Read an Excerpt
By Alexi Venneri
John Wiley & SonsISBN: 0-471-71272-8
Chapter OneRule 1-B is for Brave
Brave. That is where it all starts. In business, you have to be brave to even seriously think about starting a new venture. You have to be brave to tell someone about it. You have to be brave to get someone to buy into it. You have to be brave to quit your nine-to-five job and strike out on your own. To win the game, you first must be brave enough to play it.
The Man in the Hawaiian Shirt
You would never confuse Lonnie Benson with Indiana Jones or any other action hero. But I consider him one of the bravest guys I've ever met.
Lonnie is the founder of Who's Calling. Yes, he's the guy who lets me spend a lot of money on blue rubber balls. Guided by Lonnie's vision, Who's Calling has shot from $300,000 to $60 million in annual revenues in just a few short years.
To his credit, Lonnie doesn't act the part of a wealthy entrepreneur. If you run into Lonnie in downtown Seattle, he's likely to be wearing shorts, sandals, and a funky Hawaiian shirt. He smiles easily and appears relaxed. But there's a hint of rebellion in his eyes, something that says, "Don't tell me it can't be done."
Local Calling Hero
Lonnie Benson was born in 1956, delivered into life by a Navy obstetrician at an Army hospital in Seattle. His father, an electrical engineer, was serving with the Air Force in Korea. Lonnie didn't see him until he was six months old. Bythen, according to a journal kept by his mom, Lonnie was already fascinated with phones. "I guess it was the sound of human voices coming out of the receiver in the handset that really grabbed my attention," he recalls. "My mom says I was practically addicted to playing with the telephone."
Fast-forward to October 1987. "I was three months behind on my rent, unemployed, broke, and hungry. I was one small step away from living on the street. But I had an idea. I knew that if I started my own small local phone company, I could take business away from the big local phone company."
Here was Lonnie's opportunity: telephone traffic between Seattle and nearby Tacoma was heavy. Many people living in Seattle consider Tacoma "local," but in fact these communities are in two different local calling areas.
The big local phone company, U.S. West (now Qwest Communications), charged callers up to 25 cents per minute for calls between the two local calling areas, meaning that if you lived in Seattle and wanted to chat with your sister in Tacoma, you had to either talk very fast or pay a hefty phone bill at the end of the month.
Lonnie needed cash to turn this opportunity into a business. By luck, and by living in a basement suite below a mutual friend, he happened to cross paths with a guy named Dan Horton. Dan was new to Seattle. Lonnie hardly knew him and he hardly knew Lonnie. But after a couple of nights of brainstorming and bar-hopping, Dan realized that Lonnie was onto something big.
Dan, to his eternal credit, handed Lonnie the cash he needed, just $350, to launch his first company, PhoneLink.
Now it was up to Lonnie to deliver. By now, he'd learned just about everything he could about the existing telephone system-and he was ready to outsmart it!
By law, U.S. West was allowed to treat calls from one local calling area to another as toll calls. Lonnie found a location roughly between Seattle and Tacoma where he could set up an electronic bridge between the two local calling areas. His homegrown bridge essentially transformed what would have been expensive toll calls into inexpensive local calls. Then he created a very simple switching system to handle the calls, using an old IBM 286 PC that he programmed himself to emulate a telephone network. Unlike U.S. West, Lonnie charged callers just 25 cents per call. Whether you talked for a minute or an hour, you still paid 25 cents.
He of course needed a way to market his creation. "Some guy came to me and said for $300 he could mail my promotion to 10,000 people. I gave him $150 in telephone credit and a check for $150, which fortunately he didn't cash for a couple of days. The next Monday after the mailing went out, I started getting 10 to 15 phone calls a day. We charged $20 to sign up and our phone never stopped ringing. It just took off like a rocket and kept going straight up."
Lonnie kept expenses low by resisting the urge to spend money on fancy new equipment. He wrote a billing program that ran on the IBM 286 during odd hours of the night when the little computer wasn't busy handling phone calls. Instead of buying an expensive printer to churn out bills and invoices, he daisy-chained six low-cost Panasonic KXP4450 printers to achieve the same results.
"Early on I made a critical decision," Lonnie recalls. "I simply refused to spend more money than I was taking in. It doesn't sound like a big idea, but it's been a basic element of our formula for doing business. With the exception of the cash we borrowed to get started, we avoided borrowing money. As a consequence of that decision, we had no debt."
