Key Idea #1: The Lightbulb

If any business school wanted a classic entrepreneur as a "specimen" for study, Jim Burr would qualify. Even after hours of questioning, poking and prodding, they would never be disappointed in what they would find. He is true to his own ideas. Some would say he's tough guy …a first-to-market, fearless leader …a light in the darkness …a bulldozer for the wreckage …a strong-willed individual who likes to have things his way. He has created hundreds of jobs, delivered thousands of hours of service to customers, and generated millions in cash flow. Today, what he created is in the hands of others.

Why? He, himself, says he outgrew his capital. The lesson? Pull back to self-fund or be ready for others to be part of the decision making. This is not a sad story. It is actually not even unusual. The entrepreneur who plows the field and plants the seeds often has to leave the future's harvest to others.

What do you think? What are some of the clues Jim gave you that reveal he is a risk-taker?

Possible answers: He borrowed from his brother and cashed in his wife's life insurance policy to buy a helicopter and he didn't even have a pilot's license or have a pilot to fly it. He did no research. Jim just had a hunch that he could get people to pay him to use his helicopter.

What do you think? Where does intuition come from?

Possible answers: This is a hard one. Having grown up in an inaccessible place, Jim figured that others were just as frustrated as he was with the long drive to "civilization." What looks like a hunch, insight or intuition comes from long-term experience. What makes this fascinating is that we see this all the time with small business owners. They find a need and fill it before others even notice the need. It is the person's intimate relationship with the situation that gives the insight - or intuition - to take action that may appear foolish to others. Jim dreamed of getting easily from one place to another; and, because there were few roads and massive mountains all around him, the only way to make his dream come true was to buy a helicopter.

You think back... Why did Jim take investors?

Answer: He said he outgrew his cash flow. This means the profits earned from his business were too small to finance the purchase of more helicopters and hire more people.

You think back... Why didn't Jim borrow money from a bank?

Answer: A bank will give businesses either a line of credit or a traditional loan. Jim already had a line of credit and probably couldn't get a traditional loan because he was maxed out on his credit line. It's a little like being maxed out on your personal credit cards. If you try to get a car loan from a banker, you might be told to pay down your credit cards first.

What do you think? What is the difference between a bank loan and taking money from investors?

Answer: A bank loan is called "debt financing" and money from investors is called "equity financing." This simply means that, if you borrow from a bank, you are in debt for the amount of money you borrowed plus the interest. When you have an investor, you don't owe the money back to that person in the same way you owe a bank. An investor gives you money in exchange for part ownership in the company. The amount of money the investors "puts in the deal" will affect how much ownership they get.

Jim did not tell us how much ownership he gave up, but, obviously it was a large enough chunk that he lost the control of his business. He did say that one investor, "felt like the mistakes that I had made in expansion and so forth were not consistent with what his views and goals were and control shifted from me to him. And within that year I found myself starting over."

You think back... What did Jim do when he started over?

Answer: He got another helicopter. Then his first company got into trouble and in five years he was able to buy it back for cash. This is like a soap opera.

What do you think? Why did his first company have so much trouble?

Answer: Nobody really knows the fine details. However, when the founder of a company is removed, the relationships he has built up are lost and the institutional memory about what works and what doesn't work in a specific business and in an industry are lost.

You think back... What happened to cause Jim's second term at the helm of his company to go sour?

Answer: One customer (an oil company) pulled the contract they had with Rocky Mountain Helicopter.

You think back... What did Jim learn from this experience?

Answer: Don't put all of your eggs in one basket. He said, "Always have two or three arrows in your quiver that can go in a different direction. If you're gonna put all of your ideas, all of your eggs in one basket, so to speak, it could be a problem. So always have an alternative. My analogy is the lily pad theory. The lily pad theory is that if you're a frog and you're on a lily pad, you don't jump from that lily pad until there's another lily pad, A, and B, that that lily pad is within your reach. So kind of always have another lily pad idea."

You think back... What good came from Jim loosing the oil business contract?

Answer: He began to focus on medical evacuation - the type we all saw in the TV series, MASH. In the Vietnam War, helicopters were used to remove injured soldiers from the field to take them to the health care professionals. This is the business Rocky Mountain Helicopter is succeeding with today.

You think back... Why did Jim feel he was forced to take the company public?

Answer: He needed cash to fix his balance sheet. This means, once again, he had too many expenses and not enough sales to make the business work. His debt was piling up and he also said if he was ever going to get any cash from the company for himself, he would have to go public. Remember in "SMALL BUSINESS 2000 program 402" we learned that there are only two reasons to go public: to raise money for operating the business and to allow the initial investors to be paid off.

Jim thought going public was the solution.

You think back... What advice does Jim give the small business owner about going public?

Answer: Jim said, "You need to consider that you're no longer in control. The heart and soul, the builder, the founder, the idea, the dream goes away. An active board of directors is replacing that now. That's replaced now by an active group of underwriters; an active federal agency called the Securities and Exchange Commission, an active group of accountants and lawyers and people that really are not interested in what this company is about. They're only interested in, 'What's this company going to do for me?'"

What do you think? Why was Jim ousted both times he took investors?

Answer: He is not a team player. He is a typical entrepreneur who likes to dream up an idea then bushwhack his way to the result. He doesn't want anyone telling him what to do or questioning his decisions. When a company grows to a certain size, often entrepreneurs voluntarily step aside. Jim never volunteered so he was thrown out. Now he's sad and bitter.

For more about investors, study Thomas Keller and for more about going public, study Bill Hagstrom and Bob Simpson.

Key Idea #2: There is life after bankruptcy. Rocky Mountain Helicopters, under the leadership of Russ Spray, reorganized and re-capitalized with two major investors and today the company is growing.

You think back... What does bankruptcy allow a company to do?

Answer: Once a company files for bankruptcy, it can forego paying its bills for a time period defined by the court. Salaries are usually paid to keep the employees who are going to do the work to get the business back on its feet, but creditors are placed at bay by the courts. This gives the business breathing room to improve business practices, cut operating waste, and focus on getting and keeping more customers.

You think back... Why should bankruptcy be a last resort?

Answer: Because it is complicated and very expensive. Only 10% of the companies with less than $100 million in sales actually survive bankruptcy. Rocky Mountain is lucky. Study Graber Products to see how another company handled a near-death experience. Then learn about how to keep the bankers at bay from Steve DiAntonio.

For more, go to the overview. Go to the transcript. Go to other stories about businesses that have been sold.

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