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January 8, 2017

Starting With Why

I’m not gonna front, when I watched Simon Sinek’s TED talk “Start with Why”, my immediate response was, “who’s actually DONE that?”

The premise is that great companies start by answering “why” first: Why does your organization exist? Why do you get out of bed in the morning? And why should anyone care? These inspired leaders and organizations are all able to connect with people because they have a higher purpose. Profit is simply an end result, not an answer to why. Sinek’s discovery felt like a luxurious revision of history for successful companies like Apple. Didn’t they really start like the rest of us – wanting to build something cool that a lot of people would pay for?

It wasn’t until I read the book “Bold” by Peter Diamandis that I connected the dots. He said, “for exponential entrepreneurs, finding a significant challenge is a meaningful road to wealth.” The word significant caught my eye because significance comes from having meaning, and meaning comes from finding a problem worth solving. There are no problems more noteworthy than societal ones, and solving those problems for profit is the single boldest challenge I can imagine for an entrepreneur.

Think about it, building a successful business is already tough; now do it while solving a social problem. But looked at boldly, solving a social problem IS the path to success. When I framed the challenge this way, I thought “if I can’t do it, who else can?” That’s not meant to be a humble-brag, I say this because I’m confident in my experience as a businessman and volunteer. I’ve built 8 businesses and successfully exited 4, all while sending hundreds of low-income students to college with scholarships.

Not only did this challenge feel right for me, I also felt a great sense of responsibility. If I were to succeed, it would show other small business owners what’s possible but if I failed, the haters would shake their heads.

A Problem Worth Solving

I suspect most readers don’t know how I grew up so a bit of perspective may help. My family of four lived in a motel in Lomita, CA till I was 16. I was fortunate to get a full ride to Culver Military Academy in Indiana for high school and a full ride to Boston College. In total, I’ve received over a quarter million dollars in scholarships, all thanks to generous people who believed in a concept; if they helped a low-income minority, they may change a life.

I never asked anyone to hand me anything. Just don’t tell me no. Give me a shot and if you crack that door, I’m blowing the hinges off that bitch. And that is all any of us need. I knew that one day I would give low-income kids a shot – the kind I got.

Through our work at Minds Matter, KIPP Schools, and LA Teamworks, we’ve given that shot to hundreds of low-income kids by sending them to college on scholarships worth millions. However, the conversation shifted from getting low-income kids into college, then through college, and now college isn’t right for everyone.

Turns out, only 4% of low-income high school freshmen go on to complete college in 6 years.

The educational opportunities for those who never attempted college are limited to vocational schools in blue collar trades. Without a degree, a world of opportunities remains closed.

Those who went but didn’t finish college, end up with huge college debts, no degree, no marketable skills, and shit for work. Frankly, they were worse off than had they never attempted college to begin with.

I asked myself, what are you doing to help millions of kids who don’t go to or finish college?

Brainstorming Ideas

Now it was time to get surgical in my process and come up with a business that could be part of the solution for low-income, non-college graduates.

One approach to creating a business is to come up with a solution and then find people who want it. Ready-fire-aim. This is bass-ackwards and causes people to fall in love with their solution without figuring out if the market cares enough to pay for it.

I prefer design thinking and the first step is to pump out a huge list of unfiltered ideas. I came up with a decent sized list but truthfully, not as many as I had hoped.

Here was my list of ideas and for each one, I wrote multiple one-page business canvasses to fully vet the idea.

Sales school

Impact investing fund

Auctioneer talent agency

Modern academy of business

Virtual assistant outsourcing firm

Artificial intelligence financial advisors

Equity crowdfunding to alleviate poverty

There was also low-hanging fruit like consulting, professional speaking, or writing a book. I swore not to do any consulting gigs because they would trap me: they pay well so it’s easy to get addicted to the money without ever figuring out what I really want to do.

Speaking and book writing can have a major impact, but I love to operate businesses, not talk about them. I figured I could speak or write a book as tools for spreading a message later.

