Panelists for Q&A

1. Panelists for Q&A

2. LESSONS LEARNED FROM SUCCESSFUL SMALL BUSINESSES • Surveys and Slides by • Pat McMullen, President of MGS Construction • and • Karen Stubbs, VP, Business Development, J2 Engineering

3. Before we get started….. • About that Survey • 25 firms, good cross section of all variables • Data is confidential except panelist’s comments • Format • Recap results of survey • Q&A with panel • One-on-One as time allows • Slides with Much More Detail on Website • http://same-satx.org/

4. “They Said It Best” “Running a business is hard work ….be prepared mentally prior to taking the leap of faith”

5. Before you leave today… • Goal: • Walk out with a general understanding of how 25 diverse small businesses established and sustained success • Identify a few things you want to ensure you continue….. a few things you want to stop …a few things you want to start

6. About our respondents…. • Age Range at Startup: 26-57 • Years in Business: 3-23 years • Experience Background: extremely broad • Geography: SW/SE/NE/Upper Midwest. Lacked CA and NW

7. More about our respondents… • 20 firms were once “Start Ups”; 5 were acquisitions of existing companies • No Super 8a’s ---we’ll explain later • Size at start up and now • New Startups were 1-3 employees • Buy outs were 6-50 employees • Ranged from 7 to 450 employees today

8. “They Said It Best” “find an outlet besides drinking that can keep you sane and focused”

9. If there’s one flaw in this survey • Startup success rate in our industry is actually high (yes…it really is) but we only spoke to folks who were successful • Those who failed would have most likely added different perspective • We decided it was too awkward to interview those firms …de nile is not just a river in Egypt

10. Why Did They Start a Business • Positive: “Just wanted to do it” • Negative: “Couldn’t stand working for others anymore” • Limited “Opportunity Driven” answers but more personal for our sample population rather than coming together of market conditions. • Hidden Message…when you’re ready, there will be opportunity

11. How Did Startups..Begin • Most started out as Federal subcontractors; several began as commercial Prime contractors. No startups started as Federal Prime • New regulations drive New Opportunity: e.g. creation and expansion of SDVO brought new owners. And there are always new regulations e.g. 8(m)

12. “They Said It Best” • “Yes, you can hire family….you can also step in front of a South bound train…with my family, I’d rather step in front of the train”

13. Good Buy.…Buy Out • Most recovered investment in <3 years • Tended to grow much more rapidly when compared to ‘start ups’ • Minimal ownership changes 5-20 years later • Beware: small sample population for above statements .

14. Was There One Outstanding Problem at Start Up • Of course….Money!!! • All other issues vied for 2nd place • And this is why we chose to not include Super 8(a)s as they’re typically cash rich

15. Differences in Type of Services / Type of Business • It appeared to us that all types of businesses had similar experiences • No major differences noted by type of service • However…. • 8(a) participants clearly benefited • Construction firms had additional challenge of bonding

16. “They Said It Best” “it was hard at start up and I did some dumb things but, five years into it, this is the most fun I can ever imagine. This is my company, understand? I built this thing myself. I love being an entrepreneur.”

17. Lessons Learned at Startup… • No one knew everything about running a business, everyone had to learn a lot • Some knew very little at all • Almost no one had it easy (2 out of 25) Almost all spoke about putting in more hours but no one expressed regret: but we chose successful firms

18. Lessons Learned at Startup… • A lot of focus on understanding all that was involved in building the business • For most, this was a more stressful time because of the uncertainty about surviving

19. Lessons Learned: at Start Up • All of our firms survived start up • They did through a various means • Common threads • Hard work • Passion • Basic business sense

20. “They Said It Best” “We are successful now because we established a good management and business plan and had the courage to follow through.”

21. Formative Years Overview • Years 3-5 were less about learning what to do and more about hiring staff, establishing relations, establishing business processes • Hiring the right people dominated most discussion at this period…..Comments consistently reinforced major point from Good to Great: you simply can’t outgrow your ability to hire and maintain the right people

22. Formative Years: Two Issues for Everyone • Need to focus…lots of opportunities but not enough time to chase every opportunity • Need to diversify ..New clients..New services

23. Formative Years: Major Transitions • “culture vs. growth” • “letting go” • Moving from doing work to being a business person who is now responsible for leading the company and managing people and processes

24. “They Said It Best” • “People talk about the long hours and make it sound miserable. But then you try to buy their company and they scream….I’LL NEVER SELL MY BUSINESS..”

25. Predicting Success • Able to find and retain good people who “fit” • Owner learned to delegate • Developed relationships that formed future of company…stopped bidding beyond those clients • Began to show financial discipline e.g. budgets

26. Predicting Success (cont’d) • Most bought into strategic planning • Found “Sweet Spot” • Found a “Good” Mentor • 8a program was huge success for most (not all) • Mentors came in all shapes and sizes (e.g. individuals, agencies (SBA), companies, SDBO) • Mentors filled in the gaps and everyone has deficits in skill set

27. Start Up Period vs. Formative Years • Seemed startup was more stressful due to fear of failure. • Future years often had much greater problems but owners knew they could survive • It didn’t get easier….owners were smarter and had evolving support system

28. “They Said It Best” “20 years later the most important lesson at startup is still the most important lesson….we need to always maintain our focus”

