May 1, 2008

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Building a Foundation

Every Successful Company Starts with an Idea

Janine S. Creager

May 1, 2008


When Bryan Welton, president and CEO of Namefiers received his first order from Hewlett Packard, he could’ve shouted from the rooftops with joy. But when asked for the company’s graphics department, he was absolutely speechless. “I didn’t have the heart to tell them the company was just my wife and me,” says Welton. “So, I went along with it. I couldn’t sign my name Bryan, so I signed it [my middle name] Lynn.” Signing forms with his middle name and setting up an answering machine he bought at Wal-Mart to play “on hold” music from the couple’s 100-sq.-foot office were two tactics Welton used to make his company appear larger and more established than it was. Now, with more than 60,000 clients serviced from an 80,000-square-foot office and warehouse, he doesn’t have to pretend anymore. Welton is an anomaly for entrepreneurs as a whole, as the odds of making it as a business owner are stacked against them. For creative business minds like Welton, success usually comes by weathering some rough beginnings, working long hours and enduring sleepless nights. The answers don’t come easy, but as shown by several successful Utah business leaders, it can be done. Out of the Gate Before the first product is made, or the first service offered, most would agree that a few essential building blocks need to be in place. “It’s sort of a misnomer that starting your own business is easy, that working for yourself is easy,” says John Lund of the beginnings of his company, StoryRock. “The reality is that you have to commit and never turn back.” Motivation and a solid belief in your product is crucial for success, Lund says. StoryRock officially launched in 1998, but began much earlier as a concept in John Lund’s mind: What if digital technology could be used to capture high school memories? With that optimism, Lund was able to transform this concept into CDs and DVDs of athletic events, school plays and color images for thousands of schools around the country. Later, this same technology was applied to preserving historical records for military personnel and then as a resource to the burgeoning scrapbooking industry. For Michael Proper, CEO of DirectPointe, which provides computing managing solutions and services, taking a personal inventory helped him define the direction he wanted to take with his company. Proper knew the importance of taking charge of his life, having been abandoned as a child and growing up in the foster care system before finally being reunited with his mother. “You have to get the direction, the clarity,” he says. “You’ve got to learn to ask the questions and understand the need, and question your own logic and thinking: ‘Are the concepts true and correct? Can they be adopted in the real world? Is it really right?’ “The basic fundamentals are all there,” he continues. “There’s nothing stopping anyone of us from starting a business. When you understand those parts and principles [it makes it easier]. Our own minds are very, very powerful in the war of business. Using your mind is a very big competitive advantage.” David Ludlow, president and CEO of Bullfrog Spas, admits that he is an “idea guy” who wanted to be an inventor from his childhood. That motivation and persistence has resulted in a multi-million dollar company which an average annual growth of 45 percent since 2001. For Ludlow, success is fully dependent on what he refers to as the “Five P’s”: A Product with unique advantages, Proceeds or funding to be able to run the business as well as re-invest in it, competent People who want to be part of the company’s culture, a well thought-out and detailed Plan for the present and the future and Passion or a clear vision of direction. “If you take any of these out,” he says, success will be difficult to attain. “You have to have all of those five things. Maybe you can miss one [but it’s going to be tough.]” It Doesn’t Grow on Trees The notion that anyone would be willing to invest in a great idea is far from the truth. Business, after all, is business, even with a revolutionary and innovative product or service. If there can be one statement concerning the finances necessary to start a business, business owners say it would probably be: It will always cost more money than you think. “I started with a couple of partners, [but] from there, the business is a cash toilet,” John Lund states candidly. “Every round of getting cash, you think this is your last, you think you have enough, but there’s always more you need. [Saying that it] takes twice as much time and four times the money is an understatement.” Like Lund, Michael Proper, who mortgaged his home twice, and David Ludlow, who left a stable income with his family business, used their own financial resources before turning to angel funding or capital investors. “Angel funding…comes back to [the fact that] you have to do what you need to do to make it happen,” says Proper. “There are many ways to get that done. It depends on the business, the model, goals, intentions and doing the right thing at the right time.” Even if the timing is right, there’s no guarantee the route to success will be smooth. Thanks to venture capitalists who invested tens of thousands of dollars, Ludlow was able to take a year and create a prototype of his interchangeable and portable spa JetPaks. His investors promised that if they liked the prototype, they would plunge an additional million dollars into the project. Ludlow worked feverishly to produce the best product he possibly could. But even with that initial show of confidence, and a fully functional product which met the criterion set, the investors backed out on the deal in the end. Another rejection from a major retailer followed this disappointment a few years later. Ludlow persisted and was eventually able to find investors who believed in him and his product, yet four years later in 2001, with annual