From the October 1999 issue of Startups

The universe is made of rules. Nations, religions, Monopoly, Scrabble, Clue, football--they all have 'em. There are rules on the highway, in airports, schools and hospitals. And there are rules in science, like the law of gravity, the Doppler Effect, thermodynamics--hey, wake up!

The business world has rules, too. Some of them rules will probably never change. You still have to pay for services rendered to you, and being caught toilet-papering your competitor's house is never a good idea. But breaking some rules can be a shortcut to success.

"Rules are meant to be broken," says entrepreneur Dara Craft. "I think you have to be of that mind to be an entrepreneur. If you're going to follow the rules, you might as well forget it, because the rules will beat you before you even get started."

For those who don't know, below are the most common rules of entrepreneurship. Now that you know them, don't be afraid to break 'em.

1. Listen to the experts.

2. Have a business plan.

3. Be adequately capitalized.

4. Start a business in an industry you know.

5. Don't launch a business in a crowded marketplace.

1. Listen to the experts.

Dara Craft, 31, is CEO of Babies `n' Bells, a chain of self-service kiosks located in Babies R Us stores as well as hospitals, maternity stores and doctors' offices. Babies `n' Bells provides personalized birth and wedding announcements (wedding bells--get it?) and party invitations.

It doesn't sound like a dumb idea, especially considering Babies `n' Bells' 1998 earnings were half a million dollars, but in 1997, when Craft prepared to franchise her 4-year-old, two-chain kiosk in Dallas, her advisors RSVP'd a big fat no.

Craft wanted mothers to run the self-service booths. The moms would stay at home, printing and filling orders at their own convenience, and spend four hours in the booth every Saturday.

"There's nothing proprietary about [your idea]," Craft was told by an attorney. "There's nothing from preventing anybody from [stealing it] and going out on their own."

"You're dealing with mothers," another griped. "They don't understand business. They won't know how to do this."

And these attorneys were friends of hers. The three business consultants she met with were equally unenthused. One, from the SBA, "[was] kind of like, "You want to do a homebased what?' " Craft recalls with a laugh. "These were men--they had no clue. I don't even think they knew there was a market for birth announcements."

She should laugh. This year, Craft's earnings will hit closer to $1 million, and her employees--all moms--work at home with nary a problem. So does Craft, who has three young daughters. No matter what the experts tell you, Craft insists, "If you're knowledgeable, you've done the research and you have a love for the business, then go for it."

Other rules broken: Rules #2, #3 and #4. "Business plans are useless to me," says Craft. Which doesn't mean she didn't think about what she was about to do. "If you have any sort of mathematical mind, you can take a piece of paper, put down monthly expenses and profit margins and come up with how much you need and how much you're going to end up with."

Caveat to breaking Rule #1: Sometimes the experts are right.

2. Have a business plan.

Jeff Daniel is a salesman at heart. That's the only explanation for how he talked his former employer, Trilogy Software, into funding the first six months of his recruiting company, College.Hire. It's also the only explanation for how he got The Wall Street Journal to profile his company just one day after its January 1999 Internet debut, how he landed household name Amazon.com as a client within months, how College.Hire is working with 25 colleges and counting, and why it's expected to be bring in $10 million in sales next year. Daniel, 29, is a convincing guy.

Daniel and his staff of 34 did all the aforementioned without a business plan, because he didn't feel he had the time to waste. "I didn't want to spend six months writing a business plan, then go out on campus and have students say, `Get lost.' I wanted to get on campus and see if the students liked [my idea]. That was the first test." The students apparently gave him an A. Within three months, Daniel had received 15,000 resumes.

Daniel has what former president George Bush used to call The Vision Thing. "I've always thought that if you have a good vision, the planning will take care of itself," says Daniel, who used to recruit college students for jobs at Trilogy and saw a lot of shortcomings in the system. "There's so much noise--companies coming on campus and trying to recruit [graduating] students--and I just felt like there needed to be some service, some calm place students could go and learn [about these companies]."

The Vision Thing has worked. College.Hire will be on 37 campuses next year--maybe more. "What I [lack] in planning," Daniel says, "I more than make up for in energy, enthusiasm and endurance." All of which will help in his next step: seeking venture capital.

Other rule broken: Possibly #5. College.Hire isn't the only recruiting company out there, you know.

Caveat to breaking Rule #2: Some rules can only be broken for so long. Six months after his debut, Daniel decided to start writing a business plan--not because he felt he needed one, but because "a business plan is key to getting a venture capitalist to give you the time of day." Yes, Daniel can sell, but he isn't God.

3. Be Adequately Capitalized.

Scott Maitland had $50,000. What he didn't have was $1.2 million--the amount he needed to start his business, the Top of the Hill Grill. He could have surrendered, but this is a man who fought in the Gulf War. ("I decided to become an entrepreneur because I had a commander who almost got me killed a few times, and I didn't want anybody stupider than me in charge of my life," he explains.)

Maitland, now 33, probably wasn't afraid of bankers. But maybe he should have been. The South Chapel, North Carolina, entrepreneur "made 21 presentations to 16 or 17 banks and investment firms"--to no avail.

So Maitland formed a Founder's Club. He offered citizens of Chapel Hill the opportunity to invest between $100 and $1,000; after the restaurant opened, they'd receive twice their investment in free food and beer. Here's what happened:

  • He raised $85,000.
  • A bank agreed to give Maitland $500,000--provided he could match it.
  • Maitland started searching for local investors and ended up with 35--all so excited that a bank was going to give him $500,000, they invested from $3,000 to $110,000 apiece.

