Ever wonder how someone goes from a $10,000 investment to $20 million in sales? How someone starts a business alone in his or her apartment and ends up with an office at One South Wacker Drive and 80 employees? Want to know how someone takes the lessons of an unsuccessful first business and parlays that into a big and sustainable success?

Jon Morris is the founder and CEO of Rise Interactive and he has accomplished all this and more. He was gracious enough to sit down with Technori and discuss how he did it and offer some advice.

First, a brief summary of Jon and his company. Rise Interactive is not Jon’s first company. He started a search engine marketing agency in 1996. It was quite successful until the dot com bubble of 1999 reduced his revenues by 80% in a single month. The company didn’t survive.

He then went to the University of Chicago’s Booth School of Business. There, he was convinced by a friend to enter a business plan competition. They received second place for their idea to teach internet marketing to other businesses. Second place came with $10,000. Rise Interactive was born.

Company Culture

“Hire the right people. If you don’t hire the right person, make sure you’re strong enough to make that change.”

It was very clear, from the moment I walked in the building, that company culture is a big deal at Rise Interactive. It was the thing Jon talked about the most. He is passionate about creating a company people enjoy working for. By far, the biggest component of company culture is who you hire, and Jon made it clear you have to be diligent about getting and keeping the best people and removing those who don’t work out.

To illustrate the point, he asked me who my favorite sports team is. It is, of course, the Green Bay Packers. He then made a comment that I found both original and insightful. “Every off season, even if they win the Super Bowl, they try to upgrade the quality of their team. How often do companies do that? Especially when you’re a startup, your team is the most important thing.”

Getting the right people into the right positions means more opportunities and a healthier work environment for everyone. According to Jon, “You want to hire someone who is a cultural fit and also has the right skills or talents… I’ve made a few of those [bad] hires. The damage of hiring someone that is not a cultural fit is astronomical. That was probably the biggest mistake I’ve ever made.”

It’s this combination of being smart about who you hire and having the courage to face the difficult task of letting someone go that creates a great company. To some people, that last part might sound cold-hearted, but in the long run it leads to more jobs–not less. Remember that first company Jon had? He says the dot com bust didn’t help, but the main reason the company failed was because he didn’t have the right people to make it work. The result? Everyone, including Jon, was out of work.

Fast forward six years to when Rise Interactive started hiring employees. Having learned a lesson from his first company, he was diligent about building the right kind of team. Unfortunately, it’s not always easy to know who those people are–especially early on. In Jon’s case, he ended up having to let a number of the people he hired go. He said this was difficult but necessary. Those people were replaced, and eventually, the right team was in place and Rise Interactive was poised for growth. Today, the company employs 80 people and the future is bright.

How do you know who the right person is? Jon said that early on, he wasn’t completely sure. That’s why some people were let go in the beginning; it takes time to figure this out. Today, they have a system that ensures the people they hire are highly likely to succeed. It starts with any potential hire taking an analytical exam created by Rise Interactive. The pass rate is 22%. It’s a high barrier to entry but that’s what you’d expect from a great company. A candidate that passes this difficult test is almost certainly a fit from a skills perspective.

What about cultural fit? It starts with the company’s core belief: “Improve the lives of the people we touch or interact with. Whether it’s employees, clients, vendors, the industry, the community.” In other words, someone has to care about being great to the people around them. Any kind of bullying or demeaning behavior is not tolerated.

Ultimately, no amount of pre-screening can guarantee a good fit. Jon said they never just fire someone. They always try to work with them or maybe try them in a different group, but sometimes he has to make the tough choice of letting a person go.

From what I saw, it works. Forget about the numbers for a moment. Their office was beautiful, the location amazing, people were smiling, the place was vibrant, and it just felt like a great place to work.

That’s not an accident.

“A lot of my energy goes toward making this one of the best places to work in Chicago,” Jon said. Their HR department is referred to as employee services and it’s not just a naming gimmick. “We view our employees as our clients.” In other words, Jon doesn’t think about how his people work for him; he thinks about how he works for his people.

That great office? It’s not for show. It was intentionally chosen to be the most convenient space for as many employees as possible. It’s located right next to “L” and Metro lines. It’s brightly lit, well kept, and well designed. An easy place to get to and an uplifting place to work.

Jon said he and Rise Interactive’s head of employee services spend a lot of their time reading and thinking about how to make people’s lives better. In the early days, he had a goal to never lose a client due to bad performance. He says that goal has now been modified to, “never lose a client or employee because of our bad performance.” They might lose an employee, but that’s the price you pay for hiring people who are great and highly sought after.