losses in the hundreds of thousands of dollars, Ludlow was given an ultimatum: turn a profit or the funding ends. Ludlow took the investors at their word and kicked his workload up even higher. “That year, we made $13,000,” says Ludlow. “The beauty of it all is that we weren’t losing money. I’m the eternal optimist. If something doesn’t work, I just work harder.” To meet his financial objectives, Namefiers’ Bryan Welton maxed out the family’s credit cards, took cash advances, floated expenses, asked clients to pay up front whenever possible and begged and borrowed money from supporting and believing family and friends. But unlike others, he did not seek outside funding. “[My wife] Jenny and I worked really hard to maintain the ownership of the company,” he says. While this approach may not work for everyone, it is a decision that Welton is grateful to have made. “Knowing that if you ever have to make a [decision quickly], you don’t have to consult with a board. This was our baby. We raised it.” Making Sacrifices In the world of entrepreneurship, nothing of value comes without sacrifice, which includes more than just money. Time, relationships and even health can be greatly affected by the efforts needed to get a company off the ground. But for individuals who are willing to pay the price, and have great support, these sacrifices can result in success. Among the sacrifices made by Welton and his wife Jenny were setting aside their own fears and ignoring the doubting Thomases around them. The couple developed an idea to create an online source for lanyards, nametags and other personalized items. “There were a lot of naysayers [who said that] people want to feel the engraving, to touch it,” he recalls. “As the owner, you will always wonder if you are a viable company. The owner is the realist; deep down inside, you wonder.” Proper feels that the greatest sacrifice he had to make to get his company DirectPointe going, was his time. “You had to prioritize your time. There’s no room for error. You can’t not miss a commitment,” he says. That kind of dedication, however, wrecked havoc on his health. He remembers working so much that his sight started going from staring at monitors for too long. “It was the first time that my body started breaking down. It wouldn’t pay attention to the right things.” Ludlow knows that the sacrifices were worth it in the end, but at the time, it was a significant challenge for him, and especially his family. “The hours it took, I can’t tell you the burden it put on my family,” he says. Ludlow remembers the day he received a phone call from his wife saying she was on the way to the hospital because their daughter had broken her arm. Ludlow listened to the dilemma and then told his wife to call him later and let him know how things went. “I wasn’t there to support her,” he recalls. “I worked from 7 a.m. to sometimes 2 a.m. for six to seven years straight. The pressure just wore on every muscle, every brain cell.” As his success has grown over the years, some people have referred to him as lucky or smart to have done so well. Ludlow has a different perspective. “You work your tail off for years and years,” he says. “It’s tougher – a lot tougher – than I thought.” So, Is It Worth It? With a little prioritizing and perspective, most business owners say seeing a dream become successful is worth the hard days. However, even when the sacrifices are immense, entrepreneurs must strive for a greater sense of balance in their lives, says Proper. Yes, the work and the time commitment are necessary for success. But when it comes to health or relationships, it is important to ensure that priories are intact. “For me, it was about being balanced, setting goals,” says Proper. “If the basic things in your life are not in balance, your probability of success goes through the floor. It’s a huge endeavor to start a business. You can’t take it lightly. It’s really possible if you have your life in balance, your priorities straight and your model in place.” Most business leaders do the best they can while growing their fledgling companies. But with hindsight, many individuals recognize missed opportunities due to a lack of knowledge or experience. Welton remembers turning down a customer who wanted an astounding 20 million pieces because he felt the job was too big for the company at the time. “The company was one and a half years old. We would have had to float over time. It was easy to say no, but I agonized how we could have done it.” Although Welton may not have decided any differently, he does wish he would have taken longer to consider the decision. “As a company, you always want to say yes and figure out how to make it work,” he says. Proper believes author Jim Collins teaches the key to deciphering whether an employer has hired the right people by asking two questions: Would you hire him or her again and would you miss him/her if he/she were gone? Based on this system, Proper recalls one such employee that didn’t pass the test. “I probably held on for too long,” he says looking back. As quickly as the incoming dollars seemed to slip through his fingers, Ludlow says he would have raised more money in the beginning. “When you have to keep going back for more money, you don’t have a very good lever to [negotiate with.]” With that added money, Ludlow would have brought in experts to allow him to focus on what he did best. “You can’t [afford to] hire the right people in the beginning,” he says. “You just have to wear a lot of hats. Money would bring in key people.” While Storyrock’s Lund may not have any regrets as such, he is quick to point out that starting and maintaining his business has been exponentially more difficult than he imagined. Even still, he says, “As difficult as it all is, regardless of the risk associated, our country is built on following your dreams. I think that if you believe in something you owe it to yourself to make it happen, to put it all on the line to make it happen.”
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