The sudden popularity of PhoneLink also forced Lonnie to reevaluate his self-image. "I'd always thought of myself as some kind of techie. After PhoneLink caught on, I started hearing stories from people about how it had changed their lives. An elderly woman told me she had been paying $170 a month in toll charges because she wanted to stay in touch with her daughter, who lived a few towns away and was going through chemotherapy. PhoneLink lowered her phone bills to $5 a month, which made a huge difference in both their lives. They didn't care about the technology. They wanted to spend more time on the phone with each other and I was making that possible. That's when I stopped seeing myself as a lone-wolf techno-geek and started seeing myself as a businessman providing valuable services to people at reasonable prices."
Within a year, Lonnie's start-up was raking in profits exceeding $100,000 per month. "I went from the depths of poverty to making more money than I had ever dreamed possible within a very brief span of time. It was like one of those old movies where the poor guy suddenly strikes it rich."
Find the Gaps and Jump Right In
There's no question that PhoneLink's initial success relied on Lonnie's gut instinct and technical insight. But Lonnie wasn't the only guy in Seattle who figured out how to wire together a telephone bridge. Back in the 1980s, phone service across the Pacific Northwest was notoriously expensive. The high cost created a subculture of fly-by-night pirates offering hard-pressed consumers alternatives to the Baby Bells. Most of the pirates had a "take what you can and give nothing back" mentality, and vanished after making a quick buck.
Lonnie didn't just take the money and run. He was having too much fun! He perceived correctly that PhoneLink could be grown beyond its beginnings as an improvised platform for inexpensive phone service. His crucial insight was that PhoneLink, despite its questionable status on the margins of the telecom industry, was not a pirate. It was a business. Even so, PhoneLink was unusual for a start-up-it defied the odds and continued to grow, without a significant line of credit or substantial backing from investors.
Two years after its launch, PhoneLink had 25,000 faithful customers happily paying 25 cents per call. And they were making lots of calls. Lonnie figured that his operations were costing U.S. West between $3 and $4 million in lost revenue every month.
"That's when I got the proverbial knock on the door," he recalls. "The utilities commission ruled that if I wanted to stay in business, I would have to become a registered telecommunications carrier. I guess they figured I would just go away. But instead of arguing with them, I went out and bought the equipment we needed to become a legally authorized long distance carrier."
You gotta love a guy who isn't afraid of the utilities commission and turns lemons into lemonade. In retrospect, it's clear that PhoneLink succeeded where other start-ups failed because of Lonnie's remarkable ability to identify small gaps in the market that had the potential to grow into large opportunities-and because he was brave to act swiftly enough to get an early jump on the competition.
I like to think of it in surfing terms. You can spend all day at the beach waiting for the perfect wave, or you can jump in and ride a not-so-perfect wave to hone your skills. Riding a series of small, imperfect waves won't land you on the cover of your favorite surfing magazine, but you'll be ready for the big wave when it finally comes.
The Amazing Vans
Following a hunch that the newly energized telecom industry would grow rapidly to encompass more than telephony, Lonnie changed the company's name from PhoneLink to Fox Communications. "The new name had a certain ring to it-no pun intended," says Lonnie.
True to Lonnie's wandering spirit, Fox Communications morphed, transformed, and reinvented itself to keep pace with the evolving telecom market. Then the advent of the cellular phone as a popular consumer item inspired Lonnie and his team at Fox to leap toward an entirely new wave.
The evolutionary path from PhoneLink to Fox Communications to Who's Calling was by no means a straight line. It wasn't even a paved road. There were unexpected side trails, blind alleys, 12 other companies, dead ends, shortcuts, and wormholes.
One of the wormholes appeared in the spring of 1996. Previously, cellular phones had been used mostly by businesspeople for business communications. By the middle of 1996, it seemed as though everyone suddenly had a cell phone and was using it all the time.
When Fox Communications stepped into the cellular market, Lonnie quickly discovered that marketing cellular telephony wasn't much different from marketing landline telephony: Most of the dollars spent on marketing seemed to go nowhere. And that made him think. Lonnie was never one to accept the status quo. He was determined to find the most cost-effective way to market his cellular phone services. Direct mailing wasn't the right approach. TV, radio, and billboards seemed too expensive. There had to be a different way.
Lonnie thought it over. It's important to explain right now that Lonnie's thought processes are not linear. He has attention deficit disorder, which makes it difficult for him to perform some of the straightforward tasks that you or I might take for granted. He can't play chess, read 1,200-page Russian novels, or sit through three-hour business meetings.
But Lonnie Benson has learned to honor and respect the flashes of inspiration that illuminate his brain like bolts of lightning on a dark summer night. When one of those bolts arrives, Lonnie Benson pays attention to it. That's how he's different from most of us, and that's why we've all got something to learn from him. He also believes that anyone can catch a bolt of lightning-they're everywhere. You can often hear him saying, "You don't have to be Bill Gates brilliant to be a billionaire." And he really means it.
