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Becker Private Equity & Business Podcast
Building Businesses: Lessons from a Career of Wins & Losses 6-2-25
In this episode, Scott Becker shares hard-earned lessons from building multiple businesses.
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This is Scott Becker with the Becker Private Equity and Business this podcast. Again, before I get started, I am so thankful to our listeners, our sponsors, our guest. Just having a tremendous run with the podcast. Past 7 million downloads and ranked really highly in the Apple list. Thank you so much. Today's discussion is Building Businesses Lessons from a Career of Wins and Losses. So lots of wins, lots of losses and I'm just going to go through about 10 points points on this. Building businesses Wins and losses. The first background I'll give I'll start with this. I've been involved in building two successful businesses. First, a health care media company known as Becker's Healthcare that became really successful with a great team and great leadership in several niches. Second, health care legal practice originally built in a specific niche and then grew into several other niche practices and areas as we got bigger and more successful. I've also served on the board of a company that sold for nearly a billion dollars. I've served at a couple other boards. Some of those were successful, some of those were not. I've had the chance by background to invest in venture capital and private equity funds, including within Teresen Horowitz, one of the best known venture capital funds. Incredibly successful people. I've also invested in several startup companies throughout my career. Some of those went well, some of those went to zero. Zero is always a bad things. I've started several businesses, couple of them been very successful. A couple of them have completely failed or petered out. We've seen both that I've made lots of investments. Some have been successful, some have been total disasters. In fact, some of the ones I thought were real wins ended up being real losers. We'll talk a lot this afternoon about building teams, niches and a lot more and try and also give in some of my most miscellaneous points that I love to talk about. So I hope you enjoy this. What we're going to try and do again a second discuss common lessons from wins and losses. So the core concept I'll start with next is teams. Every success I've had has been built around building teams. And every failure I had, it was really where I didn't make the effort want to put in the time to seriously build teams where I've served on companies boards and I'll just go through this really quick. One of the boards I served on early company called Ambulatory Surgical Centers of America. They had droves of brilliant people, a ton of a plus leaders. They ended up having huge success for a long period of time. Similar example Physicians Endoscopy ran by a gentleman, Barry Tanner. Significant success over very long period of time and really succeeded with that team and that growth ultimately sold to, you know, went through five, several, several different private equity funds over the course of 25, 30 years and then finally sold to Optum United for some crazy amount of money. The flip side is I've been involved in a board where they had one supernova leader, but ultimately that was the, that was the be all and end all. They ultimately sold the company for a number that was not very exciting and largely because you can't go very far with just one supernova leader. It just doesn't work. This leads me to the next point. There's this constant discussion today about the myth of the solopreneur, what I call the myth of the solopreneur. Peter Diamantes, brilliant business person says we're going to see a unicorn built around a solopreneur soon. And he may be right. I have a very hard time buying into this concept of a solopreneur. I'm a believer you got to build teams, you want to be successful. I am a believer that yes, you have to outsource stuff. And I still believe very strongly you need a core team, but outsource everything beyond your core team. In building the media company, we decided we needed editorial, we needed a conference team, we needed a sales team. And in a sense we outsourced everything else for a very, very long time. We still have a receptionist, we have an 800 number that people call into leave a Message, stuff like that. People might hate that, but we built a half a billion dollar business with that mindset of outsourcing everything that we don't have to. The next thing I'll talk about with teams is I'm the biggest fan of Jim Collins and for those of you old enough to remember Jim Collins, one of the great business writers of our time, at least of my time. Here's this concept, good to great. It essentially says that, that when you it's all about getting the right people on the bus. If you get the right people on the bus, you could do almost anything that you want. And if you don't get the right team on the bus, doesn't matter how your strategy is, no matter what you're doing, you can't go very far with teams. I'll give one more comment or two more comments is that there's this concept of what I think was the evolution of a founder. The founder early on is what I think of as a solopreneur. That's stage one of founding a business. Stage two is you