Risk-taker Featured

7:00pm EDT February 28, 2007

When you’re creating an online marketplace for the manufacturing industry, there’s not much to look at as an example. So Mitch Free, founder, president and CEO of MFG.com Inc., does-n’t let it bother him when something does-n’t turn out quite right.

“We’re cutting a path that no one has cut before; of course we’re going to make some bad decisions along the way,” he says.

When that happens, you need to realize that you just found another way not to do it and move on, he says.

Free has grown MFG.com from a small Web site in 1999 into a full-fledged global marketplace, with $15 million in revenue and more than 100 employees.

Smart Business spoke with Free about why a company can never rest on its laurels and how he motivates employees to succeed.

Q: What is the biggest danger for a growing business?

One of the opportunities growing businesses miss is they become timid. They get a little bit of success and they don’t want to risk it. You don’t want to be too careful, because it will allow someone who is more aggressive to come in, learn from what they did and take the market away.

It’s like the Geoffrey Moore book, ‘Crossing the Chasm.’ A lot of times, the companies that start to cross that chasm aren’t the ones to succeed in the market because they spent so much time figuring out what the market wants in their particular industry, and then they get it, and then they get comfortable. They become risk-averse as they get past their entrepreneurial roots.

Then some new entrant will come along, look at how the first company became successful, and take all the learning that took them years to get. They will apply it in a more aggressive fashion and ultimately become the dominant leader. You have to keep moving fast and aggressively.

Q: How do you manage growth?

There are a couple of legs to that stool: One, you listen to your customers. If you’re close to your market, close to your customers, they will tell you when you’re not providing the same level of service you were at one point. That’s a pretty good indication of when you’re growing faster than your infrastructure and your systems can keep up with the level of service your customers expect.

Also, you need to have a really good handle on your financial controls. You need to know if you are making money. Are your investments wise? You can grow a business really rapidly, and you can do it at the expense of profits. You’re not so concerned about profits as [about] gaining market share and building a moat around your castle and making a very defensible position.

But you want to make sure you’re not doing it very quickly and that you have the cash on hand. The amount of cash on hand restricts your growth.

It also restricts your ability to attract and retain the right talent. You need to make sure you keep those employees. As you’re growing and managing growth, remember, people can only do so much. It’s not a wise decision to bring in bodies to fill positions who aren’t necessarily the right people. That will get you in trouble because then you’ll start to degrade your culture and your vision.

Make sure you have the right people to grow, the cash to maintain your growth, and you know what your customers are telling you.

Q: How can you become a better leader?

There are certain innate skills that you’re born with, but I think you can learn a lot of it. Read biographies of successful leaders and get their mindset, what made them successful. It’s very important to study people who you consider to be the leader you want to be. Every leader has to develop their own style.

Q: How do you motivate employees?

People have a couple of basic needs in life. They want to feel loved and appreciated. They want to believe they are contributing to something.

People don’t want to think they are going to work every day and moving a rock from one pile to the next. You need to let them know you appreciate them and what they are doing is valuable.

Of course, you have to adequately compensate them, but you can’t retain people for money alone. People need that mental and psychological satisfaction. You make sure they know they are appreciated and they have work to do that is contributing to something and they understand how they’re making a difference, how they are impacting the company.

You provide them opportunities to grow, to learn new skill sets, to pursue new opportunities. It’s the way I’d want to be treated.

HOW TO REACH: MFG.com Inc., (770) 444-9686 or www.mfg.com