As you can see, I actually spent some time going through each idea to flush them out to see what really resonated with me and to consider which ones really had market viability. I didn’t belabor for very long, but I was rather methodical in thinking through them.

Lean Business Modeling

Auctioneering and sales school were the two ideas that met my three-step validation:

  1. What excites me?
  2. What would people pay for?
  3. What am I uniquely capable of solving?

For those two businesses, I built a 1-page business canvas for the auctioneering agency and I created different versions of the sales school by customer type: underserved third, non-technical college grads, technical college grads, traditional college grads, and enterprises.

With those two ideas down on paper, I could pretty easily see that the auctioneering agency didn’t have the scale I’d like, and thus, would help fewer kids. The auctioneer takes 10% from the funds raised and the agent gets 10% of the auctioneer’s fees. Any higher, and the agent is eventually going to get cut out. For a $50,000 auction, that means the auctioneer makes $5,000 and the agency makes $500. Hardly worth the money. The real money is in being the auctioneer and while you can see I have a heck of a lot of fun, I wouldn’t want to travel very often and Denver doesn’t have enough market share to grow this as big as I’d like.

So I narrowed it down to one idea: sales school.

What No One Admits, But They’ll Likely Do

The best way I knew how to make money without a degree was in sales. I figured, if you can sell, no one cares what your degree is. They just want to know if you can make them money.

In Dan Pink’s book “To Sell is Human”, he states that 1 in 8 jobs in the US is in sales, and of the other 7 jobs, 52% of their work involves influencing others, aka sales.

I went onto all the job sites in Colorado to get a count of the most unfilled positions in the state. #1 were engineers/programmers and #2 were tech salespeople. That formed the hypothesis of my first idea: a tech sales school. It was perfect, a beautiful mix of my passions in business, tech, and education.

So I set about running tests to validate my assumptions. The first test was to see if low-income youth would attend a free workshop on tech sales. As an investor in two co-working spaces called Thrive Cherry Creek and Thrive Ballpark, I had access to after-hours training rooms. I’ve got ample experience to teach a 2-hour seminar on sales so the real test was to see who came.

The sign ups were slow, a lot slower than I thought. And those who signed up were folks who owned large successful businesses, to salespeople looking to switch industries and get into tech. The underserved youth weren’t signing up and I had even done an outreach to leaders with access to these kids.

After talking with these kids, I learned that they didn’t want a job in sales. And they most certainly didn’t want to pay to go to school for a job they didn’t want.

In the same breath, they also told me that they would love to become financial advisors or real estate brokers. Reading between the lines, they wanted a job that veiled the sales and had a better title.

While companies can hide the fact that they’re training industry-specific sales people, I couldn’t do that with a school which was fundamentally about sales.

Fatally Flawed For-Profit Education

One of the greatest advantages I had in this process was access to a wonderful network of people. I’m amazed by how open people were to help me crack this nut and open doors. As I began to float this idea to a few friends, the first person I was told about from multiple people was a guy named Townsend Wardlaw. First of all, how badass is that name? I was told Townsend had attempted something similar and that I should talk with him.

Fortunately, Townsend used to be in Entrepreneurs’ Organization so I had that in common with him. He was open arms and told me about his venture in this space. I met with other folks like Graham McBain at SecureSet (and formerly with Galvanize), Jeff Macco who founded a coding academy for low-income students called SeedPaths, Kelcey Gosserand who was at Startup Institute which had a short-term tech sales program, Christian Dieckmann who was Assistant VP at Corinthians College, and Mike Simonton who was a VP at Tuliva, among others.

I learned very quickly: for-profit colleges had a bad name and many had a fatally flawed business model. The flaw was that low-income students couldn’t pay $20,000 for a 6-month boot camp. One option was to take $5,000 per student in government funding via WIOA dollars (Workforce Innovation Opportunity Act). Even then, I’d be competing with proven community colleges who offer certifications and degrees for that amount and students would still need to take a $15,000 loan to attend my school.

The second option is to shorten the school to make it only cost $5,000. For that amount of money, the school would need to be less than 6 weeks. That wasn’t enough time to produce enough value that companies would be willing to pay a premium for the hire or a placement fee.