hire a lot of people, but those people aren't necessarily better than you. And the business has limits as to where it can go in stage two. Stage three is you're hiring people that ultimately do everything you used to do better than you could do it. And I think when you get to that point, that's where the magic can really happen. A business that you could grow because the growth doesn't come just from you. It comes from a lot of other people driving the boat and pushing it forward. Couple more points on teams. I'm a huge fan of. Don't prejudge people. Whenever I've hired people, whenever I've seen people hire people, there are so many people that come in that people think that's going to be the next star and doesn't turn out to be. But so many people that don't look like they're going to be the next stars for whatever reason, but are these high internal motors and end up being the real leaders as we go forward. So don't overly judge people as you're building teams and growing teams. Couple more thoughts I'll have for you. There's this great belief that you need a certain size enterprise to build great teams. The reality is you need a certain size enterprise to have the team you want and not to be fragile to the loss of key people. I remember early on in building a business, one of my best, best people leaving and being like, oh my God, I'm dead now. And so you end up ultimately having to build teams. You're not so fragile to the loss of people. You also unfortunately also have in business what I call ride or die people. People that even if you could, you never want to lose them. Just so freaking great that you build entire enterprises around them. One of those is the CEO of Becker's Healthcare. Jessica Cole has been a true ride or die leader. The last point I'll make on teams is I'll try and come back a couple times. Judy Faulkner and Epic. What she's done is constantly committing to improvement and constantly building engineering teams and people teams is really remarkable. And it's a great lesson for all of us. The next topic I'll talk about today is niches. Some people do great in the broad consumer markets, the total addressable market concepts we're selling in China. I have seen that all of my successes have come from highly focused efforts at niches. And, and most of my failures have come when I've tried to go too broad at something and not really narrow down who's the ideal Persona, who's the ideal customer, what are we trying to do? I would say that in addition, the very most successful companies I've worked with have been really niche focused and really know what they're trying to do. Originally built a law practice, an initial media company founded on a specific niche area. And one of the lessons I have about niche areas is if you get really great at your niche, you also tend to see things in other niches, in adjacent areas to grow into other areas and adjacent areas. But if you don't make the effort to get really great at your niche, then it's hard to understand where to grow into adjacencies and to grow from there. In building a niches, I'm a big believer that you have to get yourself so engaged in things to really see the field, to see the opportunities to see what's out there that it's very hard to hardcore whiteboard every niche you're going to go into. But the flip side is when I've been so close to businesses, I'm able to really dig into them. And you see things so clearly when you're so close to them and you see opportunities and those those opportunities when you really are close to your business, you almost realize you're not going to fail. It's either fine, succeed or succeed greatly. And that's you want to be so close to your business that you could see niches like that. A couple of the thoughts on niches we often think about niches is can you win in the niche? And then in addition, is it worth winning in? So can you win? Goes to how deep or incredible is the competition in it. Like for example, I'm building a software company. I don't want to compete with Judy Faulkner and that, but I just don't want to do it. But I want to pick a niche point area to start with and then grow from there. And then is it a big enough area that's worth winning in? Some of the areas we've grown into, we could win in them, but they're not worth winning in other areas. Hyper competitive. We can win in them, but it takes a lot of effort to win in them. One of the examples of a niche that I've seen recently company called Shoulder360 or Conference Shoulder360. The beauty that is you know exactly your target customers are exactly your target audience is exactly what you're trying to do. I love that it's not a company we're involved with. I just love the concept. Shoulder360 Jack Welch hit it well on niches. He often said you want to be first or second in the niche, maybe third. Because in great times you clean up, in bad times you survive. And I think he's right on there. We'll also talk about niches versus the total addressable market. Whenever a founder comes to someone and talks about the total addressable market being China, and that's the example we always talk about, or everybody always talks about, or all of the United States or every consumer, they almost get laughed out of the room. Whereas if they come to a very specific niche you're going after, it's much easier to grab somebody's attention as an