For those who have been watching Australia’s Shark Tank, Steve Baxter is a regular who has an eye for spotting a great idea and a tendency to really crunch the numbers before making a deal. Born in Cloncurry, a rural town in Queensland, Baxter was raised in Emerald until he joined the army as a teenager and began a career in electronics. In his early twenties, with just $11,000 of startup capital, he built his first company, Internet service provider SE Net. From there, Baxter went on to launch several businesses, including PIPE Networks, and then eventually developed the co-working community River City Labs.
One of his latest and most high-profile projects, however, has been his participation in the Australian version of Shark Tank, where he serves as a voice of experience and, at times, brutal honesty to the hopeful entrepreneurs who come knocking. “Six or seven times a day, the door opens and someone comes in and asks you for money. It’s really quite curious,” he says of filming the series. In contrast to other reality shows, Baxter maintains that Shark Tank is very simple and that what the viewers see corresponds closely with what is actually filmed. “What I would say is [that] what you see on TV is a very honest, compressed version of what we do. […] They [the producers] haven’t sensationalised it in that respect.”
The compression is necessary, however, as pitches and negotiation can go on for much longer than the fifteen or twenty minutes that are presented on TV. So much so, that Baxter sometimes grows bored, especially when entrepreneurs can’t provide basic information to him about their own businesses. “I don’t like not having my questions answered,” he says. After a certain point when things seem futile, he starts “looking at the roof and twiddling [his] thumbs.” Some of it comes down to personality as well. He adds: “If I don’t like you, then I’m not going to want to invest in you.” Having values in common is an important factor for him, which is why he has yet to invest in a company attempting to sell vegan products, for instance. “In the same way that a vegan wouldn’t want a cold-blooded, fish-killer hunter like myself, I don’t necessarily gravitate towards that.”
He also keeps an eye out for common mistakes that new entrepreneurs often make. Chief among them is the tendency to try to bring a product to market without investigating the needs of the market first. “So many people have a solution that they go out looking for a problem for,” he says. “You see it a lot with technology. Just because your Bluetooth phone can open your door, do you think people want to do it that way? The answer is no. Really what you need to find is that problem, and you need to understand the solution for it.” In Baxter’s view, starting with a solution and then trying to create a problem for it to solve is “backwards” and “very hard.” A better approach, he asserts, is to examine what problems need to be solved in the market, and then introduce various solutions that can be modified over time until they suit the market.
According to Baxter, another issue plaguing small start-ups are the many aspects of business such as marketing, sales, and accounting, which are difficult for beginners to grasp. Because of this, he stresses the importance of building a team. “Very few people are good at [everything], and that’s why teams are really good in business.”
It’s also important, he says, to know when to cut one’s losses. “I’ve got some entrepreneurs [that] I’ve invested in that I have so much respect for, but sometimes I feel like their business is like the zombies on The Walking Dead,” he says, and he finds it difficult to convince them that they have no market. However, he prefers to back investors are not too quick to give up, either, ones that “will explore every last inch, maybe even to their detriment, to be honest.”
When it comes to the need for constant growth in a startup, Baxter takes a more nuanced view, and says that growth can come in many forms. “Yes, growth’s important, but what kind of growth in the company are you measuring?” He suggests that the number of new users of your product or service is often more important than simple growth in revenue, and that many times entrepreneurs may have to purposefully pause or slow their business in order to create better infrastructure that will make for a better business in the long run.
After decades as an entrepreneur himself, Baxter has learned many lessons from his own companies. One of the major habits that he developed from this personal growth was to make hiring the right people a priority. “It doesn’t mean that everyone is going to be a world leader. They [just] have to be appropriate for the role.” He also asserts the importance of character, “I’ll take a good person with a poor idea anytime, as opposed to a poor person with a good idea,” he says. Above all, he stresses that one needs to be able to trust those with whom one works, both in the sense of being confident in their skills and also in the sense of relying on their personal fortitude as a human being.
As far as the everyday processes of working, Baxter suggests that every business should have a plan for each procedure, and that employees should have the freedom and flexibility to edit the manual when they are faced with contradictory real-world conditions. “It is about a mature approach, a systemic approach to business.” In addition, it is critical to carefully select the right employee for the right tasks, and to not promote people simply based on their desires for advancement. “The best salesperson makes the worst sales manager, for example,” he says, “[and] every salesperson wants to be a sales manager.”
He insists that it is important to be mindful of an employee’s skill-sets and to understand what drives them. Without a deep interest in the work, an employee is unlikely to produce at his highest level, and this can be one of the largest inefficiencies in a business. According to Baxter, the work itself should be the reward and other perks that the company provides should be incidental.
In spite of these strong opinions concerning the way a business itself should be, Baxter says that he notices a few personality traits that successful businesspeople have in common, though there is one major pattern that he sees time and again: the courage to make hard decisions, even when others don’t agree. “You have to be forceful at times. You don’t have to be nasty, but you may have to make some pretty unpopular decisions.” In other words, the fortitude to be brutally honest about what should be done is a critical quality.
On the complete opposite end of the spectrum, however, Baxter has noticed that sometimes new entrepreneurs succumb to somewhat dishonest puffery while trying to impress investors. While he agrees that it’s important to “play a bigger game” and to even inflate one’s own confidence in order to make the business look good, at the end of the day the numbers are what ultimately matters, and those cannot be faked. “This is why I like numbers, this is why I like facts about businesses,” he says.
For many entrepreneurs, their ultimate goal is to one day sell their company, but Baxter asserts that this is the wrong strategy to take. “Should they have a plan? Yes. Should they build a business to sell? No. They should build a good business because a good business will be very sell-able. If you concentrate on the exit, you’ve dropped the ball.”
Another common concern for new business owners is where to get capital if they cannot conceivably bootstrap the company on their own. For that, Baxter suggests meeting with other entrepreneurs in your industry as much as possible and learning how they started their own businesses. “Go out there and get connected to different industry groups. You have to network. You have to get out there and do it.”
To view this editorial as it appeared originally in The Australian Business Executive magazine, click here.
Written by Raul Betancourt.