Speaking to a group of would-be entrepreneurs and their supporters at a BizStarts Milwaukee gathering, Hillis said, “You better have a lot of friends because you don’t have all the answers yourself.”
His first catalog for what would grow into an 1100-person company that distributes 65,000 products for the nursing home industry was “an unmitigated disaster.” In the six months after it went out, the company, he said the young firm “sold two brooms.”
He rushed to see a friend, Tim Keane, who had experience in the direct marketing business, and Gary Comer, who started Land’s End. They commented on his first attempt by saying, “This (catalog) is a joke.” They helped him rework the catalog, and when it went out the second time, sales immediately followed.
BizStarts has recognized the value of such mentors and has created a cadre of more than 40 advisors, including entrepreneurs who have sold their companies. They are assigned in teams to budding entrepreneurs. Their unvarnished advice is free. The concept started at MIT, where 90 successful entrepreneurs donate their time to startups. UW – Madison has also adopted the concept with its Merlin’s Mentors program.
There is no reason why entrepreneur teams need to make the same kinds of mistakes that I made when I started companies or Hillis made. They will make other mistakes, but repetition of mistakes is inexcusable.
It is the goal of BizStarts to make starting a company and repeatable, robust process. The hit rate for success will be a lot higher with mentorship in place.
It’s impossible,” Hillis said, to launch a company “without mentors.”
Hillis also created an Advisory Board that he relied heavily on and later converted to a formal “start spangled” board. “Everybody needs a boss,” Hillis said.
This business model innovator, who has served as chairman of the Milwaukee School of Engineering (MSOE) board of trustees, attributed the success of his virtual distribution company (it carries no inventory and gets paid up front) to these other factors:
- Employee ownership. Every employee is a partner who owns shares. “It’s really a bad idea to keep the whole company for yourself.”
- Assessing mega-trends, such as the aging of the American population, the coming of internet-based businesses and cheap telephony. Direct Supply was an early mover on PC-based cloud computing.
- Hard work. “We worked at this (the startup) day and night for six years.” Profits arrived in year seven.
- Frugality. Hillis drew his first salary in year seven of $44,000 after burning through his savings and an investment from his father-in-law. He mortgaged his house to finance the early years. The firm’s offices are in inconspicuous, converted warehouses in Milwaukee. He turned down a $50 million subsidy from the governor of Illinois to move to fancier digs in Illinois.
- Stealth profile. He only agreed to speak to BizStarts because it was honoring new entrepreneurs, winners of a regional business plan contest.
- Partnerships. Early on he hired 50 MSOE engineers and now has 150. He has similar ties to Marquette. He has partnerships across his industry.
- Luck. But no one in the audience thought Direct Supply’s success hinged primarily on luck.
- Perseverance. His way-out business models always met with naysayers. Posted all over his company is Winston Churchill’s quote: “Never, never, never give up.”
Direct Supply now has five companies in its portfolio, all business model innovations. The latest is “virtual manufacturing,” under which the design, specification and sourcing is done in Milwaukee, but manufacturing is contracted out to 15 plans all over the world.
Brilliant! No hard assets deployed in machinery by his company. Four or five more plants are being added, and Direct Supply now “manufactures” 18% of the product it distributes.
Hillis is having too much fun to ever retire. And he hinted from the podium that a sixth startup is underway inside his flourishing company.