investor. What you could do then the investors issue is can you grow big enough to make something out of that niche. I got a real good lesson in niches and what's in the USA Today USA years ago doesn't have a specific niche. Real niche trying to be newspaper for everybody. Its value several years ago was very close to the value of a niche media company we had built. And I just found that fascinatingly interesting that this broadly known publication wasn't that much more valuable than something we had built in a niche. The last thing I'll talk about with niches is the paradox of point solutions. You're almost always going to start with point solutions because that's the way you do something better and more confident than anybody else. The flip side is in the long run you probably can't be a point solution unless you're so big, you got to be a little bit bigger than that because nobody wants to deal with thousands of different point solutions. Again, to go back to Judy Faulkner and people eat in your her eating the lunch of people is at some point epic develops a module that competes with your point solution. In many, many houses will be epic first. Even if point solutions better, they don't want to work with it unless they have to because you're so much better. So there's the paradox point solutions. Most are going to start with paradox point solutions. Most are going to start with niches. But at some point you have to get bigger and find bigger niches and go beyond point solutions. I find it's a brilliant paradox. The fifth thing I'll talk about is product market fit for companies. One of the things again you see countless times with entrepreneurs and founders, engineers is they build something at such length but don't spend enough time commercializing early. And many of us do this. I mean, we can't help ourselves. We don't commercialize early enough and thus we build something that people don't really want. So it's a lot easier to be in your room coming up with a product and so forth and so on for a lot of us than actually trying to sell. But if you don't commercialize early and sell early, you're in a lot of trouble. CEO Becker Healthcare again says ready, aim, fire. Not ready, aim, aim, aim, fire. The constant need to get out there and commercialize and test early and then see how it goes. Jim Collins says fire bullets, not canon. So you could test early. I think he's right on. And you have to spend a lot of time early on. They're going to who is your ideal customer? And we often call it a Persona at the media company who's the customer? Trying to reach and trying to understand it. But, but this concept, whenever you're looking at businesses, thinking about businesses, is commercializing and testing early. It's no fun. You have to have a thick skin, but you got to do it. I've also seen, you know, people come to us a couple years into funding the business and saying they are now making a big pivot. If you're an investor, when somebody says you're making a big pivot, this is when you mark down internally in your head the investment to zero often. So that's, that's, you know, one thought on the big pivot. But you have to test early to know whether your market really wants what you're trying to do. You want to have great clarity of who you're trying to be the go to for and what you're trying to be great at. We often talk about product fit and market fit and ideas as the funnel in five stages. I'll go with this very quickly. Somebody has an idea that's one top of the funnel, then they have a product, then revenues, then profit, then scale. And by the time you go from one to five, you've narrowed out a huge amount of the competition of potential players. 6th concept. I'll go through a couple overstated myths. A favorite overstated myth that we have is culture. Each strategy for breakfast. And I just think this is like become part of the populist view. But no, it's really culture, talent, strategy, drive, it's a lot of things to make things really successful. MSV this culture strategy is similar to the concept of this concept of, you know, the solopreneur myth. I just don't think, I think it's fair to do things alone. I think it's very hard to call it just culture. A lot of place have great cultures are not very successful yet to have culture plus talent and strategy. 7th concept startups growth driving things forward. And this is something I wish it wasn't true and it, it may. I don't think it's unique to me. Any time I've had real success, I've become so taken by the effort that I've become obsessed and compelled by the effort. The flip side is when I've not had that drive in growth, I've had a very hard time having great success in getting things where they need to be. There's no way around it early on that you have to have this burning desire to succeed. Dave Thomas of Wendy's, the founders of Wendy's I used to love Wendy's, used to say that ultimately you need a burning desire to succeed. I think this is largely true. Every success I've had has had a founder or a fire starter that really has had that drive and nervous energy or whatever it is we call them fire starters, like it actually start fires. Most entrepreneurs realize that sometimes you have it, sometimes you don't. But greatness in getting something really going requires sustained drive over a serious period of time. And a couple things I'll tell you