Entrepreneur Round Table May 2013
Opportunities await entrepreneurs in North Carolina, but successes will be determined by a team effort.
Qubein: How important is a fertile business environment for entrepreneurs? What is the state doing to encourage it?
McCrory: It’s probably the most important thing for the state’s prosperity. The dynamics of business are changing because the sustainability of large corporations is no longer predictable. Startups will shape the state’s economy by providing growth opportunities. We need to look at the tax system and make sure it encourages venture capital and risk-taking. I want successful entrepreneurs here to grow. If they sell their startups, which many do, I want them to reinvest that money by starting more businesses here, not moving elsewhere to avoid taxes. Improvements in customer service are being made in state departments, and regulations that could discourage investors are being addressed. One of the major roles of government is to provide infrastructure, such as transportation, water and sewer. It’s also education. Entrepreneurs want to be around talent in order to recruit it. Rural towns are the state’s greatest challenge right now. The metro areas are doing pretty well. They are rebounding from the downturn. The dilemma is we have small towns that relied on manufacturing. Entrepreneurs need to reinvest in those towns, and the state needs to build infrastructure to support them. One of the ways to do that is connect the towns with the metros so they can recruit talent. For example, a transportation system connecting High Point to Thomasville, Lexington and Kernersville could be built so those towns could share the strengths of the metro. That’s going to be part of the state’s master economic-development plan.
Qubein: How did you start your business? Where did you get the capital to make it happen? What are some of the challenges that you encountered along the way?
Young: I was fortunate to meet my business partner, Brandon Blair, at N.C. State University while playing basketball at the gym. After encouragement
from different people, we met to talk business. We had a few clients who initially paid us, which helped our company grow. Being headquartered near Research Triangle Park, we can
pull talent from Duke University, UNC Chapel Hill and N.C. State. That’s helped us grow. One of our biggest challenges is outgrowing our network of professional colleagues. We’ve connected with successful entrepreneurs who are older than us and had the network that we wanted. They’ve been hands-on and understand the mistakes that we made, why we made them and how we can learn from them. Not understanding how taxes and growth play together was one of our biggest mistakes.
Weeks: I had the idea for my business right before I moved to Sri Lanka in 2007 to research ethical manufacturing initiatives as a U.S. Fulbright Scholar. While walking through the Duke University bookstore, I noticed how the university-licensed marketplace was dominated by sportswear-oriented brands that lacked fashion-forward products and innovation. Seeing an opportunity, I developed a living-wage garment factory in Sri Lanka, created the first School House collection for Duke and then did
the same for UNC. About two years later, I decided to reshore the entire business to North Carolina and put all of our fabric on a boat and shipped it here. We now work with about a dozen factories across the state and country. Financing has always been a challenge. I’ve raised about $2 million in equity from 50 different angel investors — $5,000, $10,000 at a time. I’ve never made the same mistake twice in the four years the company has been in business, but I’ve made a lot of them once. Growing too fast was one. We were in 100 bookstores before figuring out how to finance inventory and the product line. Finding the right people is tough, especially as a young entrepreneur who’s never worked for anyone. It’s been a steep learning curve.
Childress: Richard Childress Racing lost its franchise in 2001 when its driver Dale Earnhardt died. That’s when I came closest to quitting. One reason I didn’t was a pact that Dale and I had. Another reason was the business’s 500 employees. Many of them have families, so about 2,000 or 3,000 people depend on RCR. We had to keep going. When times are tough, and you’re struggling, you’ve got to pull it together. You have to have no quit in your body.
Qubein: In the 1990s, North Carolina had about 240,000 people who worked in the apparel- and textile-manufacturing industry, and we all know what has become of that. I’ve often wondered where is that experience? How can we tap into it and use it?
McCrory: I’m not giving up on that industry in North Carolina. There are some manufacturers in the state that can fill national and international needs in niche markets. One of the great challenges is finding the talent and labor. People who are still working in these plants, which exist here in Guilford County, are aging out. We need to find the 20- to 25- to 35-year-old craftsmen who can do the job, and our community colleges have to provide those skills before this group ages out. The last of the baby boomers are going to be out of the job market soon. We’ve got to replace that talent while also updating equipment because you can’t rely on labor anymore, especially competing against Vietnam, China, India or other places that will pop up as labor prices continue to rise in China. Companies are always going to move toward cheaper labor and power. Much of the textile industry moved from New England to North Carolina because of cheap power.
