools and characteristics mentioned in our research. However, a few characteristics were consistent among each of our interviews: (1) They started with a clearly defined plan. In each case the entrepreneur had some form of a business plan, some written and formalized, and others only visualized in memory. They knew what their primary product would be, the market (arena) in which it would be sold, and why it was distinguished (differentiated) enough to be successful. (2) The circumstances changed and they adopted the plan. Mark Ewing had the vision to see the benefit of a merger; David Garthe re-invented his business after the dot-com bust completely changed the website advertising architecture; Harry Brumleve survived alone after losing a business partner and the prospect of a valuable product line. (3) They constantly strived to realize the plan. Through failed initiatives, dissolved partnerships, and monopolistic competitors each of these entrepreneurs has found a way to keep moving forward.

In addition to basic business fundamentals, all three of our candidates have sound technical skills that could easily keep them employed by another firm. More importantly, they understand that the true value of these skills lies in the products that can be created with them. As entrepreneurs, they are willing to leverage these skills and assume the risks (and rewards) of creating such products. Unrelenting creativity and hard work have assured continued success of these entrepreneurs and their products.

References

References

1) John L Thompson. “The facets of the entrepreneur: identifying entrepreneurial potential” Management Decision. London: 2004.Vol.42, Iss. 1/2; pg. 243

2) http://www.thefreedictionary.com/entrepreneur, viewed September 24, 2005.

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4) “Cities For Entrepreneurs.” Anonymous. Journal of Accountancy. New York: Nov 2005. Vol. 200, Iss. 5; pg. 21, 1pg.

5) Hupalo, Peter I. “Entrepreneur: What’s In a Definition?” Source:http://www.thinkinglike.com/Essays/entrepreneur-definition.html, viewed September 24, 2005.

6) Kephart, Pamela, and Schumacher, Lillian. “Has the ‘Glass Ceiling’ Cracked? An Exploration of Women Entrepreneurship.” Journal of Leadership & Organizational Studies. Flint: 2005. Vol. 12, Iss. 1; pg. 2, 14 pgs.

7) Krell, Eric. “Mastering the Entrepreneurial Life Cycle.” Baylor Business Review; Waco: Spring 2005. Vol. 22, Iss. 2; pg. 2, 10pgs.

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9) Yeung, Rob. “Analysis: Entrepreneurs – The sweet smell of success.” Accountancy. London: Jul 2005. Vol. 136, Iss. 1343; pg. 62.

10) http://www.sba.gov/advo/stats/sbfaq.pdf, viewed November 1, 2005.

Sources from this webpage:

a) “Survival and Longevity in the Business Employment Dynamics Database” by Amy E. Knaup, Monthly Labor Review, Volume 128, Number 5 (May 2005), pp. 50-6; “Redefining Business Success: Dinstinguishing Between Closure and Failure” by Brian Headd, Small Business Economics, Volume 21, Number 1 (August 2003), pp. 51-61.

b)Preliminary data from the 2002 Survey of Business Owners from the U.S. Census Bureau; Advocacy-funded research by Robert Fairlie (Research Summary #243); Advocacy-funded research by Waldman Associates (Research Summary #242).

11) http://www.geocities.com/mengle98/Ch1/page2.html, viewed November 20, 2005

12) http://www.liraz.com/webquiz.htm#q10, viewed November 20, 2005

13) http://app1.sba.gov/survey/checklist/index.cgi, viewed November 19, 2005

14) Donald C Hambrick,  James W Fredrickson. “Are you sure you have a strategy?.” The Academy of Management Executive Briarcliff Manor: Nov 2001.  Vol. 15,  Iss. 4,  p. 48-59 (12 pp.)

15) Suzanne Mulvehill. “Fear Factor: What's really holding you back from starting your own business? These 31 tips will help you face your fears and finally get the guts to become your own boss.” Entrepreneur magazine : April 2005

16) Jim Stovall. “Five Mistakes Entrepreneurs Make.”  Accounting Technology: CPA Wealth Provider: Best in Show Boston: Oct 2005.  p. 18-19 (2 pp.)

17) http://ezinearticles.com/?Critical-Entrepreneurial-Skills&id=84877, viewed November 20, 2005.

18) http://www.salon.com/tech/view/1999/10/04/marc_ewing/ viewed October 29, 2005

19) http://www.redhat.com viewed October 27, 2005

20) http://www.ameritrade.com

21) David Garthe, Owner Garthe Corporation, Interviewed In person by Aaron Johnson, November 18, 2005.

22) Harry Brumleve, Started Jet Engine Consulting, Interviewed In person by Willie McGarry, October 25, 2005.