After 15 years of working through the ranks of a multinational corporation, I was ready for a different kind of challenge. I wanted the thrill of building something from scratch. The company I worked for had allowed me to take a gap year, in which you take a year off in the middle of your career and then pick up where you left off. It seemed like a simple plan: start a business, let it run, then go back into the corporate world.
I started doing some research based on my twin passions of food and wine. The privatization of alcohol retailing in Alberta, a growing population of wine drinkers and new technological advances in wine preservation presented an opportunity. In 2008, I opened Calgary's first wine bar, Vin Room, which offered 100 wines by the glass, the largest by-the-glass offering in Canada.
Armed with enthusiasm and corporate know-how, I thought I had all the tools needed to enter the world of entrepreneurship. Little did I know that writing the business plan would prove to be the easiest part. Five months into renovations and still waiting for my final bank loans to come through, I stood in the middle of the construction site operating a shop vacuum as we scrambled to finish in time for the grand opening. It was then that I realized I had no idea what I had gotten myself into—and that I was in for the education of my life.
I also realized that I had become a corporate refugee in the world of small business. It quickly became clear that the habits and mindset that I had developed over the years at a big company were not necessarily applicable in the dynamic world of a startup.
From the moment my partners and I started to execute our business plan, I realized that my contacts and experience were all related to big business. I wasn't in Kansas anymore.
I was accustomed to established relationships with lenders and ready access to the operating capital of a large corporation. While the business plan had been an easy sell to family and friends, I did not appreciate how arduous the process would be to secure credit from lenders. All my education and track record in running a business in the corporate world did not save me from the detailed scrutiny of my business plan, my resource plan, my operations plan and my ability to enter into a new industry. Each of our three lenders required several discussions and negotiations for credit terms. It took twice as long as anticipated and twice as much effort. And we received our last loan only after we had opened our doors. It was a humbling experience.
When it came to dealing with suppliers, I was accustomed to formalized bidding processes, detailed contracts and having my pick of suppliers. However, it soon became clear that this wasn't an option for a startup. Small businesses are built on relationships, often with other small businesses, and as much as you're choosing a supplier, that supplier is choosing you. Because a startup lacks a track record, many suppliers are wary of doing business with them. I quickly learned that I had to develop social capital outside of my big-business network. Networks became key to finding introductions and referrals, as well as people who could vouch for me as a reputable businessperson with whom others would want to work. It was all about relationships rather than formal contracts.
Probably the biggest mindset shift for me was twofold: recognizing how important a company culture is and how much work it is to build one. At a big corporation, I was part of an existing culture that was easy to take for granted. You assume that the firm's success is mostly due to its products and customer service, when in reality that success is underpinned by its people and a deeply rooted company culture. When you're a startup entrepreneur, there is no company culture, so you have to develop one. You can't magically create culture. It takes time and energy. While it seemed easy for me to articulate a culture on paper in which Vin Room's guests would come first and people would work in a fun, respectful and performance-driven environment, I certainly didn't appreciate the effort it would take to take this culture beyond words on paper—nor the ongoing effort and nurturing it required.
I learned that creating culture starts with the hiring process. The kind of people who join a startup don't necessarily have the same mindset as those who work for corporations. The former tend to be risk takers, action oriented, are used to making decisions quickly and are focused on the day-to-day running of the business—rather than to strategy or big-picture activities so attuned to a corporate manager mindset. Think of it as moving from herding sheep to herding cats. My focus became finding people with the right attitude rather than technical excellence—people who were willing to learn and shared in my enthusiasm to grow something from the ground up.
Then I had to learn to channel all that independent high energy into a cohesive leadership team. This required constantly engaging and re-engaging my management team in my vision. I had to design systems and policies to support the culture, and set up reward systems to reinforce the behaviours I was looking for. That proved to be fragile—and frustrating. But it taught me about patience.
When I was in the big-business world, I mistakenly related creating culture to implementing policies and systems. But it isn't. You can't write a policy for each possible scenario. Instead, you have to depend on setting the right context so your managers are equipped to make the right interpretations for each situation. It's all about communication and clarification.
I also learned the hard way that culture can easily be destroyed by hiring the wrong manager or creating a policy with unintended consequences. My mistake was to spend lots of time engaging my managers with our company culture, but not doing the same with my partners. I assumed that we were all aligned on our vision of culture. In the end, building a startup and dealing with a partner whose vision for the company differed so much from that of the other partners was detrimental to the company and we had to remove him. It was a costly lesson. However, through this painful setback I also learned that employees and shareholders will allow you to make mistakes as long as you acknowledge them and move decisively to fix them.
I've learned that in a startup, success or failure hinges on a small number of employees, and culture is often a major reason that employees join or leave a company. Because of this, I've changed my mindset to take the time to nurture our company culture.
Coming from big business does have its upside in the world of entrepreneurship. There are some good habits from my corporate experience that proved helpful in my startup. One of the most important is the analogy of the "three-legged stool"; with each leg of the stool representing strategy, structure, and culture, which all must be aligned in laser-sharp execution. If you miss any leg of that stool, the stool doesn't work and your business fails.
This big-picture thinking proved valuable in my startup. With a new business, you have a blank page to design your company and execute your plan, so my corporate training to think about execution from a strategic perspective was useful. I understood the importance of communicating our strategy to the right people so we were aligned. This included key shareholders, managers and employees. After all, if they didn't understand what my business is about, how could it succeed? Secondly, it was important to set up a structure to align with our strategy. Survival in the hospitality business is about guests first and margins second. The latter means you need to set up a structure to hire the right managers, create performance contracts to reward desired behaviours and establish cost targets for the desired margins. Lastly, our culture of performance and fun must align with the strategy and structure. Each major contemplated change is thoughtfully considered in the context of aligning strategy, structure and culture.
Another corporate mindset that has proven to be advantageous in a startup is discipline in processes and systems. In a startup, it's tempting to get caught up in the tyranny of the urgent, and the easiest path is to deal with the crisis right then. Although it may have seemed painful to my managers who were not used to this corporate mindset, we implemented processes and systems for all our major activities, from employee-training manuals to menu costing to performance contracts. Even though that took a lot of management time before we had even opened our doors, it provided consistent training and execution, improved operating margins and created line of sight on individual manager accountabilities for delivering our business targets. This approach of "going slow to go fast" has saved us hundreds of hours in management time and an over 50% improvement in our margins from our first few months of operations to what they are now three years later.
My first year at my startup was the most exhilarating time of my entire business career. I remember one time when Sean Durfy, the CEO of WestJet, came into Vin Room. As I was wiping the table of a guest who had just left, Durfy asked me why I had left the stability of the corporate world for the turbulent world of a startup. I could only simply say this, "I've never made less money but had more fun." I knew right then that I would not be returning to the corporate world.
My startup is three years old and, in a world where I once felt like a refugee, I am finding a home. We're now entering into a growth phase as we open a second location, and that may require a change in mindset. The world of startups is exciting but before you make that leap from the corporate world, know that you've been trained to ride a very different animal.
Phoebe Fung is proprietor of Vin Room, a Calgary-based wine bar that ranked No. 25 on the 2011 PROFIT HOT 50 list of Canada's Top New Growth Companies, and a former financial executive with a multinational energy company.
More columns by Phoebe Fung