Qubein: Bob, you work in an industry that on one hand is not that innovative. On the other hand, the way furniture is being made and brought to market could be called quite innovative. How is the industry changing? How do entrepreneurs find opportunities in that ocean of change?
Maricich: The furniture industry got in trouble because of a lack of innovation. It’s estimated 25 million Americans are working at home today, which is expected to triple in six or seven years. There is also a trend toward smaller homes, so rooms will have to be multifunctional: dining, entertaining, office. People are also spending more time in the outdoor areas of their homes. All the old stuff doesn’t work. Innovative entrepreneurs, especially in the furnishings industry, who take advantage of these trends will find a wide-open road.
Qubein: Stanley Furniture just reshored some of its production in Robbinsville, creating about 400 jobs. Does reshoring bring opportunities for entrepreneurs?
Maricich: The future of the furnishings industry won’t be like its past. The opportunities here are in global logistics, home offices, design and value-added services. It’s a technology-driven business now, and there’s a technology base rooted in manufacturing here. The low-wage jobs will go to low-wage countries. I’m not an entrepreneur. I’m an intrapreneur. I ask where’s the future for what we do. College students today are part of the echo boomer, 18- to 35-year-old group. There’s 70 million in that cohort, which is almost the same number of baby boomers. Because 40% are living at home, their demand for housing within the next decade
is going to change everything. How can we leverage our competencies and brands to meet it? North Carolina, with its roots in manufacturing, furnishings, technology and textiles, allows startups to take advantage of that opportunity.
Qubein: So there will be many opportunities ahead in North Carolina because of changes in housing. Are there also opportunities overseas for entrepreneurs who want to work here, sell there?
Maricich: The rest of the world aspires to our lifestyle. When someone in Vietnam, Thailand or China makes a lot of money, they build a big house or a skyscraper full of big condos that matches our definition of living well. On my first trip to China in 1989, all of the wealthy people had homes that looked like the Ritz-Carlton Hotel because that was their connection to how successful people lived. Many of the people who come to the High Point Market are looking for furnishings that they can repurpose in those environments.
Weeks: There is an opportunity for made-in-America labels both domestically and abroad. It is huge in Asia, and no one is really feeding into that by capitalizing on that brand and making it mean quality, innovation and design again. Many of the large apparel companies are ensuring that parts of their production or supply chains allow them to tell a made-in-America story. Abercrombie & Fitch Co. is doing some pieces here, and Levi Strauss & Co. is known for being made in America. But the U.S. apparel industry has fallen behind in regards to manufacturing technology, slowing its response to this demand. The factories that I worked with in Sri Lanka were 20 years ahead of the ones I work with in Durham, which have machines from the 1960s because that’s what’s left here.
McCrory: Before I was governor, I was on the board of directors of Kewaunee Scientific Corp., which makes lab equipment in Statesville. Its growth is in the Middle East because those countries want products made in America. It’s very similar to the old days: Made in the USA to the Middle East means high quality.
Qubein: If you were speaking to an audience of college students about to graduate, what would you tell them they will need to be successful entrepreneurs?
Childress: Each person meets a mentor along the way, and that’s critical. I had a great one — G.W. Douglas, who was with Douglas Battery Manufacturing Co. in Winston-Salem. I was working there, and he taught me a lot about business and life. Also, there’s risk in everything we do. I always tell the people in my racing business to weigh risk versus gain. You need to ask yourself if you can handle the failure to get the gain in what you want to do.
Young: We took a lot of risks. We were still in college when we started. We knew from marketing that we had to be creative. At the same time, with technology making so much data available, companies have to understand and analyze it. We knew that if we combined the two, we could help them grow quickly. That was where we started, and we just kept growing from there.
Qubein: We recently had author Seth Godin at the university, and he spoke about fruitful failures. He says they are part of life, and the only way we can find success is to overcome them. What was the biggest surprise or obstacle you’ve had in business so far?
Weeks: Everything was a surprise for me. Ignorance was bliss, because I was 23 years old, had an idea, had no idea what I was up against and thought anything was possible. You start down the road and decide you’re not going to quit. You figure out the obstacles and solve them along the way. People can see when you have passion for what you do, and it’s what gets you out of bed. That is key to being persistent because it makes hearing no manageable. It gets easier, but starting out, it was difficult. So many folks told me that the industry was dead. You have to keep pushing and find the yeses. The people who helped recognized the passion we have for the brand we’re building.
Qubein: Overconfidence can get us in trouble. This is tough for entrepreneurs because an entrepreneur is a visionary who wants to develop a solid strategy. It’s easy to get into that zone of overconfidence while working hard. What would you say is one important factor to success in an entrepreneurial endeavor?
