Chris Fontanella of Encore Professionals Group On Five Things You Need To Create A Highly Successful Startup
Pick a Fight — Size up your competition and then choose which competitor you want to take down. Be the devil to the God in your industry. For my business partner and me it was the firm we once worked for. They were Goliath; we were David. Initially, we lost tons of deals to them. But we persisted, and scratched and clawed at them. Over time, we gained more and more marketshare. Our goal was never to be as big as them, however. They’re a global organization with national and international offices. We could not compete with that. Our goal was to be a pebble in their shoe. When clients had needs, we wanted our company to be an option they considered. If our old firm was not on their game, were ready to pounce. We were the wolf always at the door.
Startups have such a glamorous reputation. Companies like Facebook, Instagram, Youtube, Uber, and Airbnb once started as scrappy startups with huge dreams and huge obstacles. Yet we of course know that most startups don’t end up as success stories. What does a founder or a founding team need to know to create a highly successful startup? In this series, called “Five Things You Need To Create A Highly Successful Startup” we are talking to experienced and successful founders and business leaders who can share stories from their experiences about what it takes to create a highly successful startup. As a part of this series, we had the pleasure of interviewing Chris Fontanella.
Chris Fontanella is the founder of Encore Professionals Group, a professional services firm specializing in the placement of accounting and finance candidates in temporary and full-time positions. After earning his bachelor of arts degree in New Testament Theology from Oral Roberts University, he attended Fuller Theological Seminary, where he earned his master of arts degree in Theological Studies. Subsequently, he segued from a life of ministry into the staffing and consulting industry. He is also the author of Jump-Start Your Career: Ten Tips to Get You Going and Tune Up Your Career: Tips & Cautions for Peak Performance in the Workplace.
Thank you so much for joining us in this interview series! Before we dive in, our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’ and how you got started?
After a couple years “learning the ropes” of the staffing business at one of the largest staffing companies in the country, I went to work for a newly founded start-up at Deloitte and Touche called Resources Connection. While at Resources (later named Resources Global Professionals), I deepened my knowledge of accounting and finance and established numerous relationships with CFOs, VPs of Finance, senior audit executives and others, including Directors and Managers of Human Resource departments. Over the years, my business development efforts generated millions in revenue for the organization. During my fifth year working there I started to think that if I could make money like that for them, I certainly could make it for myself. The business entity and its infrastructure would need to be established, of course, but, I told myself, it could be done.
What was the “Aha Moment” that led to the idea for your current company? Can you share that story with us?
While at RGP, my revenue production never dipped below any quarter or year that preceded it. My numbers always went up. FIVE. YEARS. STRAIGHT. But, my bonuses went down. As the company added more internal staff to grow the organization, there were more mouths to feed. And at the time, the compensation plan was structured in way where all business developments professionals received an equal share of the bonus pool. A part of the bonus dollars were also distributed based on “managerial discretion.” Over time, I grew increasingly unhappy with this compensation model, especially since I was killing it saleswise. So after five years with the firm, I left to join a competitor that seemed to offer a better scenario. In the least, the compensation model afforded me an opportunity make more money than I had been making at RGP.
Was there somebody in your life who inspired or helped you to start your journey with your business? Can you share a story with us?
Turns out, the grass is not always greener on the other side of the hill. For a variety of reasons, I was not happy with the company I left RGP for. So despite not having another job lined up, I submitted my resignation. A week or so later, I received a call from a former co-worker at RGP. Surprisingly, she had been fired, even though she was the top revenue producer in the Orange County, CA office. She had the brilliant idea of starting our own firm. Since I was the top revenue producer in the Los Angeles office, she thought we’d make a formidable team.
What do you think makes your company stand out? Can you share a story?
What made our company stand out was our constant emphasis on the value of relationships, an emphasis I continue to stress in my current company, Encore Professionals Group. Over the years, we had “carried” people on our benefits until they transitioned into new opportunities, and we increased candidate hourly rates even though that meant our margin would take a hit, and we creatively structured our contracts in ways that made sense for our candidates and clients. In general, we always tried to function in a way that put others before ourselves.
How have you used your success to bring goodness to the world?
I have worked with others to help them get their businesses off the ground and I am currently exploring working with schools and other programs to teach kids about the work world and building a noteworthy career.
You are a successful business leader. Which three character traits do you think were most instrumental to your success? Can you please share a story or example for each?
- A willingness to start at the bottom: the bottom rung in the staffing industry is cold calling. I hated it, but it had to be done. It helped me learn more about the roles I would fill, taught me how to establish rapport with potential clients, and instilled in me the idea that you should never over promise. Say what you will deliver and then deliver it.
