September 22, 2023

Corner Office: Dane Atkinson of SumAll, on Making Pay an Open Book

Q. Were you an entrepreneur early on?

A. My parents made me work for money at a very young age. I had a dog-walking business when I was about 6 or 7 years old. I wrote my first piece of software when I was about 11. At around 13, I started working in advertising, because a lot of people didn’t know how to use computers. They paid me $25 an hour. By the time I was 18, I was C.O.O. of a subsidiary of one of the Grey advertising companies. We had about 20 or 30 employees.

Q. That’s a big management role at a young age.

A. I tried to ignore the fact that I was younger, and I would lead from the front. So I worked longer hours, just to make sure people knew that I wasn’t taking advantage of them. I looked after them, and that really helped protect me from other mistakes.

Q. How many companies have you started?

A. Well over a dozen, if you count the act of starting. Fewer if you just count the ones that were successful.

One reason entrepreneurship is so amazing — and one of the reasons I recommend it to everybody — is that unlike most other career paths, it is the purest lens for looking at yourself. If you’re in a big operation, you can blame the surrounding environment. When you’re starting your own company, it’s just you. There really is nothing else. So you have to take that medicine at its purest form, which I think matures you as a person faster.

Q. What were some early lessons running your first company, SenseNet?

A. I made every mistake possible. One of the biggest mistakes I made was that, in your first company, you can really get attached to the idea of equity and ownership, and so it becomes much more of a baby to you. You lose that after you do it a couple of times, but I was overly greedy early on with the ownership. It was a huge learning curve.

Q. Tell me about the culture of your current company.

A. We have a wildly different environment. For example, everybody knows everybody’s salary. It’s pure transparency, which manifests itself with a much greater level of trust. Everybody knows each other’s ownership stake, too.

Q. What was your thinking behind that?

A. The first few months of the company, all we did was talk about culture. We didn’t even know what we were going to do first. We really overthought how to build an environment.

The usual corporate doctrine can be configured poorly for employees. It’s almost designed to enable evil to happen. You can tell an employee they have 10,000 shares, but it doesn’t mean much if I just give myself 100 million shares or whatever. Their stake is going to be worthless. Most of the engineers out there have no idea what their ownership stake really is. They’re just told, here’s how much you own. It’s worth this now, and it could be worth that later.

Q. What happens if you want to pay somebody above-market wages? How do people react?

A. I can’t hire them. So far I’ve not been able to go “out of bounds” to hire people. I try to get the consensus of the team, but if they say it doesn’t make sense, then I don’t hire them.

Q. But you’re the C.E.O.

A. I’m good at arguing. I’m good at getting people to believe in things. But if I can’t get them to believe that we should hire this person for a certain amount, then I might actually be wrong.

When we first started with this, we’d send out the package details of every new hire to the entire team. That caused a lot of stress. So we’ve switched that and now just their peer group will know the new hire’s compensation and be forced to a vote. The information is shared on a drive that everybody can see, but we don’t broadcast it out to everybody. Very few people look at them, though. But they know the information is there if they want to see it, and that creates more trust in a deeper way.

Q. What else about your culture?

A. We have a trial on-boarding process. Anyone we hire goes into a 45-day test period. But we have a really high bar, and only about 65 percent make it through. At the end we have a fresh, clean start and we decide if we want to get married. It turns out to be much healthier for on-boarding when you make sure everybody likes who we’re bringing on.

Q. And with the 35 percent who don’t work out, what’s the pattern?

A. Sometimes people don’t fit into our environment. We’re still at a stage where culture makes an extreme difference. Sometimes we’re not an organization that’s as supportive for them as we’d hope to be. A couple of people who didn’t make it through required an additional level of mentoring. And we believe in mentoring. But if they need an excessive amount, they won’t develop. They won’t grow fast enough, and it’s not the right place for them, or for us. So we save each other the hassle.

Q. A lot of companies struggle to create an environment where people have frank discussions about employees’ performance. How do you do it?

A. You’re expected to have hard conversations as often as you can. That’s how you get better. You’re expected to sit down with your peers and say: “You know what? You really didn’t do that well.” And those conversations are amazing because they de-stress the frustration that people can feel. So you’re unhappy with the way somebody managed the project. You sit down and you talk with them. Maybe you didn’t understand the full picture. We’re all human beings. You have a basic belief that everyone’s here for the same goal and is competent. Then, once you understand their pain points to work through, you can better eliminate where they really failed.