is when you see that coming in yourself, you need to cultivate that passion so it doesn't come throughout one's life all the time. Many serial entrepreneurs believe that they've become greatly successful in one thing, they're going to be gifted success in another thing. And we find this is never the case that serial entrepreneurs need that drive time and time again if they want to be successful time and time again. I remember the drive in starting a practice. Grew up like one of my colleagues in the audience in a place called Skokie. We were all fine, but not rich. Parents lost their job periodically, those kinds of things. They lived nice but didn't have money. And when I really started building my practice, there were multiple motivations, one of which I was at a first firm where if you didn't have your own business, your own clients, you were treated like a dog. I never wanted to treat anybody like a dog, but I knew I needed to build a practice and was so driven to do so. But when I ultimately built Bakers Healthcare that driving me really evolved over time. It took a little while for that, that that fuel to be fired and go after it, but it was, you know, it really came and then you can't, you have to like bite onto that drive when it hits you. It doesn't always hit you. And I think for entrepreneurs you have to realize it's going to take serious drive to make things a success. So that's the point on drive and spark and growth. And I just think that that is, you know, we used to say that, you know, you got to dig 10 ditches where they keep going and build themselves. You got to get this flywheel going to where things really start to go themselves. But it takes years to get there. People talk about viral. I'm not a real believer in viral. If something goes viral, somebody's really had to kick it to make it happen to go viral for a long time. I do full time jobs and driving and building a business. I think that's a reality for most of us. The next topic I'll talk about, and this is number eight is business plans. I view it as there's essentially three core types of business plans. There's the no business plan, there's the short two to ten page business plan and there's a complex business plan. I tend to love the short business plan, the back of the envelope business plan. And again if I have a fault it's I'm probably too much of an entrepreneur versus a deep thinker, you know, went down to law school, not a dumb person but, but at the end of the day could spend more time up time upfront planning. But I think the right mix of somewhere between the two too many people end up with great sort of paralysis by analysis and trying to build business plans. We see so much that are the Business plans, the actual business plans the business. And that's not right either. You have to ultimately get out there and test and go. But you do need some clarity of who you're trying to reach, what you're trying to do. Eric Freed, brilliant founder, says projections are all bs. I think for projections built in the total startup, that's largely the case. And the plan is not the business itself. The plan is the kickoff point. Nice. Another common myth that I just love to talk about is Julius Caesar has a famous phrase called burn the boats that you have to be all in on something. You have to be totally all in on something and can't be pursuing multiple different things. And I think there's truth and falsely to this. I'm a big believer for most entrepreneurs you are going to do far better if you're in a day job and understanding what you're doing and come up with ideas that come out of that you're solving real problems than abstractly trying to burn the boats before you're financially safe. Many, many successful businesses are people built by people that have hedged their bets. They keep a day job, they've got some income or they grow the next thing. In contrast, I see so many entrepreneurs that jump and fail and have to spend years recreating themselves professionally and business wise and financially and so forth. So I'm not a huge fan of the burn the votes concept. The last thing I'll say about business today in this talk is know your own business. The very best business people I know are they know their best customers, they know their best people, they're constantly doubling down on their best people, their best customers, their best niches that they realize business is not a democracy. You're going to put your time in, into your best areas, your best people constantly knowing the 8020 rule, what's the core your business that drives a great deal of results and spending a lot of time there. We say you're constantly doing your job and connecting the dots and really knowing your business. The people that I know, like there's somebody who's talked about a hundred years ago that I did business with and as people would say, he knew that leader Bruce St. John would know if a two by four dropped at another one of their facilities. And it's not that you have to be a micromanager, but you have to know your business. And I think that is just so important in what you do. In any event, we can go on and on. I've got a few other points I'll let them go for now, but thank you for listening to this version of the Becker Private Equity and Business podcast. We hope you enjoy this. I'd Love your feedback. 773-766-5322. Thank you very, very much.