Why millionaire entrepreneurs stand apartWhy millionaire entrepreneurs stand apart

Why millionaire entrepreneurs stand apart

Last Updated: Thursday, 3 January 2008

By Amanda Gome
Adjunct professor at RMIT University

Increasingly,
Australians are chasing fame and fortune. They want to become
millionaire entrepreneurs who are constantly in the business press,
change their industry and make the pages of the BRW Rich 200.

For
most the dream dies early. Of the 110,000 companies that start every
year, few come close to $1 million revenue in the first year or to
double and triple their revenue year after year. My research into
high-growth companies, in conjunction with RMIT University, shows only
about 5–10% of these meteorites can sustain fast growth for more than
three years in a row.

Yet year after year, a class of
millionaire entrepreneurs are born who go on to change their industries
and build huge wealth, which is reinvested into property and shares.

What
makes the millionaire entrepreneur so different from the average small
business owner? After more than 20 years of research into fast-growth
companies, I have seen 10 standout factors that differentiate this
highly successful breed from the start. Some of these factors
completely contradict the stereotype entrepreneur.

Fact 1: Millionaire entrepreneurs choose their industries and timing very carefully.

Ask an entrepreneur why they are successful and chances are they will reply: “Luck! I was in the right place at the right time”.

Forget
luck. Millionaire entrepreneurs have highly sophisticated radars. They
can see that something in society has changed, that customer demands
have shifted or that the Government is going to create new regulation.

Most
highly successful start-ups are based around products and services
initiated in response to new trends and changing conditions.

The
fastest-growing start ups in the past few years have been in the
following areas: terrorism security, protection and provision of
knowledge, services to assist the resources boom and the export
industry, baby boomer services, healthy takeaway food, services to help
people lead more balanced lifestyles, software that links people and
projects, internet sites that create communities, and highly
accountable advertising and PR agencies.

These areas all
fit into the fast-growing industries of IT, property and business
services and finance and insurance. And they all are new businesses
responding to changing trends, threats and opportunities in society.

So
what makes the millionaire entrepreneurs such close observers and
arrive at the big idea? It ain’t luck. Entrepreneurs are voracious
readers and scanners. They scan people, trends, society – and their
potential customers.

The entrepreneurs have an ability to ask the right questions that
prompt informative answers. Yes, they are probably born with a high
emotional intelligence but they also use a problem-seeking,
problem-solving process.

Rather than asking, ‘Do you
need this product?’, millionaire entrepreneurs ask the customer what
problem they have and how could it be solved. Once the business is
established, they use other tools, surveys, feedback forms and
complaints – anything to elicit information and ideas from customers in
order to create new innovations.

One successful graphic
design company, Vivid Design, sends out Scratch and Win tickets to
encourage clients to fill in customer surveys. There is an 80%
completion rate. The clients can’t help but scratch the ticket and then
they feel obliged to fill in the survey, explains founder Damian Cooke.
As one chief executive of a technology company says: “It is our role to
advise our customers before they are aware of the need.”

Fact 2: Highly successful start-ups are founded by professionals in prestigious professions.

Rarely
now do we see the school leaver start high-growth companies. Nearly all
have tertiary degrees and then go on to work for large businesses
throughout their twenties before launching their own company in their
thirties or forties.

The businesses usually have one
founder who has been highly successful in their specialised profession.
They have been neurosurgeons, stockbrokers, advertising executives,
accountants, engineers and executives in big companies.

Often
they have become disenchanted within their current organisation:
resentful at the focus on cost-cutting and frustrated that they can not
pursue an obvious opportunity. They walk out and use their networks to
access private equity and launch their venture. For some millionaire
entrepreneurs it is their second of third venture and they finesse
their entrepreneurial skills with each venture.

In fact,
research by Kosmas Smyrnios at RMIT shows that almost half of highly
successful fast growth entrepreneurs have masters degrees. And 5% have
got PhDs.

