If you
just want to get in, make a quick million or two, and get out, entrepreneurship
is not for you.
Contributed By:
VIP CONTRIBUTOR
Author
of Real Leaders Don't Follow
Source: Entrepreneur
Once described as the “Cinderella of tech,” Nasty Gal founder Sophia Amoruso parlayed an eBay used clothing store
into a fast-growing $85 million online business. But this fairy tale did not
end happily: The once-trendy etailer hit a wall, filed for bankruptcy, and
ended up selling its brand to Boohoo.com of the U.K. for just $20 million.
End of story.
In case you don’t recognize Amoruso’s name, this might jog your
memory: She’s also the author of the 2014 New York Times bestseller #GirlBoss, host of a popular
podcast and executive producer of a Netflix TV show in development, all
bearing the same brand: GirlBoss.
Don’t feel too bad for the 32-year old entrepreneur; she will
land on her feet. But I doubt if the venture capitalists who invested $64
million in the company or the nearly 200 employees at its soon to be shuttered
Kentucky distribution center, L.A. retail stores, and lavish corporate
headquarters, feel as good about the outcome.
Rags-to-riches-to-rags stories are certainly not uncommon in the
topsy-turvy entrepreneurial world. And ever-changing consumer tastes and
demands make success in online retail particularly difficult to sustain.
Nevertheless, the Nasty Gal saga provides four key takeaways that resonate
across the business realm.
Cash is king.
As with so many founders, Amoruso had a knack for everything
about her business, except for business itself. After raising venture capital,
she moved the company into lavish L.A. headquarters, opened two
brick-and-mortar stores, leased a dedicated distribution center and spent
a fortune on marketing.
That’s an enormous leap in burn-rate for a startup that didn’t
have enough of a track record to prove its business model was sustainable at
scale. When funds began to dry up, so did the company’s marketing. Sales took a
dive, cash flow went south, and that, my friends, is what you call a death
spiral.
Related: Nasty Gal
CEO Sophia Amoruso: 'Wisdom is Earned Through Experience, Particularly
Mistakes.'
If you want to be a CEO, you
have to love your job.
It takes razor focus and tenacity to meet the continuing
challenges of a growing business. If you don’t love your work, you won’t stick
with it. The book, the podcast, the TV show were all Amoruso taking her
eye off the ball because she didn’t enjoy what she was doing. She eventually
stepped down as CEO, but too late; the damage was done.
As Amoruso told Forbes,
"I didn’t love having eight people reporting to me and asking me over and
over if we’re hitting targets,” she said. “I’m a creative. I’m a brand-builder.
I’m a rainmaker. I’m a pretty good marketer, but that’s not something I want to
do every day." If the company had a tombstone, that would be on it.
Starting is easy, scaling is
hard.
Mark Zuckerberg may be Facebook’s product visionary, but the
company’s ability to execute flawlessly at scale is the work of Sheryl
Sandberg, who Zuck recruited early on as his chief operating officer. I’m not
sure if the social network would have flopped like MySpace if not for Sandberg,
but she is responsible for its stellar growth.
We all have weaknesses, but a CEO must have enough
self-awareness to recognize that, and hire a talented executive team with
complementary skills. That’s what it takes to effectively scale a business. Had
Amoruso done that instead of essentially abandoning ship, I doubt if her team
would have let her make the poor decisions she made.
Related: Do you desire to know how to buy an established business with very little capital and start making money right away? Then, see details here!
Success is not a goal, it’s a
way of life.
It’s telling that Boohoo.com only acquired the brand -- the
intellectual property – and not the inventory, the retail stores, or the
fulfillment center. The British etailer may have been founded around the same
time as Nasty Gal, but co-founders Carol Kane and Mahmud
Kamani have spent
decades in retail. They know their business inside and out.
Even so, they continue to hire talented and experienced
executives and add industry heavyweights to their board. These are
entrepreneurs who love what they do, know how to run every aspect of their
business, and are executing well at scale. They’re in it for the long haul, so
there’s a good chance they’ll be successful over the long haul.
I’ve met countless wantrepreneurs over the years. So many just
want to get in, make a quick million or two, and get out. I always tell them
the same thing: That’s not how it works. Do they listen? Nope. And you know
what? It never works out for them. Because that’s not how it works.
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