Q. How do you hire?

A. We want ambition. We want people who are hungry. We want people who love what they do. A big screen for us is seeing what people’s personal hobbies are. We look for the playgrounds people play in. We want people who are writing books or building an app or doing other things that show that it’s not just a job — they have an actual native passion for it. So we usually ask a lot about people’s hobbies.

This interview has been edited and condensed.

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You’re the Boss Blog: Maybe You Don’t Really Need Investors

Searching for Capital

A broker assesses the small-business lending market.

I spoke recently with an entrepreneur who is trying to start a security business. He and his colleagues plan to offer high-end security to executives of large corporations, and they called us hoping we could help them find money.

My immediate reaction was to cringe, which is what I usually do when I get a call from a start-up. At my company, we only help entrepreneurs with debt. And most of the time, it is extremely difficult to arrange debt financing for companies that are just getting started, although there are exceptions. If the start-up is going to offer a business-to-business service, it can often use alternative financing strategies, like factoring or purchase-order financing, to get the cash flow necessary to make it through the painful early stages.

This time, I sighed with relief when the entrepreneur said he was interested in executive security — and not in trying to open an ice cream parlor or a coffee shop. But then I asked how much money he thought he was going to need, and he replied, “About $250,000.” This was not going to be an easy conversation.

This entrepreneur was focused on equity and had a plan in mind to impress potential investors. He thought he needed money for nice offices, a proper business plan, a management team and even a succession plan in case something happened to him. He was getting ready to spend months doing a lot of work preparing to appeal to a group of hypothetical investors who might or might not ever come forward with cash. And during this period, he had no intention of earning a penny. Even though he insisted that he had several prospective clients who were already interested in his service, he believed there were other things to do first before he opened his doors.

From my perspective, he was getting ready to do the dance to lock in investors, and in the process, he was going to give away a piece of his company forever. He was falling for the myth that comes from Silicon Valley and shows like “Shark Tank” — that you need investors to make great things happen. Sometimes these investors go so far as to criticize the idea of starting a company with debt. In last week’s “Shark Tank,” Mark Cuban, the billionaire owner of the Dallas Mavericks, told an entrepreneur that debt is not your friend — that it’s a trap that a lot of entrepreneurs fall into. In my opinion, the situation is never that black and white. Both options should be considered.

In this case, I suggested that my executive security entrepreneur take a cold shower. What he really needed, I said, was his first contract. The moment he gets his first contract in place, his company will begin to have real value, and he will have started to prove his basic proposition. And then we can turn to factors to help him accelerate his cash flow so that he can make his payroll. He would be up and running the moment he got his first customer in place — and he wouldn’t incur the expense of spending months courting investors without operating the business.

How did he respond? At the end of our conversation, he seemed relieved — and excited. His list of a hundred things to do had been hammered down essentially to one: get a paying client. He had a sense of purpose. And if in fact he can deliver on that first contract, I think he will be on his way to building a business.

If you’re thinking about starting a business or taking your business to the next level, there is a good chance that you’re stuck because you think you need more money than you actually do. If this is the case, you might want to work with a mentor or friend to figure out what the most fundamental thing you need to do is in order to prove your basic proposition. If you strip away everything else, there is a chance that you will be successful sooner than you think.

Ami Kassar founded MultiFunding, which is based near Philadelphia and helps small businesses find the right sources of financing for their companies.

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Disruptions: Taxi Supply and Demand, Priced by the Mile

Annie Tritt for The New York Times.

On New Year’s Eve, Dan Whaley, a tech entrepreneur in San Francisco, got into a black Town Car and was driven one mile to a holiday party. The ride cost him $27. At the end of the night out, Mr. Whaley took a Town Car home from the party. This time, the exact same ride cost $135.

Mr. Whaley was using Uber, a service that allows people to order livery cabs through a smartphone application. On New Year’s Eve, Uber, a start-up in the city, adopted a feature it called “surge pricing,” which increases the price of rides as more people request them.

Although New Year’s Eve was very profitable for Uber, customers were not happy. Many felt the pricing was exorbitant and they took to Twitter and the Web to complain. Some people said that at certain times in the evening, rides had spiked to as high as seven times the usual price, and they called it highway robbery. Uber’s goal is to make the experience as simple as possible, so customers are not shown their fare until the end of the ride, when it is automatically charged to their credit card.

Economists call this “dynamic pricing.” It is deployed by only a small number of businesses, like hotels, airlines and car rental companies, which raise prices on weekends and holidays when demand surges.

