In last week’s post, we covered the depressing topics of failure and venture capitalists. We continue this series by talking about pressure, partners and niches.

Step 4: Along with Failure, Get to Know Pressure

As we illustrated in parts of Step 3, you need pressure. Having a wife and kids is no excuse to not start a business. In fact, they make it even more likely that you’ll succeed! Nothing focuses the mind like feeding your family. It’s part of our hunter/gatherer evolution.

I use to tell my wife all of the time, “It’s only bankruptcy. They’re not going to take our kids away.”

This was of no comfort to her, of course, even though that’s why I was saying it.

JJ and I just took on some office space. JJ did the build out while I answered the phones.

About four years back, after having very slow sales for a few months and then a big rush of orders the next, JJ and I hit a massive cash flow hole. We had exhausted every line of credit available to us. We were, flat-out, out of money. I was lying prone on his office floor. He was hunched over his desk, weeping softly. Where was payroll coming from? How were we going to order parts for the POs that we had? We had to make tough decisions that day and those changes made us a better company and better leaders.

If you never have to put yourself in that situation because you’ve carefully laid everything out, averted all risk by pilling it on to some VC, you’re not going to feel the pressure. You need it to focus your energy and you need it to keep you moving forward.

Sidebar: This is why it is so hard for the children of business owners to have the same success as their parents and why it’s hard for large businesses to enter emerging markets, like digital signage.

The success of the child is never appreciated because it’s in the shadow of the parent’s much greater achievements. A parent company will likely ask, “Why are we wasting our time on this tiny division loosing 500k a year when we’re a 500 million dollar company?”

Also, the parent (or parent business) ends up shielding the child from important lessons by using their own success to bankrolling their ventures. There is never enough pain and never enough pressure, so they only learn with a small ‘l’. They don’t own it.

Step 5: Be a Why or a How

Okay, enough about pressure and failure. Let’s talk about you. Most of the businesses that I’ve observed are started by what I call a How person and a Why person, or they have a completely bat-shit crazy person that is both.

The Why in any business is the “Why we are doing this?” person. They convince people, often much smarter than they are, to go in on something even though they are almost certain to fail. They are evangelists.

Two people, much smarter than me, that I suckered into working for TRMS. Steve Israelsky and Richard Turner.

They usually spend money like it comes out of a faucet, have no aversion to risk and have no shame. They’ll walk into any meeting believing they’ve got the right solution and make any promises necessary to close deals not out of a lie, but because they know they can get it done. They’ll take money from their mother’s retirement account and their child’s piggy bank to fund the business.

They have an unwavering, irrational belief — belief — in what they are doing. This is the sales person. They sell to their own partners, they sell to the wives and they sell to the customers. Again, they are the ‘Why’.

Sidebar: Belief is the most powerful force in the human condition. Belief is absolutely immune to fact or truth. People do the most outlandishly horrific and beautiful things in the name of belief. It’s what causes us to lift each other up or to die in the name of something. A world without belief would be unrecognizable from what we see today.

Visual Circuits bought Tightrope back in the year 1999. They had us for a full nine months and then the bottom fell out of the tech bubble and they got squeezed. First to go was this tiny division called Tightrope Media Systems. Oddly enough, the only employee that they “laid off” was… me! It’s because I’m unemployable.

So, newly unemployed with three month’s severance, I decided it was time to get the band back together. I called JJ up and made my pitch. JJ was finally making money (he never got paid when we owned Tightrope). He was getting married in a few months. He was building a house. He had every reason in the world to ignore me, but I kept at him.

“This is the moment, JJ. Right #%$in’ here! This is that moment you will look back at and say, I took my chance and I did it. Do you really want to end up working for Visual Circuits for the rest of your life?”

I got fired. I had nothing to lose. But I did really believe that there was no way to fail and I really believed that JJ wouldn’t be happy unless he stepped out and took another chance.

Equally important to your success is the How person, as in “How are we doing this?“ This person puts up with the Why person. He/she is pragmatic, practical, consistent and talented. They too have an unwavering belief in their ability to get the job done, even if they’ve never done it before and in fact suck at it, at first. But, they deliver on that belief with action, quickly picking up skills as they go along.

JJ and I were heading down to our first trade show. To that date, he had only learned VisualBasic Script and had used that language to program the very first versions of Axis MC (our media retrieval system) and Axis TV (our video bulletin board system). On the way down to Texas in my 1987 Honda Accord, JJ whips out the laptop to start programming the television control software. For this, he needs to learn VisualBasic, which he tags as, “super easy.”

Later, when JJ needed to learn the C programming language, he said to me, “C is easy! It’s like VisualBasic but with semicolons.” I think he was joking.

JJ never really stops to think about how hard something is. He just does it. He’s a How.

The How person would not be in business if it were not for the Why person. The Why person would have no hope of success without the How.

Every now and again, you find someone so insane that they are able to embody both of these personalities. You will know that you have found such a person soon after you’ve met them. They’re extremely obsessive and they’re quirkiness is often taken for genius, which makes up for their lack of sales ability.

A friend of mine is close friends with someone like this. We’ll call the insane businessman Chris, because that’s his name. Chris owns a retail outfit that sells consumer products through the web and at a local store. He rose to become one of the two largest retailers in his niche industry.

One day, Chris was fighting his point of sale system (the cash register and inventory computers). Having very little outside retail experience and even less computer knowledge, he decided to write his own system using a Linux box and PHP.

My friend who knows Chris would go to his house and marvel at the perfectly organized CD collection, where every case would open in the same direction once removed from the shelf and every CD label was perfectly level with the floor. That is, until my friend would randomly open cases and tilt the CDs just a little bit, forcing Chris to go through the whole collection and re-straighten the molested CDs.

Are you bat-shit crazy like Chris? If not, you need to either be the Why or the How and find the one you’re not, because you need both.

Step 6: Do Only One Thing Better Than Anyone Else

Focus on one thing and own that one thing. It’s very easy to go after what will pay the bills in the early days, instead of focusing on bettering the organization and the product or service that you set out to change the world with.

“If we just add this one thing” or “if we can just make this product we’ll have an extra 50k in the bank.”

These are wastes of time that will kill your business. Unless the special thing that you’re going to do is something that makes your product better and contributes to the assets of your company, you need to ignore it as the noise that it is.

Your best shot as a startup is to pick a neglected niche that is under served by established competitors that are chasing after more lucrative markets. You come in, offer something that is custom made for these poor neglected souls and keep hammering away until nobody can possibly knock you off this beachhead. You have the killer application for these people. This is pretty much a text book play. In fact, the name of the text book is Crossing the Chasm by Geoffrey A. Moore.

JJ and I got introduced to some really cool guys that were building an entertainment network for bars using digital signage technology. Unlike the dozens of other people that have tried this, these guys had the relationships with the bars and the beer companies that would want to advertise on their network. They also had more than enough cash and were ready to go.

We got very far down the road with these guys. We had spreadsheets that laid out how we were going to make very good money being a part of something that had a really high likelihood of success.

We sent our trainer, Pete, out to their facility to show them how Carousel would work as the beginning of a system that we would later change to fit their needs. Pete came back with a notebook full of changes to Carousel. It looked nothing like our vision for digital signage.

We already learned that lesson, illustrated in Step 3: Get to Know and Love Failure. We had to shut it down —one of the most painful, and correct, decisions in our company’s history.

Next week we’ll wrap things up with three observations and some parting thoughts…