All this didn't happen overnight, of course. It was a two-year process that started because following the rules for raising money wasn't getting Maitland anywhere. "The biggest mistake people make after they get an idea is to line up all the investors they can think of and go to their best prospects first," says Maitland. That's what he did. By his 21st presentation, Maitland was polished, but he was aiming at investors that were, from the beginning, long shots.

Last year, Maitland's pub brought in $3 million; this year, he expects around $5 million--and he's just opened a second pub in Raleigh. One can only wonder how much farther ahead he'd be if Hurricane Fran hadn't flooded his pub on opening night, stalling operations for some time. Even his extensive business plan couldn't foresee that.

Other rules broken: Rules #1 and #4.

Caveat to breaking Rule #3: You have to bring in money sooner or later, now or never. It'd better be one of the first three.

4. Start A Business In An Industry You Know.

Kim Dushinski, 34, and Tami DePalma, who turns 31 this month, know a lot about the book industry. Their firm, MarketAbility, markets authors' books. They have nine employees, and expect sales of $400,000 this year, up from $140,000 last year.

But when they began their business, the only thing they knew about the book industry was that they liked to read, and that books have two covers and lots of pages in between.

In May 1996, the two friends, who were both freelance publicists, went to a book industry trade show because they had taken on a couple of authors as clients and were curious about the industry. Flying home to Golden, Colorado, they couldn't stop talking about their weekend.

"That was so much fun," said DePalma. "We should just focus on the book industry."

"That's a great idea. Let's do it," said Dushinski. And so they joined forces and formed their own company.

It wasn't until well after they had collected their bags in the luggage terminal that they both wondered what the hell they were doing. Dushinski would hang up the phone with a new client, an author, and think: "Do I really know how to do this?"

Yes, they were publicists, but until then, they had specialized in travel agencies, restaurants and chambers of commerce. They knew nothing about book promotion timelines, industry trade shows, ISBNs, wholesalers, distributors, agents, packagers, special sales, library sales, targeted advertising, marketing budgets, time investments, publication dates, book selling seasons and--phew--editorial calendars. Instead of trying to land clients in local magazines like Colorado Parent, the two were now placing them in The Wall Street Journal, on radio and on television. It was a different world, and they were aliens on another planet.

But not for long. Dushinski and DePalma devoured industry trade magazines and how-to books on marketing for the book industry. They called contacts from the trade show and started schmoozing. They volunteered to do publicity for book industry events. Mostly, says Dushinski, "we learned by doing."

In some ways, notes Dushinski, ignorance is bliss. When you don't know anything about a business, "[nothing] stops you from trying. You don't place limitations on yourself."

Other rule broken: Rule #2, but to DePalma's chagrin: "[Without a business plan], opportunities will keep coming to you, and you won't know which one to take."

Caveat to breaking Rule #4: Wade in slowly and consider carefully what you're getting into. If you're going to open a plant store, we're behind you. If you're going to open a nuclear power plant, we're not.

5. Don't Launch A Business In A Crowded Marketplace.

Nobody seems to be sure how many restaurants there are in Columbus, Ohio--not even the public relations bureau hired to promote the city. But in a metropolis where people eat out more than anywhere else in the country (save Orlando, Florida; Denver and New Orleans), the estimates range up to 3,000. In a one-mile strip on High Street, where Kevin and Mike Kurlas, 23 and 24, opened Pepper's New York Delicatessen and Restaurant in 1994, there are 165 restaurants. Fifteen are delicatessens, just like Pepper's.

Well, not just like Pepper's. "Yeah, there are tons of restaurants in Columbus," admits Kevin, who adds, "I guess it could be viewed as cockiness, but we feel we have no competition."

Like its co-founders, Pepper's has pep. Last year's sales were $800,000; this year, the brothers opened their second restaurant, in Ashtabula, Ohio. Eventually, they will take over the world. But for now, it's mostly Columbus, and as Kurlas notes, the advantage of starting in a crowded marketplace is that you toughen up immediately: "If we can make it here, we can make it anywhere."

An appropriate motto, since the brothers owe their business idea to New York City. Kevin was 17 and Mike 18 when they visited the Big Apple and discovered delis--a wonderland of salami, pastrami and everything meat . . . and wheat, and rye and pumpernickel. Says Kevin: "This was the greatest thing--no pun intended--since sliced bread."

After numerous trips to New York to research delis, they succeeded in recreating the same atmosphere in Columbus.

Other rule broken: Rule #3. The Kurlases began their restaurant with $500 (hey, they were teenagers). After trying to rent a kitchen from churches and the VFW, they convinced a pizza parlor to rent them part of its kitchen. Mike made sandwiches; Kevin sold them from the trunk of his car. Once they could afford to print menus, they started catering. For a time, they ran a restaurant out of a two-car garage they renovated.

"The number-one goal should be to generate cash flow," says Kevin, who believes anybody can create a success story with $500. "That's the great thing about being one of us--an entrepreneur. You start off with a blank sheet of paper. You never have a destination, but along the journey, you start adding colors to the piece of paper until you have this wonderful painting that you continually add to."

Caveat to breaking Rule #5: "Find your niche," advises Kevin Kurlas. Sure, they went into food, but it's not like the brothers made hamburgers and called themselves McKurlas's.

Contact Sources

Babies `N' Bells Inc., (888) 418-BABY, http://www.babiesnbells.com

CollegeHire.com, (800) 760-2020

MarketAbility Inc., (888) 55-TWIST, http://www.marketability.com

Pepper's New York Delicatessen and Restaurant, 201 S. High St., Columbus, OH 43215, http://www.peppersnewyorkdeli.com

Top of the Hill Restaurant and Brewery, (919) 929-8676, topofthill@aol.com

Geoff Williams (gwilli2181@aol.com), a freelance writer in Cincinnati, has never even torn the tags off a mattress.