In this instance, Lonnie's idea involved assembling a fleet of wildly decorated vans to advertise his company instead of paying other people for space on their regular billboards. Some of the vans featured huge pictures of tropical fish. Others were adorned with pictures of giant keyboards. Big and bold was the only rule. Some of the designs were assembled from ultrareflective sheets of plastic that could be seen at night from miles away.
Simultaneously odd and irresistible, the vans appealed to Lonnie's maverick sensibilities. "I also liked the fact that you could build equity in the vans and that I controlled everything. What other kind of media lets you do that?"
A Last-Minute Detail That Changed the World
Wally Rex, who now runs client relations at Who's Calling, was hired specifically to unleash Lonnie's fleet of 60 vans on Seattle. He recalls how Lonnie added an extra, last-minute detail to the plan:
"Lonnie decided to put a different toll-free number on each van. We could do that because we're a phone company. I'd go out and park the vans all over town, or keep driving them around until we found an area that would get some calls. If a van was generating calls, I'd leave it parked where it was. If the van wasn't generating calls, I'd run out and just keep driving it around until the calls started. Pretty soon, we knew exactly where to park the vans for maximum impact. And we were making deals with restaurants, 7-Elevens, and parking lots all over town."
Every night, Wally would log onto the company's billing system and carefully analyze the pattern of calls from the toll-free numbers on the vans. Over time, the ad hoc plan turned into an extremely effective marketing technique for Fox Communications. But another bolt of lightning was about to strike.
"At the time I really didn't care who was making the calls," admits Wally. "I was happy to know which vans were delivering returns on our investment and which weren't. To me, the vans were just big movable billboards."
One night, as Wally reviewed a day's worth of calling records, Lonnie walked past his desk. Then he stopped and turned around. In a flash, Lonnie realized that his van-based ad campaign had the potential to become much more than just a one-time business tactic. It could be the basis for a whole new enterprise, and maybe even a whole new industry. He suddenly had the answer to the age-old question, "I know half of my advertising is wasted, but the trouble is, which half?"
"Lonnie saw immediately that if we could track the response to the ads on our vans, we could do the same thing for other companies," says Wally. "And he saw that the technique wasn't limited to vans. It could be applied to marketing everywhere, for any business. That's when Who's Calling was born."
Five years later, Who's Calling has grown from less than $1 million to more than $60 million in annual revenue. We've pioneered a new industry. Today we not only track advertising and record calls-we partner with our clients, helping them leverage calls into sales transactions for more revenue at less expense. Our success was made possible by Lonnie's willingness to act bravely.
Lonnie overcame his own limitations and inhibitions. He persuaded a legion of doubters. He stood up to a large, established telecom. He was named one of Ernst & Young's Entrepreneurs of the Year. The Better Business Bureau keeps giving him awards. His company has been listed as one of the top five fastest-growing privately held businesses three years running and is now listed in the local Fastest Growing Hall of Fame. He battled the state of Washington. And he won.
Lonnie has balls.
In business, being brave often means flying in the face of prevailing wisdom. Genuine bravery almost always involves taking risks. Entrepreneurs risk their capital, their time, and their reputations. Everything they own-tangible and intangible-usually goes on the table at one point during the process of launching a new business.
New York-based Marquis Jet Partners was brought to life by brave people who were willing to take risks-and accept the consequences of their gamble. Here's their story.
Back in 2000, two aggressive young entrepreneurs, Kenny Dichter and Jesse Itzler, decided to make the skies friendlier for hip-hoppers, sports stars, and Wall Street types. Contrary to popular belief, not all entertainers, athletes, and entrepreneurs are wealthy enough to own a personal jet. In fact, most aren't even wealthy enough to own shares or fractions of private jet planes.
Consider this: The up-front fee for a one-quarter share in a Gulfstream V is $10.1 million. Even the smallest fraction available, a one-sixteenth share in a Cessna Citation Excel, costs $620,000 and only entitles you to fly 50 hours per year!
So if you were a mere celebrity and not a megastar-or if you were a megastar without a mega-ego-there was no practical way to avoid the hassles of commercial jet travel without spending millions.
Kenny and Jesse have numerous friends in the sports and music industries. In 2001, they saw a clear opportunity to create a new kind of business for a new kind of customer.
In their business model, customers would not buy jets or fractional shares of jets. Instead, customers would buy prepaid cards entitling them to 25 hours of jet time. The cards would range in price from $109,900 to $299,900, depending on the aircraft.
Excerpted from Balls! by Alexi Venneri Excerpted by permission.
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