Fact 3: Millionaire entrepreneurs possess very superior emotional intelligence.

Autocratic?
Forget it, although entrepreneurs use the sheer force of their
personality to create and communicate a powerful vision. Recent
research shows the one major characteristic of fast-growth
entrepreneurs is the ability to bring teams of people together and
inspire them to work towards the one vision. This requires very
superior emotional intelligence.

Often millionaire
entrepreneurs are very good at reading employees, knowing which one
needs shock criticism to motivate them, which one needs step-by-step
assistance and quiet encouragement, and which one needs loud and
frequent pats on the back.

Fast growth requires bringing together the right skills, assets,
relationships and abilities. All of this requires sophisticated
communication skills.

In fact, in these days of skill
shortages, if you can’t recruit, inspire and retain a team of great
people, you don’t have a business. Most of the entrepreneurs offer
flexible work practices and increasingly let staff have a close
involvement in the decision-making.

Most don’t pay
above-award wages but they excel at building in incentives, rewarding
with commissions and bonuses. They work hard to communicate the vision,
provide a smart workplace and perks, from trips away to flash cars.

They
offer family-friendly environments, telecommuting – even child and dog
care. And they love to celebrate even small milestones. Instead of a
pay rise, a promotion in a fast-growth company might mean a position on
the social committee to organise an event.

Fact 4: The most successful entrepreneurs are not loners – they have long term business partners with complementary skills.

Think of the Rich 200.
Many of the people on that list had business partners. Michael Buxton,
real estate agent, met Max Beck on the tennis court in 1976 and they
went on to create Becton, which built many of the landmark CBD
buildings in Melbourne through the 1980s and 1990s.

Entrepreneurs
Lloyd Williams and Ron Walker also struck up another very successful
partnership, with Williams the strategic brains behind Hudson Conway
and Walker, the networker, door opener and facilitator. Many
millionaire entrepreneurs started in business with family members
including brothers Rino and Bruno Grollo of property development and
construction company Grocon. The key is to ensure the skill set of the
partners is completely different. There is usually one strategic genius
who is quite introverted – and who partners up with an extravert who
excels at marketing, communications and networking.

Fact 5: Millionaire entrepreneurs do not spend that long planning their business.

Hopeful
start-ups are told compulsively to plan, plan, plan. But if they did,
they would soon find themselves out of business: the competitive
landscape is changing too fast. If you have a good idea, you cannot
afford to spend two years researching it.

Of course, the
exceptions are the expensive start-ups in industries such as technology
and biotechnology. But most fast-growing businesses, especially in the
services industry, take less than six months in the planning. Some just
took a few weeks – or even a few days – to hatch. But be warned: those
entrepreneurs have often had decades in the industry with many networks
and access to new technology and distribution networks.

Fact 6: Millionaire entrepreneurs watch every cent.

No
surprise there. Most start the business from home and only move out
when they are forced out by too many staff taking over their lounge
room and they are fearful of the local council knocking on their door.
Tales abound about the sacrifices they make, from sleeping in cupboards
to not being able to eat. The first year is by far the worst.

Needless to say, they are often profitable from day one. Soon after they are paying themselves a fairly generous salary.

Fact 7: Millionaire entrepreneurs are no fans of budgets.

How can they be when they are so responsive to changing customer needs and the competitive landscape?

Yet
they do plan – but if they did not stick to budgets they would be out
of business. So how do millionaire entrepreneurs budget? Our research
shows they set strategic goals, often just on several sheets of paper.
But no five-year business plan for them; they review their strategy or
goals on average every six months.

Take Terri Scheer,
who runs a fast-growth insurance brokerage, Terri Scheer Insurance.
Once a month she sits down with her management team for a detailed
analysis of the market and her company performance. At these meetings
she looks for changes in regulations, customers and the market. Once
she predicted the market would turn down – and quickly developed an
insurance product for landlords just as the demand for such products
increased. When asked for a budget: she replies: “Let’s just do as much
business as we can.”

