In a new series by Big Change Advisors, we’ll highlight experienced entrepreneurs and share their insights on business methodology, philosophies, and keys to success. Kicking off 2018 is a look at David Pomeroy, the founder and former CEO of Pomeroy IT, a NASDAQ-traded company that received the Top 50 Fastest Growing Companies award for the 1990s and generated annual revenues of approximately $1 billion. David has had three public offerings and has served on the advisory board for IBM, U.S. Bank, and Xavier University. David was awarded the Ernst and Young “Entrepreneur of the Year”award and is the author of Leadership in The Trenches: A Road Trip in Reality to Success.
How did you get started in the IT business in 1980 and what made the business so successful early on?
I was involved in the auto industry, which was very poor in 1981. I read an article in the Wall Street Journal about Apple, and so we visited an Apple store in Cincinnati. It was very busy. They were not even waiting on people. My partner did some research and he asked me to go in with him to open a store. We went to a regional Apple representative who said, “We don’t qualify.” We kept going back to him. Finally, he referred us to ComputerLand. We contacted them in Cupertino, California. We signed a contract to have the first ComputerLand franchise in the downtown Cincinnati area and we were off and running at that point. We second mortgaged our homes to buy the franchisor to sell Apple. Then IBM came in September 1981.
It all came out of a need. At the time, auto industry dealerships were a disaster. There were no sales. Interest rates were 20%. With ComputerLand, the business plan called for $300k per year. We did $3 million. Business exploded. We took the risk because we knew we could always go back to what we were doing. We could always sell cars.
What advice can you give entrepreneurs today as they are in the early stages of startup?
Make as much as you can as fast as you can. Don’t slow down. For the first five years, make no changes in your lifestyle. Save your money, and put it back into the company. Don’t expand too fast. Watch out for bandwagons. Watch the way they go, and don’t jump on to quick. Don’t buy a new house, new car, etc. Don’t tell people about your success. Low key it. Check your ego all the time.
Nobody needs to know how you’re doing. Not even family. You will eventually have a crisis and you will need the savings. Everyone goes through it. There are books that are really good with key advice: How to say no, how only the paranoid survive, how you must manage to budget to actual.
You had a partner in the 1980s and then bought him out. What were the pros and cons of having a partner?
Pros: Shared risk, shared workload, shared capital infusions. Trust in that. When you’re gone, somebody else cares, but verify. Another pro is to bounce ideas off each other. Shared knowledge, increased workload. You can do more with less.
Cons: You must have an exit strategy or a buy-out agreement, a tie-breaker if you can’t resolve. Somebody like a CFO or attorney. Based it on sales, profits, value? Agreed valuation method. Example: No one gets paid until you can agree. This is very tough but effective. Another huge con is, if you’re doing all the work and the other partner is not. This is almost impossible to fix. Don’t do partnerships if you can!
How has business evolved or transformed since those early days, and what should new entrepreneurs be aware of?
There is more production through automation, more tools. Sales is all about planting seeds not immediate results. There is higher and more emphases on customer satisfaction (i.e., calling people).
Nowadays, it’s important to understand the balance sheet, how it works, and how banks view them. It’s knowing how a banker thinks before you make a presentation.
It’s also important to grow through the customer’s needs and wants. Where is their pain?
You have to understand how capital works. And make sure you are growing and not standing still.
What was the most challenging thing in business during your 20+ years as an industry leading CEO?
Always looking forward, moving with change. It was the grow or die mentality. Watch the bandwagons and knowing not to jump on too quick or too late. This is tough.
Study, research, ask for help. What does your customer think? Look for strategic inflection points in your industry, when fundamentals are about to change.
The meteor is out there. It always is. You can’t avoid it. You must prepare for the worst. Every business must. In farming, it’s weather. High interest rates, manufacturers, a fire, a flood, a death.
You must have backups to people and the banks. Your people want opportunity. You must create that or they will leave. Study how can you get the best out of them and you.
Watch for more Big Change Spotlights to come. To learn more, or to volunteer to be featured in an upcoming Spotlight, contact us.