Crash COURSE

Entrepreneur, Jan, 2000 by Geoff Williams

WHEN YOUR BUSINESS IS GROWING SO FAST IT'S S OUT OF CONTROL, HERE'S HOW TO PULL THE ENTREPRENEURIAL EQUIVALENT OF STEERING INTO THE SKID.

YOU'VE IMAGINED BEING SUCCESSFUL SINCE YOU WERE A LITTLE KID. YOU'VE DREAMT ABOUT IT, DROOLED OVER IT AND DESIRED IT. BUT ARE YOU READY FOR SUCCESS, ESPECIALLY IF IT DROPS IN ALL AT ONCE? IF YOU AREN'T THINKING BEYOND THOSE INITIAL MOMENTS OF GLORY, PUCKER UP AND PRACTICE SAYING "HAS-BEEN."

SEE DICK OPEN A DOT.COM COMPANY. SEE JANE START A HAMBURGER CHAIN. SEE THE DOLLARS FLOW INTO DICK'S INTERNET ENTERPRISE. INVEST, DICK, INVEST! SEE THE CUSTOMERS FLOW INTO JANE'S HAMBURGER CHAIN. GRILL, JANE, GRILL! WATCH DICK'S STOCK OPTIONS SKYROCKET. WATCH JANE OPEN RESTAURANTS IN BOISE AND GUAM IN THE SAME WEEK. SEE DICK AND JANE BECOME SUDDENLY SUCCESSFUL--VERY, VERY QUICKLY.

Sometimes, success is easy. It was for Dick and Jane. Their books were an instant success for textbook publishing company Scott, Foresman & Co. (now Addison Wesley Longman Inc.) in 1930. And they've enjoyed longevity. By the time the last Dick and Jane story was written, it was 1965, and their books had reached 85 million boys and girls. The books would continue to be sold until 1970 and read beyond that.

NOT SO FAST

Entrepreneurial success can also be easy. It's reacting to that success that isn't always simple. If you don't react in the right way, success can overwhelm, control and humiliate you. It can happen to the biggest of companies, like Planet Hollywood, which, after going $250 million in the hole, had to declare bankruptcy and restructure last year. It had expanded too quickly, Robert Earl, the company's CEO and cofounder, told the press.

Success can also overwhelm even the smallest of companies. Just ask Bill Edlebeck of Chicago. The 35-year-old owns The Heritage Bed & Breakfast Registry (think of it as a "front desk" for bed and breakfasts, says Edlebeck); after 12 years of growing at 33 percent a year, the oil started gushing. Because in 1998, Edlebeck did what many entrepreneurs were doing at the time: He established a Web presence (www.heritageregistry.com). After allying himself with IBM HomePage Creator, the phone started ringing. And ringing. And ringing.

Edlebeck remembers the turn-around vividly. He had made plans for lunch with a friend one morning, and by the time lunch came around, he couldn't leave. The phone had been ringing steadily all morning. Usually, he was lucky to receive 10 calls and make one, maybe two, reservations in a day. But about 50 calls had come in, and he'd made five reservations, all before lunch.

The phone kept ringing the next day. And the next. Edlebeck was running the business on his own, and life had been moving along no faster than the plots of those Dick and Jane books. But now ...

"I was afraid of my own office," remembers Edlebeck, who soon realized he wasn't equipped for what was about to happen: In 1996, The Heritage Bed & Breakfast Registry's sales were $73,000. In April 1998, everything started to change, and Edlebeck's company made more than $176,000 that year. His 1999 figures, estimated at press time, topped $205,000. Sounds good now, but back in April 1998, his sudden success was quickly becoming a nightmare.

"I desperately needed new phone lines, phones, computers, a LAN and a more efficient way of running the office," recalls Edlebeck, who has since hired two employees to help keep up with the onslaught. "Another glitch was that the sudden jump in volume sent up a red flag with our credit card processor. After years of the kind of slow, steady growth characteristic of a homebased business, they won dered why our volume had jumped and, fearing the worst, stopped making deposits into our account. They never told us this, though, so I couldn't figure out why we were making more money than we ever had and yet had no money in our account to cover the checks that we were paying to hosts."

Edlebeck's crime? Not preparing for the day he would become very successful. As an entrepreneur who once went through similar problems and now delivers seminars on dealing with sudden success, Russ Holdstein, president of Growth Strategies, says, "The real problem is when you have a business that hasn't evolved or changed. To stay successful, you must change to keep growing and adapting."

SUCCESS CAN BE A BULLY

"It took me 20 years to make an overnight success." Eddie Cantor, the vaudevillian, said this in 1963, long after his red-hot career had cooled. But it could apply to almost anyone who wants to make a name for himself or herself. It took Holdstein about four years, and when his overnight success came, it almost destroyed him.

In 1975, Holdstein started Payday, a then-revolutionary company that provided payroll services to small businesses out of his San Francisco apartment. By 1979, Holdstein's company had swelled to several dozen employees and was pulling in about $4 million. At the time, Payday was considered one of the fastest-growing companies in the country. But that's when disaster struck.