So why do people accept this pricing from airlines and hotels but became irate with Uber?

“With regular day-to-day decisions, consumers like predictability and don’t like to see prices change,” said Dirk Bergemann, a professor of economics at Yale. “People are trained that there is a level of predictability with purchases. There will be a regular price for a bottle of ketchup and a relatively average price for a taxi.”

Professor Bergemann said that as technology continually made it easier for companies to change prices in real time, businesses would try to do so. He said, however, that companies would have to be prepared for repercussions.

In 1999, Coca-Cola’s chief executive, M. Douglas Ivester, mused about vending machines that would raise prices for drinks as the temperature rose. The outcry from customers was a public relations nightmare, and the company denied it was testing such a product.

Amazon suffered a similar uproar in 2000 when it reportedly experimented with DVD prices.

But there is another way to think about it. “Sure it’s about the regularity, but someone who is driving a car on a regular occurrence deals with dynamic pricing all the time: it’s called gas prices,” said Travis Kalanick, co-founder of Uber. “Because this is so new, it’s going to take some time for folks to accept it. There’s 70 years of conditioning around the fixed price of taxis.”

Julie Glassberg for The New York TimeTravis Kalanick, chief executive of Uber.

Some consumers might argue that price increases are fine, but there is a ceiling, and when that is breached, it begins to look as if a company is taking advantage of its customer. Charging someone $135 to travel a mile on New Year’s Eve could easily get lumped in that category — unless you are completely rational.

“If you’re a pure economist and following the laws of supply and demand, the argument is that if someone is willing to pay a price, then it is not excessive,” said Liran Einav, an associate economics professor at Stanford. “But that all depends on the type of long-term relationship you want to build with your customers.”

You might think that a technology company shaking up the taxi industry would want to maintain relationships with its customers. But that’s certainly not the lesson Uber learned.

“I don’t think that the constantly changing car price is necessarily where we want to go,” Mr. Kalanick said. “But on Halloween and New Year’s, it’s here to stay.”

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You’re the Boss Blog: Can an Applebee’s Franchisee Be a Real Entrepreneur?

Zane Tankel built the highest-grossing Applebee's in the world.Ruth Fremson/The New York TimesZane Tankel built the highest-grossing Applebee’s in the world.

Today’s Question

What small-business owners think.

We’ve just published a lively small-business conversation with Zane Tankel, who bought into the established Applebee’s business model but who has also challenged that model in many ways, including what his employees wear, how they are hired and rewarded, where he builds his restaurants, and what food those restaurants serve. Based on revenue numbers confirmed by Applebee’s, the results have been impressive. “Maybe this kind of thing isn’t for the average franchisee,” Mr. Tankel told Eilene Zimmerman, “but we pushed the envelope right from the start, took those protocols to the next level, and I think that’s entrepreneurship.”

Please take a look at the conversation and tell us what you think: Is Mr. Tankel an entrepreneur?

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Conversations: Why It’s So Difficult for Entrepreneurs to Head for the Exit

His goal was to find a way to help his company, Beryl — a call center that caters to hospitals and is based near Dallas — keep growing while also allowing him to free up time to pursue other ventures.

In January 2010, Mr. Spiegelman signed a letter of intent to sell a majority interest in the company to a private equity firm. But after considering the risks of letting someone else control his company, which has 350 employees and annual revenue of $35 million, he decided to walk away from the deal.

Mr. Spiegelman, who is 53, spoke recently about why he decided not to sell and why succession and exit issues are so difficult for business owners.

Q. How did Beryl get started?

A. I started the company with my two brothers in 1985. But I’m the only one involved now since my youngest brother, Barry, died from a brain tumor in 2005 and my other brother, Mark, left the business 11 years ago.

Q. What roles did the three of you play when you started the company?

A. We tried to align our roles with our natural talents. Mark was the technical genius behind everything we did. I was the sales and marketing guy. Barry was the utility guy who helped do everything to bring it all together.

Q. Why did your brother decide to leave the business?

A. Mark had always been a natural entrepreneur. It seemed like every year he wanted to spread his wings and get involved in a different business. In 2000, he decided it was time he did something else. It ended up being the best decision for everyone since up to that time, it was like we had three chefs in the kitchen. Something had to give.

Q. Is your business like other call centers?

A. We made the decision early on that we would never compete on cost. We have taken what is generally thought of as a commodity and turned it into a product with a premium price customers are willing to pay. It has set the bar differently for us.