- A willingness to work my tail off: inspiration seems useless without perspiration. Career dreams seldom come to fruition without a commitment to hustle your ass off. There’s a time to stop dreaming and get down to the business of hard work. When I started my first business, I woke before sunrise to commute from my home in West Covina, CA to Irvine, CA. Anyone familiar with the CA freeways knows that makes for a grueling day on the road. I worked long hours — -calling on potential clients, scheduling meetings with potential clients, and interviewing candidates for potential projects, all in the hope of making deals. Then I’d wake up and do it all over again. My business partner and I lived under a cloud of potential until the business found firm footing and our hopes began to materialize.
- Selecting the right business partner: the history of business is littered with failure because business partners failed to see eye to eye. It wouldn’t be accurate for me to say, however, that I picked my business partner. In truth, she picked me. But the principle is still true: picking (or being being by) the right partner(s) to align yourself with is one of the most critical decisions you will make when entering into an entrepreneurial business relationship. There’s no step-by-step manual for this. I found it requires a combination of objectivity and intuition. Initially, I did not know my business partner inside and out but I knew a handful of things based on observation: she was the top producer in the office she worked in; she was a CPA; she had worked at Deloitte and Touche, a reputable accounting firm; and whenever I saw her in meetings, she communicated well and people wanted to be around her. On an intuitive level, I felt we would work well together. I had no way of knowing, but my gut told me she had drive and ambition, just like me, and that we would work well together. Time would tell. It did: we never had a cross word and we built a multi-million dollar business.
Often leaders are asked to share the best advice they received. But let’s reverse the question. Can you share a story about advice you’ve received that you now wish you never followed?
My business partner and I always consulted each other (and, on occasion, our spouses). I don’t have a bad advice received story to share.
Can you tell us a story about the hard times that you faced when you first started your journey?
When we first started our business, an unexpected catalyst prompted explosive growth for our firm. The Sarbanes-Oxley Act of 2002 was a major tailwind for the staffing industry. Companies could not find enough qualified professionals to help them implement the new accounting pronouncements. One of my clients needed fifteen consultants to get the job done. That helped our fledging startup to become firmly established in the market. But it also burdened us from a payroll standpoint. In the staffing business, you pay your candidates on a weekly or bi-weekly basis, and your invoices are paid 30–45 days laters. Well, while we were basked in the glow of landing a huge deal, we failed to realize how our payroll demands exceeded our collections. My business partner called me one morning and informed me we would fail to meet payroll, if we did not immediately get my client to pay our invoices. Fortunately, they accommodated and we averted a major business blunder. Suffice it to say, from that point on we had much more respect for accounts receivable departments.
Where did you get the drive to continue even though things were so hard? What strategies or techniques did you use to help overcome those challenges?
Dark backdrops can create a desire to break out of one’s existing environment. After investing nine years studying and preparing for the ministry, I decided to walk away from that. I had no idea what I was going to do with my life and definitely had no clue as to what my “career” would look like. All I knew was that I wanted a better scenario than what I knew — -and was willing to work my ass off to make it happen. Brandon Steiner, founder of Steiner Sports, jokes that he “saw the light [of entrepreneurship] at an early age — -the light of an empty refrigerator.” Nothing puts fire in your belly more than hunger. Nothing makes you more pragmatic than life’s harsher impositions. Dark days make you long for a different, more radiant reality. I guess my strategy was to simply to work hard to change my scenario. And the technique I employed was to keep pushing toward a goal. Once that goal was met, I set another. And another. And another.
The journey of an entrepreneur is never easy and is filled with challenges, failures, setbacks, as well as joys, thrills and celebrations. Can you share a few ideas or stories from your experience about how to successfully ride the emotional highs & lows of being a founder”?
Thanks in part to the aforementioned Sarbanes-Oxley Act, my business partner and I built a profitable consulting practice within a six-month window of time. Before long, a national consulting firm expressed interest in buying our company. After two years in business, we sold to that company. Thrilling! Things were going great. The CEO we worked with on the transaction was amazing. Wisely, he continued to allow us to run our business the way we knew would be most successful. He understood that we knew our market and knew our clients, and we were profitable at a 40% gross margin. Then a coup happened. Led by the COO, a handful of members from the executive management team had the CEO ousted. I wondered how that would portend for my business partner and me. Sure enough, a couple years later, the self-appointed CEO (former COO), decided changes needed to be made in our region. In essence, he believed he could replace us with one person to run both the Los Angeles and Orange County regions. He also wanted to change our business model from staff-augmentation (temporary assignments) to “consulting” (more project-oriented business). It was not a happy day when he sent us an offer letter to extend to our replacement. Yeah! That’s what he asked us to do. But we didn’t. Instead, we called him and told him he now had a problem in southern California and he best get on a plane to come speak with us. Long story short, he did fly out, accompanied by General Counsel. And we hammered out a spearation agreement from the company. Our deal included being paid out the remainder of our employment contract for an eighteen-month period. On the downside, we could not start another business until our non-compete expired. One week after inking our deal, the Great Recession hit. The southern California practice suffered huge loses, while my business partner and I learned how to golf. And eighteen months to the day, I was back in my old office. A private equity firm had purchased the business and asked my business partner and I to return to the company to rebuild the practice left in ruins by the self-appointed CEO. How’s that for entrepreneurial highs and lows!
