Two years ago I decided to write a book called Where’s the Loot? about how people made millions during the high tech and Internet boom. I spoke to those who did well – like Sean Howard, who made $120 million through Internet company OzEmail and bought himself a $13 million mansion on Sydney Harbour and a Whitsunday Island.
I also spoke to many of the people who made it to the top then flamed out. This group included Spike Networks founder Chris O”Hanlon and Jodee Rich, co-founder and joint managing director at One.Tel, whose personal worth touched $1 billion before the company failed early last year.
Learn from the successes and challenges of others
What was the difference between the ones who successfully rode the boom and those that got wiped out when the big waves came? More importantly, what can you learn about their massive successes, and just as massive failures, to help you in your business today?
There are a lot of differences between the entrepreneurs who made it during the boom, but one interesting fact is that most of those who either walked away with great personal wealth or built quality new businesses started out during or before the 1990s recession.
Howard founded OzEmail in 1992. Cashed up with about $8 million after selling his Australian Personal Computer magazine to Kerry Packer, he started the company because he believed that people would one day send emails between companies as well as within them. Recession or not, he was on a winning idea and risked most of his hard-earned nest egg to grow OzEmail during its early few years. He reaped his reward in 1999 by selling OzEmail to international giant WorldCom at the height of the Internet boom for a total of $520 million.
On the flip side, many of those that failed like One.Tel started in the mid-1990s as the boom was gathering speed. In this environment, it was very easy to raise capital and grow new businesses quickly. But it also meant that companies like One.Tel and other dot-com failures like LibertyOne could become very large before finding out if they were viable and could deliver profits.
Build the business with long-term strategies and goals
There was no discipline. Unlike some of the customer-focused, cost conscious technology and Internet businesses that emerged lean and mean from the 1990s recession, these companies were like teenagers who had borrowed their father’s Porsche. They were big on vision, big spending and very high speed – until they hit a tree.
In One.Tel’s case, the main tree was the company’s billing system. It had created its own software for billing customers that simply didn’t work very well. Add to that a business model that often saw it sell phone calls more cheaply than it bought them for and One.Tel was a leaking boat from the start. Just how leaky it had become wasn’t apparent until investors stopped putting money in. Then it sank like a rock.
So what can you learn from all this?
Take advantage of the lack of competition
Beyond having discipline forced upon them, companies that start, or businesses that expand, during a slaving economy also benefit from cheaper labour, rent, equipment, professional services and, because interest rates are so low, money. Also, if you are among the few brave enough to operate during a downturn, you also benefit from a lack of competition.
Build strong, lasting relationships with clients
Another less quantifiable, but very real, benefit is that during difficult times you are more likely to build strong, long-term bonds with customers, suppliers and partners. This is the sort of deep, unspoken bond that exists between soldiers that survive a war, or that you might still have with your school friends or the people you knew in your first job.
If there”s a simple message from the high tech boom it”s that if you want to make it big when the economy recovers, you have to be fit and ready – and that means pushing now.
Ensure you have structured systems in place
Rather than worrying about the current downturn, you should see it as an opportunity. This is the time to refine your value proposition to customers, cut costs and make your business systems watertight. As you endure this pain, remember that even in an extraordinary period like the 1995-2000 high tech boom, there were only a handful of really big winners. They were the ones with real and sustainable businesses that were strong enough to survive both the downs and the ups of the economic cycle.
