Al Danto | Crain's Houston

In this ongoing series, we ask executives, entrepreneurs and business leaders about mistakes that have shaped their business philosophy.

Al Danto

Background:  

Al Danto teaches entrepreneurship at Rice University’s Jones Graduate School of Business in Houston. But he’s not stuck in an ivory tower: He’s founded and invested in several companies, including printer/publisher Structured Graphics, which he sold to a private equity group; Universal Worker, an international healthcare recruitment firm; and Arcemus, an intellectual property protection provider that was sold to Iron Mountain. He now manages The Danto Group, which advises owners of private companies on exit strategies. He also helped found the Veterans Business Battle at Rice, which has led to more than $3 million in investment offers to startup companies led by ex-military personnel.

The Mistake:

I didn’t seek out the power of wisdom. When I was young, I thought I knew it all. It’s like listening to your parents and not realizing it’s important until you’re in your 20s. Or the pioneer who comes back with an arrow in his chest and tells you not to go down this road or that road.

The specific example that comes to mind is looking at people as an investment instead of as an expense. My first business was a printing business. I remember early on when we were hiring managers, we pulled the trigger really quickly and hired someone who was willing to work for less money. But we had to babysit him and eventually had to fire him, losing any money I thought we had saved.

We then hired a really good person who was able to do a lot of the work I was doing and allowed me to look at the bigger picture. We paid a little more in salary and benefits, but we got a proven person who freed me up to expand the business. So the money I lost in the short run to pay for a better person paid off in magnitudes. That person was with me for 30 years.

I found out the value of paying someone a little more.

The Lesson:

I found out the value of paying someone a little more. It’s a common lesson anyone could have told me, that I could have learned from a mentor, and it was a very expensive lesson.

There are other things that come from wisdom. Capital is one of them. Over and over again I’ve seen startup companies take on equity capital really early before they’ve proven out their concept and it’s very costly. You give up 10 percent to 20 percent of the company and it comes back to really bite you. It’s certainly something I could have learned from someone more seasoned.

There are hundreds of mistakes you could avoid if you could just run it by someone. When you’re an entrepreneur, you’re alone. You need to have someone to bounce ideas off of, to have someone to help you. When you’re young, you know everything. And when you’re older, you realize you don’t know anything.

Follow The Danto Group on Twitter at @TheDantoGroup.

Photo courtesy of Al Danto