Q. How so?

A. I think that many companies miss the fact that having a great internal culture where you have engaged employees is not only the right thing to do, it’s also good for business. We have won nine “best places to work” awards and have client-retention and employee-retention rates that are unheard of in the industry. That has also made us four to six times more profitable than a typical call center, which allows us to invest in better tools for our people. It also allowed us to avoid bringing in outside investment as we grew the business. We have had control over our own destiny.

Q. Then why did you decide to explore selling part of the company?

A. There were a couple of reasons. One was that starting in 2009, because of changes in the health care industry, we saw opportunities to accelerate Beryl’s growth. Another was that I had brought on a team of very experienced senior leaders from outside the company who were chomping at the bit to expand and take advantage of the market drivers. Third, I was interested in diversifying my own time to try to help other businesses connect culture with financial performance. For example, I had begun to get involved in something called the Small Giants Community, an international community I helped build around the ideas in Bo Burlingham’s book, “Small Giants: Companies That Choose to Be Great Instead of Big.”

Q. Isn’t there something contradictory about bringing in outside executives and outside investors to help your company grow faster — so that you can help other companies learn the joys of staying small?

A. Being a Small Giant does not mean staying small. All entrepreneurs are growth-driven. Being a Small Giant means that we want to grow for reasons more than just growth and profit.

Q. Part of the goal, I assume, was to take some money off the table.

A. Taking some money off the table was a factor, but it was the least important one. Having built this profitable business, I had been able to build some wealth outside of the business over the years. I had already reached the point where my financial security wasn’t at risk.

Q. So what happened?

A. I signed a letter of intent in January 2010, to take on a major investment by a private equity firm.

Q. Did the investors give you any assurances about how they would run your company and treat your employees?

A. Yes. They did that by validating our belief that there was a connection between the culture we had built and the financial performance of the company.

Q. Then why did you change your mind?

A. Well, as we went through the due diligence process, it began to dawn on me what life would be like to have a financial partner, people who are focused on the short-term view of financial performance. Even though I knew that their plan was to get a return on their investment in four to six years, I began to get nervous. I felt like if we went down this road, it would have an irreversible negative impact on Beryl’s culture.

Q. And you decided to walk away?

A. I did. I pulled the plug about three weeks before we were supposed to close the deal. I know there are cases where entrepreneurs sell their business, get their payday and are happy. But I know there are many more cases where business owners look back and are disappointed with the impact on the culture of their business.

Q. Did you learn anything from the investors?

A. It was great for us to get an outsider’s take on what we needed to do to improve our business, like building an outside sales team, which we have now done. We are making the kinds of investments the private equity firm would have done, but at our own pace, and under our control, which is exciting and fun.

Q. How are you doing it without the additional capital?

A. I decided to fund the growth out of our own working capital, or maybe take on some debt for the first time. It feels like we have reinvented the business by investing in new talent and technology.

Q. But if you didn’t really need outside capital to finance the growth and you didn’t really need to take money off the table and you had already brought in outside leaders to lighten your load, why did you come so close to doing this?

A. That’s like asking me why I had the ice cream if I didn’t really need it. As entrepreneurs, we are going through constant business phases and a search for the right thing to do. Sometimes we make good decisions and sometimes we don’t.

Q. Are you now considering other succession plans?

A. I’ve begun to look at the possibility of an employee stock ownership plan. I never thought this was a company my children, who are 5 and 9, would run. But now sometimes I think, maybe they could.

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One Size Fits Nobody: Seeking a Steady 4 or a 10

It’s a familiar problem for many women, as standard sizing has never been very standard, ever since custom clothing gave way to ready-to-wear.

So, baffled women carry armfuls of the same garment in different sizes into the dressing room. They order several sizes of the same shirt online, just to get the right fit.

Now, a handful of companies are tackling the problem of sizes that are unreliable. Some are pushing more informative labels. Some are designing multiple versions of a garment to fit different body shapes. And one is offering full-body scans at shopping malls, telling a shopper what sizes she should try among the various brands.

“For the consumer to go out and navigate which one do I match with is a huge challenge, and causes frustration and returns,” said Tanya Shaw, an entrepreneur working on a fit system. “So many women tie their self-esteem to the size on the tag.”

As the American population has grown more diverse, sizes have become even less reliable. Over the years, many brands have changed measurements so that a woman who previously wore a 12 can now wear a 10 or an 8, a practice known as “vanity sizing.”