Targets are changed swiftly because
the millionaire entrepreneurs know that goals can actually hold back
fast-growth companies. As one entrepreneur, Paul Gollan from Australian
Mortgage Brokers, says: In the first three months you might be flying
and exceeding the plan and then if you have a 12-month target you might
go into a consolidation phase.” Why? “You could or should be thinking
about growing again,” he says.

Budgets are also changed,
depending on opportunities. What happens when the perfect person
becomes available? One millionaire entrepreneur says he would blow the
budget every time to hire that person. Another says he opened a
Melbourne office, which blew his budget, just to keep a prize employee
who has to shift when his wife is moved interstate.

What happens when they blow the budget? Millionaire entrepreneurs
don’t mutter about how they should have stuck to their budget or
planned better, or they should just keep going and things will turn
out. Instead they ask strategic questions: How do we maintain our
long-term strategic advantage? Are we the best in the market? Do
customers really, really love our products? Are we keeping to our core
competencies? Where to now? How do we take this business to the next
level?

Fact 8: Millionaire entrepreneurs are not extremely competitive.

Well,
yes and no. Yes they are often aggressive and brash. Many say they took
clients from former employers, they poach aggressively from
competitors. One company put recruitment ads in the elevator of a
competitor. They sue for infringements. Their managers discuss
competitors’ strategies and sales people share information about
competitors.

They don’t have an “undo the competitor”
posture. And none of them say they respond to actions initiated by
competitors. Instead, they stay ahead of competitors. They keep a close
eye on them, knowing their pricing, their market share and so on, but
they view themselves as the leaders.

They don’t take
much notice of the local competition. They compete with the world’s
best companies. They travel a lot, search the internet, go to trade
fairs and bring back ideas.

I love this quote: “If I
play their game, I go broke. If I play my game, I set the rules,” says
David Watson, founder of Tangible Solutions.

Fact 9: Millionaire entrepreneurs are not great salesmen, but they do need to excel at marketing.

Surprised?
But this makes perfect sense. The entrepreneurs are brilliant at
building relationships; in fact, they understand relationships so well,
they often won’t take advantage of them. Many comment this stops them
being really good salespeople because they are too highly attuned to
when it’s time to stop pushing. Sometimes they stop short of flogging
their products and services and do not close the deal.

Where
they excel though is opening doors and building the relationships, so
an excellent sales team can sweep in after them and do the deal.

Established
millionaire entrepreneurs use the same skills to build alliances and
networks and develop very close customer relationships and distribution
channels. They can’t afford mainstream advertising so they develop
alternative advertising programs, more and more using the internet.

Fact 10: Millionaire entrepreneurs are not risk-takers.

When
reading case studies of high-growth entrepreneurs, the risks they take
often seem enormous. They throw their children out of a bedroom to
establish an office. They run 20 credit cards at once to finance the
business. They take their parents’ superannuation money to fund the
business.

They admit to taking more risks than most
people they know, but ask them if they are risk takers and they deny
it. It always puzzled me until we did further research.

Fast-growth entrepreneurs see themselves as calculated risk-takers.

The
difference? I think it is because these entrepreneurs are very
resilient and bounce back quickly from adversity. If something goes
wrong, they have the capacity to see it as a lesson or the path to a
new strategy that is better: not a risk that failed. They say: “What a
great lesson. We learnt so much from that and what’s risky about
learning?”

See? They are not risk takers.

 

Checklist: Are you a millionaire entrepreneur?

  • You probably started the business from home.
  • You planned the business for less than six months before opening.
  • You were profitable soon after launching.
  • You have an export focus.
  • You use technology to give a very strong edge.
  • You spend more than 10% of revenue on R&D.
  • You price yourself in the middle of the market.
  • You plan to keep growing.

 
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