It has nearly been 10 years since my business partner and I decided to start our product development professional services firm. By all measures, Intelligent Product Solutions Inc. (IPS) has succeeded well beyond our initial vision. With this milestone approaching, it is worth recounting how and why we came to start IPS and some of the important “lessons learned” along the way.
How did we get here?
For most start-up and small business owners, there comes a moment of truth when the decision is made to start up. In many cases, a seminal event triggers the process. For me, the ball started rolling when I was released from my executive position at a large tech company. I had been there for more than 13 years culminating a product development career of nearly 30 years in the corporate world. There were a few things I knew. First, I no longer wanted to be directly employed in the corporate world, especially as an executive. Second, I needed time to soul search what I really wanted to do. After a few months, I decided to dabble in the consulting world using my dusty, but still intact, engineering skills at a small design consulting firm.
That experience led me to two insights. First, I found that I enjoyed being close to the technical work again. Second, I found that I had the ability to find, land, and satisfy new clients. After about two-and-a-half years of consulting through others, my business partner and I realized we could do this independently and left to start our firm, IPS. We also realized that, while risky, the client relationships we’d built and our former engineering team members would very likely join us if we struck out on our own. And so at the end of 2007, we did.
Why are we here?
Every startup may have a different motivation for striking out on their own. Certainly, there are those who start companies purely with the goal of getting rich. We see such founders every week here at IPS. For the majority, however, the focus is not on how wealthy they will be but rather, they have an underlying passion for what they are planning to do. For my partner and me, we really enjoyed the consulting world. The variety of projects, skills and relationships were exciting and motivating. We knew there was a market for the type of full service product development capabilities we could build and offer.
Furthermore, we knew there were gaps in the marketplace where we could thrive. This is crucial – it is not just a matter of can something be done. Where is the uniqueness? In product companies, this could be unique domain knowledge or better yet, strong and defensible intellectual property. In a services industry, there has to be a clear niche that is unserved or under-served. Hopefully, in either a product or services play, it helps if you have the knowledge, know-how or ability to do something that is very difficult to replicate and, as importantly, of high, compelling value to potential clients. In the case, of IPS, we knew it was hard to build as diverse and highly experienced a team as we ended up building and we knew (from my days of using professional services firms) there was a dearth of options with the full suite of competencies of IPS. I also knew that “If we build it, they will come” was a true possibility.
When starting any company, founders need to do a risk/reward analysis. While this need not be highly formalized, it is necessary. We understood the risk (i.e. my partner and I along with “family and friends network” could lose money) but considered the risk to be moderate. We knew the clients who would help us kickstart the company (to our friends out there, you know who you are and THANKS!). We also knew that we had the relationships we needed to rapidly build the depth and diversity of the team (in a services company, the team staff-hours are the “product”). We further realized that, while not a path to fame and vast riches, we could generate a return on our investment, make a good living and, as importantly for us, have all kinds of interesting, satisfying work. Lastly, for good, bad or other, we don’t have any other bosses to whom we need to report or satisfy (other than our clients, of course!).
What have we learned?
There are many lessons learned, and we continue to learn every day. Here are a few:
1. It takes a lot more capital than you think. Anyone who thinks they don’t need a lot of ready cash behind their business is sadly mistaken
2. Related to #1, it takes a lot longer to get paid than you can imagine. You want those nice, big Tier #1 clients? Great. So does everyone else. Realize that payment terms can be 60 days or longer (sometimes much longer). In a services business, it means you pay a staff member this week and you might invoice two weeks later. Then it takes two weeks for the manager at your client to approve payment. Then you wait 60 days for the client to pay (who sometimes will only start the payment process in 60 days). Then, be prepared to wait several days for the check to clear. Engineers and other skilled workers are expensive. Better have a lot of money in the bank or a hefty line of credit behind you.
3. Not all clients are ethical. In 30+ years working inside big companies, with very rare exceptions, if a vendor did the work, they will eventually get paid. However, there are a lot of unethical small/mid-size businesses out there who, as a matter of practice, will try to stiff their vendors/suppliers out of payment. Be prepared to spend a lot more time with attorneys than you might have imagined.
4. Landing new clients takes a lot more time than you think. Furthermore, the bigger they are, the longer it takes. We recently did work for awell-known cellular service company. We spent almost two years trying to land this client and get on their “approved vendor list.” (I am still not sure it was worth our time investment, by the way.)
5. You need a strong internal team to whom you can delegate responsibility -- and you have to be willing to delegate. I can’t stress this enough. You will fail if you do not have a very capable team with the various skills needed to build and run your company. I am fortunate in having a great business partner with whom I have a very natural division of labor. Without a great partner (or partners), I can tell you that it will get very lonely at the top. We also have a powerful team in all the functional areas of the company including finance and legal. We delegate responsibility and authority and hold people accountable. If you bring in a team you that you cannot trust to take charge, and can’t empower them to do so, you have the wrong team.
6. Whether you are selling shoes or you are selling high end services, realize you are selling to people. You have to be open, honest and engaging. Even in the era of social media, rampant electronic messaging and online shopping, when it comes to services, people buy from people. Your customers always have options. If you are going to grow your business your customers have to want to work with you.
That’s it in a nutshell. Starting a new business is not for the faint of heart. You need courage and stamina, and for most of us, it is a marathon and not a sprint. You also need a lot of self-confidence and a winning business model. You must be “all in.” That is, be prepared to do anything and everything to make your business a success.
Mitch is the President and Cofounder of Intelligent Product Solutions (IPS). He honed his deep knowledge of product design on the strength of a 30-year career with companies that manufacture commercially successful products for the consumer, industrial, and DoD markets. Prior to launching IPS, Mitch was VP of Engineering at Symbol Technologies. He holds numerous US and international patents, as well a Bachelor of Science degree from Hofstra University, a Master of Science in Mechanical Engineering from Columbia University, and an MBA from Fairleigh Dickinson University. He can be reached at email@example.com.
How to Start and Grow a Start-up Panel & Networking Session
You're smart. You have ideas. You want to start and grow your own company. But you also have to pay the bills. In this open-to-all session at Embedded Systems Conference (ESC) Silicon Valley, Dec. 7, 2017, we'll hear from a panel of engineers who became successful entrepreneurs. This session will conclude with a Q&A and networking opportunity. Click here to register for ESC Silicon Valley today!