Frankly, in order to train someone to really be able to sell, they not only need classroom teaching, they, more importantly, need on the job experience. So sales in a classroom was flawed unless they could do real work and they couldn’t afford to pay for a 1-2 year training program that gave them real-world experience.

I then came up with the idea of the students picking up freelance gigs on marketplaces like Fiverr and Upwork. I figured we could use real requests for work to train and provide a share in that income. As I ran the numbers, the dollars were too small to make the numbers work on the school.

I was bummed for sure, I mean the idea was a perfect fit for me. But isn’t that the brutal lesson of the market – it didn’t give two shits what I wanted. And it told me clearly that this idea was not one I was going to successfully operate. Doesn’t mean there aren’t ways to go after building a great for-profit school, it simply meant I ran out of ways to execute it profitably in a way that I could validate beforehand.

I did look into one creative idea: income sharing agreements. ISAs are where students would give up a percent of income for a set term, akin to a startup selling equity in exchange for funding e.g. 8% of income for 10 years. This model is so new and counterculture that the only example I could find in the US was Purdue University. A company called Lumni has been doing this for years in Latin America, but hadn’t spread to the US.

I didn’t want to be in the business of educating people on a solution they didn’t know they wanted. I’ve learned the hard way – educating the market on why they need you is expensive.

Youth Apprenticeships

Through that process, I learned that I needed to prioritize work-based learning for sales as opposed to it being only classroom-based. This led me to seek out research on topics like experiential learning, earn-while-you-learn programs, and youth apprenticeships.

A specific white paper on the Swiss apprenticeship model stood out to me because it showed a complete ecosystem led by business and industry to drive education. This way, students were trained on employable skills as opposed to the US system where education and jobs are disconnected.

Here are some standout stats and additional takeaways here:

  • Unemployment: 3.1% vs. 4.9% in the US
  • Per capita income: $80,000 vs. $54,000 in the US
  • Opt-In: 70% of all youth entered apprenticeships vs. 0% in the US
  • Youth unemployment: 3.2% (lowest in the entire world) vs. 10.3% in the US
  • College graduation: only 31% of Swiss students graduate college vs. 39% in the US

I was curious, why didn’t we have this in the US?

As I went about tracking backlinks to this article to see what websites were using it as a source, I came across a link from Colorado. It turns out that while I had been contemplating this model, I wasn’t alone.

Colorado’s Governor Hickenlooper appointed a committee to figure out how to bring experiential business learning to the state. They were hot on the Swiss apprenticeship model too and formed a non-profit to implement it in the state called CareerWise (formerly BASIC).

Spearheading A Movement

I had a friend on the Governor’s commission, Richard Lewis, and within CareerWise, Ashley Carter, so I began interviewing them and other friends working with underserved youth like Rebecca Holmes, Gretchen Morgan, Scott Fast, Lorena Zimmer, and Darnell Slaughter to name a few. We explored the challenges these youth face and searched for business opportunities to serve as a flywheel for this initiative.

I carefully studied the Swiss economy to find what feeder businesses had popped up and found that third party training centers were really the only ones. The College of Young Professionals for Banking in Switzerland was formed – for example – by the Swiss banking industry, in order to train a large scale of bankers.

That led me to add a new idea: an apprenticeship training center. I built a lean canvas for this training center model and ran it through my three-step validation. When I spoke with the folks at CareerWise, I learned that they were hoping to have only 30 banking apprentices over the next year. The training center’s model worked only when there was a demand for thousands of banking apprentices. That idea got tossed.

What I found was that the entire ecosystem is self-contained. Businesses receive an ROI for hiring apprentices and CareerWise would collaborate with trade associations to build curriculum in school and at work that led to in-demand jobs. There was no foreseeable need for an outside business to get involved. So I said f-it, I’m starting my own business to hire apprentices.

And there it was, I finally arrived at my ‘why’: to accelerate Colorado’s initiative for youth apprenticeships.

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