Nothing to Lose, Everything to Gain

by Ryan Blair

  The funny thing about Excel spreadsheets is that you can build a very successful business in them that has no connection to reality. It was so exciting to see these huge numbers pop up on my spreadsheet that I rationalized the results. In reality, I had no idea how to get my business to such levels, but I knew how to get Excel to get me there, and “there” looked like a lot of fun.

  When I went out in search of investors with these numbers, I’d be asked questions I had no idea how to answer, I’d be criticized, and I’d be laughed at. Instead of building the business model on an accurate prediction, I built it on the absolute best-case scenario. And if any of my businesses had actually lived up to these Excel-built expectations, it would have been only because of luck, not because of actual skill or ability.

  In the SkyPipeline deal, one of the reasons why I didn’t make so much money as I should have was because my forecasts were always off and way too high; the real numbers couldn’t match the expectations I had set for my investors.

  After a meeting one day, a board member pulled me aside and said, “You had a great month. Sales were up by 20 percent, but you predicted 30 percent. If you’d predicted accurately, you would have gotten high fives all around, but instead you missed your numbers by a third.”

  After you do that enough times and are humbled by a board that lives to humble young entrepreneurs, you learn to forecast your numbers accurately.

  Same goes for when Blyth was about to buy ViSalus. At the time, our market in Jamaica was growing rapidly. When asked my opinion on the matter, I said that by the same time next year our sales would be a million dollars a month. I remember Bob Goergen stopping the meeting and saying, “A million, huh? OK, we’ll check back in on that number.”

  Needless to say, at the time of writing this, our Jamaica market does 1 percent of a million dollars a month. And Bob Goergen did check back. I learned my lesson more than once.

  It pays greatly to be accurate in your projections.

  2. DON’T HIRE PEOPLE WHO LIKE YOUR IDEAS ALL THE TIME.

  When you’re just starting out as an entrepreneur, you’re selling everyone. First you’re selling yourself on the idea, then your investors, your spouse, your mom . . . basically anyone who will buy into what you’re doing. And most people don’t buy into your crazy idea for revolutionizing the dog food industry.

  Occasionally someone will walk into your office looking for a job, and he’ll buy everything you’re selling. He’ll love your ideas. Every time you open your mouth, he’ll say, “Yes, sir!” and “Oh, that’s amazing!”

  You’re thinking, Finally, someone who gets me! He understands my vision!

  And because you’re so used to rejection, the flattery goes right to your head, and you hire that person on the spot.

  Of course I don’t have to tell you how this story turns out: if you hire dumb people, you get a dumb company. Now I look for employees with a high three-digit intelligence. They need to question the things I tell them; think deeply on topics, critically; and be able to beat me in Connect Four.

  3. DON’T FOCUS TOO MUCH ON THE COMPETITION.

  This is a story about how I spent a million dollars trying to get payback from a competitor, and paid dearly.

  As you’ve probably figured out by now, I’m an extremely competitive person. It’s really gotten the best of me more than once. When we first started ViSalus and got some momentum going, I started recruiting top people to help us build the business. Well, one of our direct competitors got wind of it, and started dismantling my leadership team by luring away our leaders. (The competitor bribed them with cash and other incentives.)

  I had no idea what I was up against, but it was a well-funded army whose sole objective was to take us down. They knocked us on our asses, and sent us down from $1.2 million a month to $300,000 a month. After that I had such great difficulty turning our company around that it was almost as bad as the 2008 recession. Had I not gone through it, however, I never would have made it through the recession.

  It was like being back in my juvenile delinquent days when a rival gang figured out where my homeys and I lived. They would keep attacking until we either left the neighborhood or got them back. Well, ViSalus successfully fought off the competition, but in one fell swoop that competition took nearly a million dollars a month in sales with them. They killed a lot of my family.

  I swore vengeance.

  Fast-forward to 2008, when I’d just sold ViSalus and the economy had started to falter. The very company that had attacked me was suddenly faced with absolute collapse. I remembered so vividly what its people had done to me—the sleepless nights, the loss of employees, the lack of confidence from my shareholders—and because of those memories I let my vindictive side get the best of me. While my competitors scrambled to save their company, it was payback time for me. I started dismantling their leadership team. Not to steal sales but solely for the pleasure of watching them fall. And they did.

  In return I got all their disloyal, unsuccessful leaders, spent almost all my company’s capital on the effort, and nearly lost ViSalus as a result. In retrospect, that company would have failed with or without my assistance, and if I’d been smart, I’d have put that same money into restructuring our business model to adapt to the new economy earlier. And in the end they would have failed even without my help.

  4. DON’T WASTE TIME CARING WHAT OTHERS THINK AND WORRYING TOO MUCH ABOUT MISTAKES, EVEN MILLION-DOLLAR ONES.

  I used to care too much about whether people liked me or not. For example, if I was off on my numbers—as I often was, thanks to my wildly overoptimistic sales forecasts—I would start talking in circles until I sounded like an idiot. Now no matter how bad it sounds, I say what’s on my mind and focus on the solutions, not the problems and my excuses for them. In these situations always remember these five words and twelve letters: it is what it is.