Let’s imagine that a young founder comes to you and asks for your advice about whether venture capital or bootstrapping is best for them? What would you advise them? Can you kindly share a few things a founder should look at to determine if fundraising or bootstrapping is the right choice?
The bottom line is this: if you tap into venture capital, your business is not your own. You must remember that venture capitalists only care about one thing: the bottom line. You cannot run the business the way you want unless they agree with what you think should be done. My business partner and I started our firm with our own funds. Those were the best of times. When we sold our business, we were (initially) fortunate that the CEO we sold to, allowed us to manage the operation as we saw fit. That changed. We experienced and lived through a coup. Those were pretty bad times. When we returned, we reported to the Chairman/CEO from the private equity firm. Decisions we wanted to make first needed his approval. In my mind, those were the worst of times.
Ok super. Here is the main question of our interview. Many startups are not successful, and some are very successful. From your experience or perspective, what are the main factors that distinguish successful startups from unsuccessful ones? What are your “Five Things You Need To Create A Highly Successful Startup”? If you can, please share a story or an example for each.
1 . Luck — I agree with Miguel Cervantes, who wrote in Don Quixote, “When good luck comes along, open the door and let it in.” The company my business partner and I worked for was so mad that we had started our firm. For some reason, they decided to call the clients we did business with while we worked there, to tell them we had non-solicitation agreements, which precluded us from working with them until it expired. The loophole, however, was that we could do business with those former clients, as long as we did not initiate the business call. Fortunately for us, those clients became curious after their call with our former employer and picked up the phone and called us. It didn’t take long before those calls turned into business discussions on how we could be a trusted resource for them when they had staffing needs. Luck also knocked on our door when the Sarbanes-Oxley Act was pronounced. It immediately placed an extreme staffing demand on every company. We were in the right place at the right time to help. Our business went from zero to fifty consultants in about six months.
2 . Pick a Fight — Size up your competition and then choose which competitor you want to take down. Be the devil to the God in your industry. For my business partner and me it was the firm we once worked for. They were Goliath; we were David. Initially, we lost tons of deals to them. But we persisted, and scratched and clawed at them. Over time, we gained more and more marketshare. Our goal was never to be as big as them, however. They’re a global organization with national and international offices. We could not compete with that. Our goal was to be a pebble in their shoe. When clients had needs, we wanted our company to be an option they considered. If our old firm was not on their game, were ready to pounce. We were the wolf always at the door.
3 . Build a Better Mousetrap (or Offer Better Service) — This really is at the heart of being an entrepreneur: you think you can make something better than what has already been made, (or you have an idea for a product that has not yet hit the market), or you are convinced you can offer a service better than someone else. My business partner and I were convinced we could offer staffing solutions better than our former employer because our business model was more flexible. Being a publicly traded company, they had Wall Street to answer to and gross margins to hit; we could “horse trade” all day long. Their processes were more cumbersome. We had less red tape to cut through and our processes were more streamlined. Their client service managers had to “run things up the food chain” for approval. We made decisions “on the fly.” Our clients benefitted from our adapatability and we hoped they suffered from our former employer’s rigidity.
4 . An Appreciation for Relationships — Strictly speaking, business is the practice of making one’s living by engaging in commerce. And engaging in commerce, especially if you choose to be an entrepreneur, requires engaging with people and building relationships. On a personal front, they say, good relationships make for a full life. In my book, the same can be said about business relationships. Err in this regard and your business will suffer. I once assumed a business account from someone who was let go from a company I worked for. This client was not a happy camper about my former co-workers departure and he let me know that. On top of that, he was not happy about certain fees he was being charged for our services. So I scheduled a meeting with him to discuss things and offer solutions. What I didn’t plan on was my regional manager joining us on the meeting. Over lunch, the client expressed how upset he was with his business arrangement with the firm. He pointed out that our pricing was much higher than that of our competitors and our fees for “converting” our employees to his payroll were extreme. My regional manager pushed back and denied the client’s request for a discount. My hope was that she would be willing to give something since the client was spending millions on our services. The RM flat out rejected that notion. When we got back to the car, she looked at me and said, “F*%# him; we don’t need his business.” Sure enough, that client phased out our services and we never saw business from him again. Her lack of appreciation for relationships cost the company millions in revenue.
