What Happened When I Broke the Rules of Entrepreneurship
When I left my high-paying job at a successful private equity firm in San Francisco, I broke "the rules." For the first time in my life, I felt free but also very afraid. It’s every financial professional’s dream to become a partner at a private equity firm where the compensation can amount to tens of millions in a lifetime. But me? I left the partner track to move to Tulsa. No, that's not a typo. My fifth generation Native American roots were still there in my hometown where my parents had raised me 20 years before.
I chose Oklahoma over New York, Chicago or San Francisco because I wanted to give back and transform the landscape of business in Tulsa. I am a builder in every sense of the word. I like to build businesses that contribute to the economy, but first I needed to search for and acquire a business that I could nurture.
After 16 months of cold-calling entrepreneurs, in 2010 I finally unearthed the perfect company. The ConsumerAffairs website was originally created in 1998 as a news resource for journalists looking for trends in consumer complaints. Since then, my acquisition team has transformed the website from a complaint forum into a software-as-a-service (SaaS) platform with more than 250 partner brands, representing 98 percent of our revenue and all our growth.
In the process, a new revenue stream emerged involving subscriptions as opposed to advertisements. As we increased offerings and improved the overall user experience for consumers and businesses, clients expanded their partnership with us.
We broke the rules, and it worked.
Each month, more than six million visitors come to ConsumerAffairs.com to research, review and engage with the more than 5,000 brands represented on our site. Recent additions to our user experience include expert reviews, buyers guides, how-to articles and best match tools to grow the available resources we offer consumers as a platform for purchasing advice.
Many CEOs have an idea of what they want to do with a business, but not many are thinking about how they can overhaul and revamp revenue streams. Collaborating with the brightest minds can help because the future value of a company is based on innovative ideas, products, services and revenue models that have yet to exist. Whether it’s relocating headquarters or adding new product lines and revenue streams, experiencing a breakthrough requires finding new ways to break the rules that bind most entrepreneurs. I threw away some of the top entrepreneurial rules shared among the business community to find a new level of happiness, prosperity and company success.
Rule 1 -- Follow the money.
Anti-rule -- Time is more important than money.
I could have been a partner at a San Francisco private equity firm, but instead I chose to take a 60 percent pay cut and acquire my own company.
Had I stayed at my 90 hour a week job, my career would have been purely about financial gain rather than the broader context of cultivating my own company. My acquisition of ConsumerAffairs.com has resulted in adding jobs to the overall Tulsa economy. Another benefit has been spending more time with my wife and two children. Unlike money, time is something that cannot be made.
Rule 2 -- Web-based businesses belong only in the Bay Area.
Anti-rule: Anywhere but Silicon Valley.
Bringing our headquarters to Tulsa was a pearl clutching moment because conventional wisdom says you’re supposed to build a consumer web business in Silicon Valley. Tulsa, Okla., is not typically seen as a tech town. It is still dependent on oil and gas even as we see declines in those sectors.
Although not being based in San Francisco has encumbered our product and ability to attract engineering talent, by headquartering in a smaller market, we have a significant cost structure advantage. It’s worth the trade-off in talent acquisition so that we can scale the company to further success without spending millions of dollars in rent to be located near Google or Microsoft. It just so happens that there is a lot of new development happening in Tulsa, making business overhead more affordable. As an early adopter, ConsumerAffairs is at the forefront of that economic development.
Rule 3 -- Don’t buy a technology risk laden company.
Anti-rule -- Acquire companies with innovative or technology potential.
The processes of the original CEO from whom I purchased ConsumerAffairs were largely manual. When I acquired the company, I had to build a technology platform that did not already exist. After hiring a team of 29 engineers and four product managers to overhaul manual operations, the original business is now only 3 percent of our revenue.
Even though we had to create a platform on top of the existing business, we’ve grown the company at a compound annual growth rate of 91 percent since 2012.
Rule 4 -- If it ain’t broke, don’t fix it.
Anti-rule -- When the ground is shifting under your feet, try pivoting even an established company.
Conventional business wisdom says that entrepreneurs should not change anything about a stand-alone acquisition for at least two years -- especially not its revenue model. Pivoting is supposedly only for start ups because achieving product/market fit and monetization is a near miracle for most, and earning money at something new is really hard. But with a business goal of doubling revenue consistently, we had to rethink our advertising-based revenue model, pricing and processes. I waited only 30 days to start tinkering.
Breaking the two-year rule paid off when we launched the ConsumerAffairs for Brands accreditation program. The goal now is to dispute and enable the use of feedback and analytics to drive operational improvements in customer service and product offerings.
Over the past two years, we have engaged more brands in solving consumer issues, expanded our platform to include dispute resolutions and offered brands a chance to provide documentation if they are unable to facilitate a resolution with a consumer. This is what’s unique about our partnership that no other review platform provides.
Reducing reliance on the website’s advertising model enabled us to improve the consumer experience dramatically, and by developing new products born from the need to service brands, we have seen a massive return on equity.
Rule 5 -- Micromanage for better employee results.
Anti-rule -- Unleash your staff.
Instead of micromanaging, I enable talent. Our corporate culture promotes freedom and responsibility by not having any rules. Some 60 percent of our workers telecommute. We offer unlimited paid time off with a paid vacation stipend. We maintain a well-stocked bar with the best beer selection for those who enjoy an alcoholic drink at lunch, and we have Uber on speed dial so that people can get home from work safely if they take good advantage of this employee perk. Freedom as a core belief is paying off. Our 2015 retention rate was 92 percent, which is unusual in the corporate and sales sectors.
Zac Carman has served as CEO of ConsumerAffairs since 2010, when he purchased the website from founder Jim Hood. Previous roles included Entrepreneur in Residence, Senior Associate and Associate at Mainsail Partners, a private equity firm in San Francisco, and roles in engineering and sales at IBM and Hitachi.