29. Just when you thought it was safe to go out…. • Older well established firms had many of the same challenges • Still vulnerable to loss of key people • More difficult to be flexible with ever changing markets • More pressure to maintain revenues to support existing staff • But they were clearly less vulnerable

30. There are plenty of resources …

31. Darwin right again… • The majority of our respondents evolved significantly from initial services • Where services remained constant, other aspects of the business evolved (client base, culture, locale) • For some, no correlation of current services and clients to when they started the company • Lesson Learned: Need to stay flexible and continually evolve…or become extinct

32. “They Said It Best” “Persistent is the key to success”

33. Glad I didn’t know then.. • For this group….ignorance was bliss • Most said they’d do it again but it would have been more stressful if they knew the risks • Seemed they had a sense of the basics (bring work in, do the work, manage the business) and learned from there • Lesson Learned: no one path

34. Differentiating yourself • Surprise Finding : Nothing new under the sun. We anticipated more complex answers. • We kept hearing the basics: Quality, Responsiveness, Best Value, Integrity • Lesson Learned: though getting to success can be difficult, understanding what you have to provide as a product/service is fairly straightforward….do good work

35. Lessons Learned: Accounting Software • Purchase Proven software that readily and seamlessly interfaces with government software and make sure you can handle job-cost accounting. • DO YOUR RESEARCH, you don’t have time or money for shortcuts • Start simple (QuickBooks) and move on • Buy software that is government auditable • Buying the software is easy, training staff is major task

36. “They Said It Best” “the most painful thing I did was save money on a bookkeeper when we started the company. It costs us about $15,000 in about 6 months to fix her mistakes. Oh but we saved about $600 in salary. Dumb, dumb, dumb move”

37. Lessons Learned: Hiring a Bookeeper • MOST IMPORTANT person we hired • Relevant experience to your industry is critical. Most know one or a few industries….but must know yours • Make sure they understand federal work • Experience with your business and software

38. Lessons Learned: Hiring a CPA • Best move was when I hired my CPA as our CFO • Get references, make sure they are familiar with government accounting • Use someone sensible, not a hot shot • An absolute must but ….must understand your industry and federal work • Invaluable, taxes can impair the entire business picture

39. Lessons Learned: Hiring Staff • At times we needed to step out and hire people before the work is actually booked • Don’t rush, check references, background • Once you hire, difficult to fire so we used temp agencies to try them out • One of the more stressful actions is terminating someone, especially if it’s a good person who is simply wrong fit for job

40. Lessons Learned: Involving Family • Never – you cannot fire them • Don’t..that’s it don’t do it • Don’t unless you must • Can be beneficial • Very personal decision • Not a problem for us, but not recommended for all • Large % of respondents used family!

41. Lessons Learned: Working with Banks • Imperative, can not grow with out a line of credit and working capital • Find one that doesn’t charge excessive fees for online bill pay and payroll options • Always work with two until you find the one who is most helpful and trustworthy

42. Lessons Learned: Working with SBA • They are your friend and an invaluable resource • Can be the key to your success but don’t believe everything they tell you • Difficult getting certified, very successful relationship afterwards • SBA can be like a university when it comes to training and education resources

43. Lessons Learned: Securing Bonding • Life blood, must keep them happy • Talk to people in the industry, find out out how they like their Surety company • Do it before you need it • They were the key to our success. Bonding company should be confident in your abilities to bid correctly and then finish the projects on time /on budget • We secured a relationship with insurance broker before bonding was required which made it easier

44. Lessons Learned: Contract Admin • Hire the best qualified personnel to do the job • At time challenging; some slow responses can lead to lack of work • Start knowing this early, ….it gets hard as you grow • Have a qualified person, who understands contracting, this will save you from getting in trouble and it will save money

45. Lessons Learned: Procurement • Mistakenly thought this was an easy hire…dumb move. • Must have procurement staff that are well versed in understanding and conveying to other departments and managers what we must do to maintain contract compliance with government contracts. • Life blood of company …must have a handle to survive

46. Lessons Learned: Business Development • No one sells the company better than the owner • The client wants to see the owner • Attend SAME events • Placing this above short term profit was key to our success • We did it first class and it paid off • Beware of BD types – some look better on paper than in reality • No one will care for or sell for your business better than you • Right person will make the difference between success and failure • You cant sell and do at the same time

47. Lessons Learned: IT Systems • We are successful by contracting only what we need • Fast changing sector needs to be kept up to date • Cannot afford to reinvent the wheel • Consult trusted and proven source for IT solutions as you grow • Hire a dedicated person when you get the chance. If it is down, you are down • Get a system/server that can support people working remotely • We did it first class and it saved us money

48. Lessons Learned: Quality Control • Do not cut quality control out of a project- ever • Without this you might as well close shop and do something else • Cant have enough of it. Ever • You cannot take it too seriously, ever. • As owner, QC is your responsibility • Essential, a company is known by its product and experience

49. Lessons Learned: Safety • Always number one. Give employees empowerment to stop work in unsafe conditions • If you are not safe, you will not work for the federal government • Essential /Priority One/ No short cuts • Develop procedures • Do it the right way which is the safe way

50. Lessons Learned: HR • Write or buy a very detailed plan and have all employees sign off on it upon hiring • Recruiting, hiring, retention and termination are learned skills; much information is available for them • Comply with all hiring rules and keep current labor law posters properly posted