  Also, I used to worry about the mistakes I’d made and how close they came to knocking me out of the game. Some people might say, Who cares when you’ve got nothing to lose? The problem is that when you’re a survivor, you actually care a lot about failure. You want to win so badly that you’ll rationalize anything just to keep an idea alive.

  But in business you have to let the mistakes become part of the process, learn from them, and then move on as quickly as possible. My best victories were rooted in my greatest mistakes.

  For instance, at ViSalus, when we launched our weight-loss products, we did it all wrong. We added them as a separate product line to two already successful product lines, thereby giving our customers three lines to choose from. It didn’t work. We had to learn from the mistake and relaunch the entire company around the concept of a ninety-day weight-loss challenge. Now our weight-loss line is our growth engine.

  If we’d sat around getting mad at ourselves, we never would have relaunched the line correctly. We took a big mistake and learned from it, and then turned it into an absolute success.

  As an entrepreneur building a multimillion-dollar business, your failures are going to be your greatest assets, provided you have a philosophy that addresses mistakes, strives to understand them, learns the key elements in them, and turns them into successes.

  5. DON’T DO YOUR BUSINESS WHERE YOU DO BUSINESS.

  After SkyPipeline was sold, I started another business. During the merger of Nexweb and SkyPipeline, one of the guys we’d hired to train our salespeople approached me about an idea for a company that would empower and educate high school kids. Having been an at-risk high school dropout myself, I really got into the idea.

  Richard wanted us to start speaking at various high schools and get their parents to buy books, CDs, and so on, to help their children. I jumped right in and went back and spoke at my old high school, and at about six others from LA to Chicago. I started getting passionate about the project. So as I exited SkyPipeline and invested in the new company, called Enspire, we created some simple, free software, and aimed to offer some online goal-setting tools. This wa
s 2003 before social networking had really taken off. Our original idea was to start a social network around people’s inspirational and motivational goals and connect them based on other mutual goals.

  I dove right in and started hiring people. We had about ten full-time employees in a tight-knit start-up environment, everyone working together in the same room and sitting around a big conference table making phone calls, writing content, booking appointments, and pitching our business to anyone who would listen.

  I could tell that one of the women we’d hired had a crush on me. I was recently single at the time, but I decided not to act on it. It’s not good business for CEOs to be sleeping with an employee and I could sense it would be trouble.

  But I was young. And she was young. I was single. She was single. And one night after a bunch of us had been drinking and partying at an employee’s birthday party, this girl offered me a ride home. I don’t believe in drinking and driving and she was sober that night, so I jumped into her car and . . .

  . . . early the next morning, I was awakened by a phone call from my business partner Richard, and I’m lying in bed next to our employee. Embarrassed, I lied. “Oh, I’m at my house . . .”

  I knew I’d made a big mistake, and I swore never to make it again. She was hoping that we’d continue having a relationship. I prayed that she would have the maturity to deal with our actions. We were on completely different pages. I talked to her and explained that as adults, our actions should not impact our working relationship. I told her that I respected her talent or wouldn’t have hired her otherwise; what happened was private.

  Fast-forward a few weeks. I’d been weighing my actions around the office carefully, so as not to treat anyone more favorably than the others. I was hoping that years down the road, both she and I would look back and be comfortable knowing we’d made a mature decision. Richard called me into the office, and as I walked in, he was standing there staring at me, and the girl was standing in the corner sobbing. “She told me everything,” he said. “You’ve been lying to me. You’ve been trying to cover this up. You betrayed her, treating her as if she doesn’t exist around the office because you’re trying to overcompensate. What is she—a notch on your belt?”

  I remember saying, “Are you kidding me? We’re adults here!”

  He absolutely tore into me, and used the moral high ground as his pulpit. I realized that what he was really attempting to do was use this scandal as an opportunity to take control of the company.

  I was the funding behind the project and I told him that if he kept it up, it was going to tear apart the company. I went home absolutely overwhelmed. In the meantime, my partner proceeded to call an all-hands meeting, attempting to turn everyone against me. Ten jobs were now on the line, and some of them were my friends and past employees. When the meeting was over, I was informed that they’d decided as a group that I was to come back in a sales role, and (surprise, surprise) Richard would take over the job as CEO.

  I was so embarrassed, and humiliation is one of my biggest red buttons. I was furious. I’d quit my job, I had invested a lot of my money, and there was no way my ego would let me come back to work in a sales position when I’d funded the entire business.

  They knew there were just enough funds in their bank account (provided by yours truly) to keep going without me. So I left, and Richard agreed to pay me back at least the initial $30,000 I had dropped into the deal.

  Turns out Richard was no CEO, and he soon had to close the company. Everyone got walking papers.

  It was an absolutely failed venture. When I got the call saying the business was closed, I sent one of my friends to get the computers. I had the ten work stations set up in my loft on the fourteenth floor of the Marina City Club in Marina del Rey (computers were even on my balcony) and started hiring new employees, then proceeded to start a new company called PathConnect out of my living room.