McCrory: Most entrepreneurs didn’t get to where they are by themselves. They usually have a team around them, whether it is investors or people smarter than them to put their ego in its place. I look back at becoming mayor and then governor, and I always had a team around
me. The people changed based on the talents I needed at the time. Surrounding yourself with people smarter than you, who have talents that you don’t, is important. I know I’m not an operations guy, so I have to have operations people around me to get the day-to-day activities done. Then I can think strategically and present the vision.
Weeks: I don’t believe everybody can be an entrepreneur. Not everyone has what it takes. That doesn’t make entrepreneurs superior people. It just takes a unique person to be one. I see college students who don’t value certain trades anymore, such as working in factories. It took us months to find an apprentice for the 63-year-old manager of our garment factory. We finally found a kid out of N.C. State who only wants to work at a factory in North Carolina. The fact that it took us months to find him was disappointing. My generation is graduating with expectations of all these cushy jobs that are going to be waiting, but they may not be there. We have to support entrepreneurs but also the trades needed to build a sustainable economy.
Young: I would definitely say resiliency. Whether you’re selling marketing ideas or yourself as a business owner, at the end of the day someone’s either going to say yes or no. And more than likely, you’re going to hear more noes than yeses. My business partner and I heard no many times from banks, potential clients and even current clients who didn’t like our ideas. Every time I come back and tell my business partner they said no, he says, “Well, that’s good for you, now get back out there and do it again.” It’s that resiliency: They said no, but I’m going to pick myself up, go out there and do it again. There are a lot of sleepless nights, but you always start the next day with a clean slate.
Maricich: Jim Collins, in his book Good to Great, writes about 10-ex leaders, those who brought returns of at least 10 times greater than their industry average to their companies. Something that resonated with me about them is they get a return on luck. Some people don’t know when they’re getting lucky. Knowing when you get lucky — it happens to everyone several times — and then jumping in and taking advantage of it can be an extraordinary thing.
McCrory: I learned certain things too late in life. When I was about 50 years old and in my fourth term as Charlotte mayor, I recognized the need for some serenity in life, a chance to step away from work. I don’t care if you run a business or are governor, you can get so wrapped
up in work that it gets narcissistic. You start ignoring things and people around you. We gain that wisdom as we grow older, but by that time, it’s usually too late.
Qubein: I’m not sure I hear many successful people speak of serenity. We have to be grounded in our beliefs because, without them, we could be robbed of resilience and passion for what we do. If you have one piece of advice for an entrepreneur, what would that be?
Young: Make sure you are always learning. Many people expect success, but they don’t expect to give the extra effort to reach it. When I was in college, and even before that, I spent a lot of time in the library reading, learning and looking for something different. Entrepreneurs need to learn from the mistakes they make. School is never out.
Maricich: I used to give my kids a quotation as one of their Christmas presents. I’m sure when they were looking at the package, they said, “Here we go again.” One year I gave “Never be a victim.” I was always troubled by former General Electric Co. CEO Jack Welch’s philosophy of firing the lowest 10% of the workforce. I had a chance to talk to him about that, and he said he wasn’t just firing the bottom 10%, he was firing the victims, people who didn’t think they could effect change anymore. It just made so much sense but can be hard to do. You’ve got to be able to pull it together and portray confidence. If you’re all-in personally, it makes it a lot easier for somebody to invest in you. Businesses fail for three reasons: bad strategy, execution or, the No. 1 reason, lack of capital. If all the stars line up you can make it work, but you can’t run a business long term and take risks if you’re undercapitalized.
Childress: No one wins alone, so build a great team and success will follow. You’re going to have days that come close to failure, and that will make you think, “Am I really doing the right thing?” An entrepreneur has to gamble and take a chance. All of them won’t pay off, but you have to try.
McCrory: Listen to people who have the courage to challenge your ideas and reward them for it. Surrounding yourself with people who say the things they think you want to hear will steer you toward failure.
Weeks: Be willing for your dream to take time. I didn’t have a sense of that at the start. I would toy around with Excel spreadsheets and catch myself saying “Oh, it’s so easy. We’re going to be at $40 million in two years, no problem.” I quickly learned from the first mistakes that you better love the journey, no matter how difficult. Entrepreneurs live a nontraditional lifestyle, so you have to be open to living that way for as long as it takes. One of my mentors told me that some overnight successes take 10 years. I saw that more and more as it went along.
This article originally appeared in the May 2013 issue of Business North Carolina magazine.