In men’s clothes, the dimensions are usually stated in inches; women’s clothing involves more guesswork.

Take a woman with a 27-inch waist. In Marc Jacobs’s high-end line, she is between an 8 and a 10. At Chico’s, she is a triple 0. And that does not consider whether the garment fits in the hips and bust. (Let’s not get into length; there is a reason most neighborhood dry cleaners also offer tailoring.)

Ms. Shaw, the entrepreneur, is chief executive of a company called MyBestFit that addresses the problem. It is setting up kiosks in malls to offer a free 20-second full-body scan — a lot like the airport, minus the pat-down alternative that T.S.A. agents offer.

Lauren VanBrackle, 20, a student in Philadelphia, tried MyBestFit when she was shopping last weekend.

“I can be anywhere from a 0 at Ann Taylor to a 6 at American Eagle,” she said. “It obviously makes it difficult to shop.” This time, the scanner suggested that at American Eagle, she should try a 4 in one style and a 6 in another. Ms. VanBrackle said she tried the jeans on and was impressed: “That machine, in a 30-second scan, it tells you what to do.”

The customer steps into a circular booth, fully dressed. A wand rotates around her, emitting low-power radio waves that record about 200,000 body measurements, figuring out things like thigh circumference.

Next, the system matches the customer’s measurements to clothes in its database. MyBestFit currently measures clothes from about 50 stores, including Old Navy, Eddie Bauer and Talbots.

Customers then receive a printout of the sizes at each store that ought to fit the customer best. The retailers pay a fee when they appear in the results, but they cannot pay to be included in the results; the rankings are based solely on fit. (The company saves the data, with ID numbers but not names, and may give aggregate information to retailers as feedback.)

Don Thomas, who manages the Eddie Bauer store at the King of Prussia Mall outside Philadelphia, said the system was helpful to shoppers. “Nine times out of 10, if left on their own, they will choose the wrong size pant,” he said. With a printout, “if it says they’re a 4 or a 6, they’re a 4 or a 6, generally. So it’s really good for the customer who’s time-starved, which we all are.”

Ms. Shaw says there are plans for 13 more scanning machines in malls along the East Coast and in California by the end of the year.

The sizing variations are a big contributor to $194 billion in clothing purchases returned in 2010, or more than 8 percent of all clothing purchases, according to the National Retail Federation.

The scanners are a modern solution to an old problem. Studying dress sizes in Vogue advertisements from 1922 on, Alaina Zulli, a designer focusing on costume history, found clothing sizes have been irregular for decades.

A woman with a 32-inch bust would have worn a Size 14 in Sears’s 1937 catalog. By 1967, she would have worn an 8, Ms. Zulli found.

Today, she would wear a zero.

Plenty of people have tried to address these arbitrary sizes. Advocating a labeling system called Fitlogic over the last few years, an entrepreneur, Cricket Lee, discovered just how difficult it is to change manufacturers’ approach to size.

Her labeling system divides women’s bodies into three shapes, straight, hourglass or bottom-heavy, and a Fitlogic label carries both the standard size and the shape.

Ms. Lee did tests in the mid-2000s with manufacturers like Jones Apparel and retailers like Nordstrom. But retailers said consumers had trouble grasping the concept. “The manufacturers were so afraid of producing more than one fit in the very beginning,” she said.

Still, she said, she will soon try to sell the sizing system again.

Some brands are taking their own approaches to make the fitting room less demoralizing. Mary Alderete, vice president for women’s global marketing at Levi’s, said, “When we try on 10 pairs of jeans to buy one, the reason you feel bad is because you think something’s wrong with you.”

Last fall, the company introduced Curve ID, a line that offers three styles, depending on how rounded a woman’s backside is — slight, demi and bold. (Levi’s is now testing a fourth style, called supreme curve.) Each of the three styles includes about 29 fits and colors, and dozens of sizes. Ms. Alderete said the company had sold more than one million pairs of the Curve jeans.

Marie-Eve Faust, the program director of fashion merchandising at Philadelphia University, called the Levi’s effort “a good start.”

“The next step is to have the major players sit together, manufacturers, retailers, brands, and say ‘This type of label should be appropriate for all of us. Let’s standardize,’ ” she said.

Dr. Faust said she had been discussing a new kind of label that takes into account the wearer’s shape, but expected retailers to bristle.

Still, Dr. Faust said, change is needed.

“It would be nice just to take the pant, look at the label and say, ‘That should fit me,’ ” she said.

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