A Vehicle for Friends Goes Far
John H. Chuang, Founder, AquentT
When I was a junior at Harvard College, two classmates and I started a desktop publishing business in our dorm room. Today our company—formerly MacTemps, now called Aquent—is the world's largest talent agency for Web and creative professionals. We've been on the Inc. 500 list of fastest-growing private companies twice, and this year we'll hit $200 million in sales, with 65 offices across 12 countries. The company has been profitable every year since it was founded.
Of course, our experience may not be equally applicable to all types of entrepreneurs. Not everyone has the same reason for starting and running a business. Some people want to take an exciting idea, test whether it can be turned into a business and then, if it works, sell or go public within a few years and move on. Some want to start with something small and grow it into a vast and sprawling empire. And others want to start small and stay small.
For us, the initial idea for the business didn't actually matter at all. Before we started the desktop-publishing business—which we called Laser Designs—we distributed American Express card applications on campus, sold stereo headphones imported directly from Taiwan and even looked into opening a snack bar in the school's library. As one idea waned, we would simply punt and start something new.
My partners, Mia Wenjen and Steve Kapner, and I were able to move seamlessly from one business to another because in the early days, our company was not idea-driven but friend-driven. That is, it existed as a vehicle for friends to spend time together. At that stage it was fine (and in fact fun) to try a series of random ideas. At some point we would need to hit on a viable business, but our company, by design, was flexible enough to keep changing until something worked.
Getting Your Idea to Work
Once you have an idea, getting it to work has very little to do with the idea, and almost entirely to do with the team. Venture capitalists have a saying: "The right people can fix a bad idea, but the wrong people can't ever get a good idea to work." That was true at Laser Designs. While the idea was decent enough, it worked because we were absolutely the right people to execute it. I believe everyone is right for some idea—the trick is (1) knowing something about the business and (2) adding value as a manager.
At the time we launched Laser Designs (1986), the three of us were working together on a student publication. We had just converted production for our magazine from traditional typesetting and paste-up to desktop publishing. Since we were both managers of the magazine, as well as designers and production artists ourselves, we had been the client as well as the service provider. Compared to other people with the same idea, we were unique in our knowledge of the customers' needs and of the capabilities and limitations of the technology.
As managers we brought something to the business beyond just coming up with the idea. In addition to knowing the market, we also had a ready pool of skilled employees we could tap (our friends), so we could ramp up quickly, if need be. We had the same advantage when we transitioned from a desktop publishing business into a specialty temp agency, two years later: I had temped one summer in high school, and Laser Designs had hired temps to transcribe a document we were typesetting. So we had experience with—and opinions on—the temp industry. It's critical to have a perspective about the business you are entering, even if it's only from the perspective of a one-time employee or a dissatisfied customer.
Once you find the idea that works for your skills and experience, it's time to focus on that idea. That doesn't mean you can't continue to experiment and try new things—it just means doing them without getting distracted.
Finding What We Needed
Laser Designs was launched without any funding at all. We were able to do so because we were resourceful, frugal and—frankly—fortunate. For business advice we turned to students at Harvard Business School, and to our clients for free consulting. People naturally like to give advice, but the advice is best when the giver feels connected. A common way to do this, of course, is offer stock options. But often what's more valuable for givers is to see their advice taken to heart, so they feel they are being helpful.
We were resourceful in making do with what we had (or could get without paying any money). For hardware we used the Macs we already owned for schoolwork and a parent's old 300-baud modem, and rented time at the school's computer lab to print out final documents for clients—on one of the two (two!) laser printers then available on campus. For software we used the desktop-publishing package we had purchased for the magazine. Our office space, initially, was our dorm room. When we moved out, we bartered for the use of a client's conference room: We got the space for free, he got a certain amount of work for free.
We were frugal in not spending money on anything that didn't directly add value to our clients. We didn't pay ourselves a salary for the first six months. Instead of buying a rubber stamp with our return address (cost: $3), we hand-wrote return addresses on invoices ourselves. Instead of paying for a lawyer to incorporate our business, we went to the library and copied some forms. We didn't hire an accountant to prepare our taxes but spent days pouring over arcane IRS code ourselves. For office furniture we took rejects from clients (and, in one instance, from a trash heap in front of our office building). Our mousepads were manila file folders taped to the desks (hey, it works).
But, in some ways we were fortunate. We didn't have to buy computers because our parents had already bought them for us. We didn't have to pay ourselves salaries because our college costs included room and board. And we were able to get our first loan ($5,000 to purchase a used laser printer) in part because our parents co-signed it.
Managing the People Part
Staffing was easy for us. Since one of the main drivers in starting our company was to do something with friends, we naturally hired additional friends as the business grew. It also made good business sense. During the start-up phase we did not have policies, procedures or rules to guide the behavior of employees. Basically, we told them what we wanted to accomplish, and left it up to them to figure out how to get there. Since we knew our friends were committed to growing the business (and of course totally trustworthy), we were able to expand quickly to far-flung cities without needing overwhelming management or accounting controls in place. At the time it didn't seem far-fetched to hire people straight out of college and have them open an office in a new city, because that's exactly what we had done ourselves.
We couldn't afford much marketing, so we did two things to acquire customers. First, we practiced a lot of "do-it-yourself" advertising. For example, we would put up flyers around town and hand them out on street corners. When we were told it was illegal to put them on streetlights, we would park in the middle of the business district and display the flyers on our car—a $300 burnt-orange rustmobile that attracted attention all by itself.
We also actively managed the word-of-mouth referral process. Instead of just waiting for customers to refer us to their colleagues, we would ask them who else needed typeset documents, and whether our services would be useful to them as well.
Second, once we got customers, we worked hard to retain them. We were customer-service fanatics. Although we offered two service levels for walk-in customers who rented time on our Macs, we ended up giving full service to all, even if they only paid $6 per hour. If someone was having trouble using our computer, we'd sit down next to them and help. Skeptics might say customers were ripping us off, getting full service without paying for it. But the result for us was high customer loyalty and retention, so we saved the costs of acquiring new customers. Again, the tradeoff was spending more time and energy in lieu of spending money.
Okay, class, what's the key lesson from dorm-room success? We knew who we were, why we were in business and what we were good at, and that wasn't going to change. So we simply waited until we found a business that could succeed within those boundaries. And even today, we still put friendship at the center of our company.