  Because of the things I learned while failing at Enspire, when we later merged PathConnect and Solution X, I turned this million-dollar mistake I’d made into a multimillion-dollar windfall.

  The moral here is do not fraternize with your employees, and choose your partners wisely. Sometimes people agree to things on paper that they don’t understand in reality. And in my opinion, a true partner would have handled this situation much differently. A true partner would have confronted me privately and said, “You screwed up. You lied. We need to talk about this. This is never going to happen again.” I would have accepted that. Instead, my partner chose to let his ego kill a lot of jobs, and I vowed never to make the same mistake if I were put in his situation in the future.

  This is an extremely tough lesson to learn, however, I know being a hopeless romantic, it’s easy to convince yourself that you can be the next Bill and Melinda Gates, who meet at work, fall in love, and are able to build their passion with passion. Unfortunately, the probability of a successful relationship is extremely low, so the likelihood of that happening is far from reality. It’s more likely instead of becoming the Gates, you become the McCourt family, a husband and wife who ran their business together and when they divorced they went through a nasty court battle, ultimately both of them publicly disgraced, and forced major league baseball to take over the Dodgers.

  In order for you to get this profound lesson deep into your psychology I’m going to use a technique that is uncommon in business education. In fact, I had to do a deep recall into some of the more obscure learning strategies that I have applied in order to firmly anchor lessons into my subconscious mind. This technique requires a chalkboard and chalk—have you guessed it? Write the following words:

  Don’t do your business where you do business. Don’t do your business where you . . .

  Trust me, though, you want to learn this lesson without having to go through it yourself.

  Thou shalt not “do your business” where you do business.

  6. DON’T ALLOW SALES EMPLOYEES TO SELL YOU.

  Salespeople should not have time to sell their CEOs or any executive other than those of a prospective customer. This is only acceptable during review time, or while handing in a material account. Then you should listen to the pitch. If a member of your team comes to you with poor results but a great sales pitch—fire him. He’s spending his time selling you when he’s supposed to be selling. A good salesperson doesn’t have that kind of time.

  Which leads me to . . .

  7. . . . NOT FIRING FAST ENOUGH.

  You’ll never regret firing someone unless, of course, you let it drag on and they comes back to haunt you by saying they felt misled or wronged. Pull the trigger fast. I’ve settled enough lawsuits over this one to feed a family of five for ten years.

  8. DON’T GET CAUGHT UP IN YOUR COMPANY.

  A company isn’t just an entity; it’s a collection of people. Measure the collective passion of your team and the collective intelligence, and you have a company that’s either worth something or it’s not. Don’t get caught up in your logo or the mission statement on the wall. Get caught up in the people who are within those walls.

  9. DON’T UNDERFORECAST CASH NEEDS.

  Just as bad, if not worse, than overly optimistic sales predictions, underforecasts can also cost you millions. When you have several people and their families depending on you for their paychecks, and you’re out of money . . . now that’s a nothing-to-lose situation. (If you have a good company, I’ll be happy to lend you the money to meet your underforecasted cash flow—at a very, very expensive cost.) I’ve taken these types of loans and, believe me, they’ve cost me clearly.

  10. DON’T TRY TO DO TOO MUCH ALL AT ONCE.

  When I started PathConnect, I was trying to run two businesses at the same time. I thought, This is great. I’ll be just like Steve Jobs with Apple and Pixar. Yeah, the difference between Steve Jobs and me is that he’d worked with the same high-quality teams for years, and had many more zeroes in his bank account along with significant experience from his days at Apple. I’d had less exp
erience at being an entrepreneur, and not enough money to hire the quality teams I’d need to run the businesses, or, quite honestly, the aptitude to run the companies simultaneously. Lesson learned.

  All too often I hear guys say, “I have eight companies!” Unless you’re Warren Buffett, do not own eight companies. What’s the good in having six businesses that make less than $100,000 a year when you could own just one that makes $1.6 million a year? As the old saying goes: A bird in the hand is worth more than two in the bush.

  11. NEVER WRITE SOMETHING YOU WOULDN’T WANT TO COME BACK TO YOU.

  Just after I sold SkyPipeline, I got kind of lazy. I knew I was going to make a lot of money, I was young, and I was already looking forward to the playboy lifestyle I would soon be leading.

  One day I showed up at the office late and seven days unshaved. It was Halloween, and all I had on my mind was what I was going to do that evening. I’d planned to take my crew to the Playboy Mansion. We had limos lined up, girls invited, and we were going to have the time of our lives.

  Because I had nothing to do, and because I hated the people I was working for, I decided to sit down and craft an e-mail to “my boys” about the evening’s festivities. I went into great detail about the night’s plans. I told them where we’d be going, what they needed to avoid, and even . . . what to bring to “protect” themselves.

  I ended the e-mail by telling them that they had no need to worry about anything except what they’d be wearing. Everything else, including the limos, bottle service and after party, would be paid for from the sale of my company. I, personally, would be wearing a cloak and mask, just like Tom Cruise in Eyes Wide Shut. And as you can tell, I like to write, so I went on to describe in every detail how we would conquer our objectives that Halloween evening.