5 . The Right Hiring Philosophy — Do not take a homogenized approach to hiring the team you want to help build your business. Instead, approach hiring as if you were putting together a puzzle. I call this the “Wisdom of Schnitt.” Dave Schnitt was one of the best bosses I reported to, partly because he hired people who were not alike. He did not seek candidates that possessed a wide spectrum of talent and skill but individuals who brought a particular skill to the table. When I reported to him, his team consisted of the following: two CPAs, one with a tax background and another with an audit background, who took phone calls from potential clients and could discuss in detail their accounting and finance related needs; a recruiter with a degree in communications; and an administrative assistant who knew how to get “stuff” done. Even though I had limited accounting and finance knowledge, and come to the table with a degree in theology, he hired me because I knew how to make cold calls and schedule meetings with potential customers. For the most part, the others were order takers, and I was an order maker. When you are building your team, avoid hiring people with the same skillset and experience. And learn to recognize transferable skills in people. It’s possible a skill they’ve used elsewhere can be applied in your business. Candidates with ambition and an aptitude for learning always excel when given a chance.
What are the most common mistakes you have seen CEOs & founders make when they start a business? What can be done to avoid those errors?
They focus on non-essentials, things only tangentially important to their business, like having a big/nice office, and state-of-the-art computer systems and software. Especially early on, you need to be laser focused on only that which generates revenue. What do we have to do to get to break-even? How many deals do we need to close until we are profitable? The question my business partner and I always asked when we considered what to do in various scenarios was this: “And this generates revenue how?” If it didn’t generate revenue or eventually lead to revenue, we assumed it was not essential to our business.
Startup founders often work extremely long hours and it’s easy to burn the candle at both ends. What would you recommend to founders about how to best take care of their physical and mental wellness when starting a company?
Create space in your day to let your mind wander and daydream about possibilities. In his book, The Ride of a Lifetime, Bob Iger says, “It’s vital to create space in each day to let your thoughts wander beyond your immediate job responsibilities.” Similarly, mythologists stress the importance of entering into your walled garden, a place to reflect, contemplate, and be introspective, so you can restore what has been sapped by the world — -and I would add, work world.
You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)
Some form of reading program that includes The Classics.
We are blessed that some very prominent names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US with whom you would love to have a private breakfast or lunch, and why? He or she might just see this if we tag them.
Hands down it would be Derek Jeter. Derek established a legendary, noteworthy baseball life and career and it contains all the things that make for a great story (the stuff myths are made of): he faced challenges that come with being a biracial kid; he had great parents who stressed the importance of hard work and education; he had his fair share of early struggles, both in the minor and major leagues; he had to prove himself; he worked his ass off; he started at the bottom and made it to the top; grinding it out at the bottom prepared him to be at the top; he never stopped trying to improve his skills; defeat inspired him to try harder; victory increased his appreciation; he is well liked and respected by those who play or played the game; he has five championship rings; and he stayed true to himself along the way. C’mon! If needed, I can on and on about him.
How can our readers further follow your work online?
They can visit my website at https://chrisfontanella.com
This was very inspiring. Thank you so much for the time you spent with this. We wish you continued success and good health!
About the Interviewer: Douglas E. Noll, JD, MA was born nearly blind, crippled with club feet, partially deaf, and left-handed. He overcame all of these obstacles to become a successful civil trial lawyer. In 2000, he abandoned his law practice to become a peacemaker. His calling is to serve humanity, and he executes his calling at many levels. He is an award-winning author, teacher, and trainer. He is a highly experienced mediator. Doug’s work carries him from international work to helping people resolve deep interpersonal and ideological conflicts. Doug teaches his innovative de-escalation skill that calms any angry person in 90 seconds or less. With Laurel Kaufer, Doug founded Prison of Peace in 2009. The Prison of Peace project trains life and long terms incarcerated people to be powerful peacemakers and mediators. He has been deeply moved by inmates who have learned and applied deep, empathic listening skills, leadership skills, and problem-solving skills to reduce violence in their prison communities. Their dedication to learning, improving, and serving their communities motivates him to expand the principles of Prison of Peace so that every human wanting to learn the skills of peace may do so. Doug’s awards include California Lawyer Magazine Lawyer of the Year, Best Lawyers in America Lawyer of the Year, Purpose Prize Fellow, International Academy of Mediators Syd Leezak Award of Excellence, National Academy of Distinguished Neutrals Neutral of the Year. His four books have won a number of awards and commendations. Doug’s podcast, Listen With Leaders, is now accepting guests. Click on this link to learn more and apply.