They also strive to grow and delight their employees once they’re on board. They do extensive training when someone is hired, host around eight employee events a month covering a wide range of topics, and they try to regularly surprise people. I found this last point interesting.

Consider the 4th of July, 2012. It fell on a Wednesday. In most companies, you’d come to work Monday & Tuesday, get Wednesday off, and then be back at work Thursday & Friday. All employees at Rise Interactive were surprised to learn they could choose to take either Monday-Wednesday or Wednesday-Friday off.

Jon also gave all of his employees an iPad Mini as a holiday gift in 2012. Employees appreciate good pay and benefits, but they also love these kind of unexpected surprises.

Check out the resources section at the end of this post if you want Jon’s recommended reading on the subject of company culture.

Getting Started

“Think about what makes you great and why you are going to be different in the marketplace.”

There’s a bit of myth amongst a lot of people looking to start their first business. Have you ever heard anyone say, “I’d start a business if I could just come up with the right idea.” Instead, what people should be asking is this: “There are a lot of businesses in that space over there and people are making a lot of money. What niche are they missing that I can jump into and own?”

Imagine if Steve Ells (founder of Chipotle), Reed Hastings (Netflix), Nick Swinmurn (Zappos), or John Mackey (Whole Foods) had all said, “There’s already a [Taco Bell, Blockbuster, Foot Locker, Kroger] in my city, so there is no point in starting a [fast food restaurant, movie rental service, shoe store, grocery store].” We would be short 4 multi-billion dollar businesses that redefined their markets. Each of these businesses saw a hole in the aforementioned industries and filled it with a great set of products and spectacular execution.

Another thing Jon pointed out about starting a business is that starters need to choose industries that are growing. For example, Jon said he would never buy or start a newspaper. Money is leaving that sector; your margin for error is extremely small and your potential for growth severely limited.

Contrast that to Rise Interactive’s business of online advertising–that sector is red hot. In addition, it suffers from a shortage of good people. This was especially true in 2004 when Jon started the business. You don’t need an MBA to understand that if the demand is greater than the supply, you can make a lot of mistakes and still succeed.

Managing Finances

“Financial discipline is crucial. Before you spend money, make sure you’re going to get a return that you need.”

One of the more interesting bits of history about Jon’s company is that he worked out of his apartment for the first two years. That’s not rare. What’s interesting is that at one point he had five other people working in his two-bedroom apartment with him. He said at times it was frustrating; people would show up to work (his apartment) at 6:30 am, and by 6:30 at night he’d be thinking, “Oh my God, they’re all still here. I just want my house back.”

By not renting an office, though, Rise Interactive had extra money to hire employees that could help generate more revenue. There was even a time when he decided not to spend $9 per month on an eFax line. That might sound a little crazy, but find ten such expenses and you have an extra $1000/yr to spend on something that will generate revenue.

Frugality is not just something that Jon gives lip service to, he has lived with it.

The structure of his company is another interesting point. Rise Interactive is divided into five divisions (operations, client services, sales, marketing, and innovation) and each division gets a percentage of revenues. I think this is unique amongst small businesses.

Most businesses must do operations, sales, marketing, R&D, and some other functions. Most small business owners don’t clearly define these different company functions. Even fewer do consistent financial tracking at any kind of granularity. When you’re small, you wear a lot of hats—but what I learned from Mr. Morris is that’s no reason to lose track of how much money you’re spending in each hat.

Small businesses need to be smart, calculating, and disciplined when it comes to finances–before cash flow problems force them to.

On Selling

“You have to be able to sell or have someone in your organization that can.”

Jon told me the story of a guy he met that had developed a great new technology. Something really useful that should have sold well. Unfortunately, the gentleman could not effectively communicate the value of his product. The business failed.

No matter what business you start, you’re going to have to sell. It doesn’t matter if it’s used cars, a new social networking site, or coffee. Selling your products or services is the life blood of your business. If you don’t want to do it (or you’re not good at it), then hire or partner with someone who is.

Understand that selling doesn’t have to be cold calling. Effective selling can happen in a number of ways. Jon’s advice was to start with one thing and really commit to it. For example, Jon started his business by doing partnership marketing. That was his big selling tactic. He would go to large advertising agencies and ask them to refer clients that were too small for them. He also made sure his business did some things those agencies didn’t do, so when one of their big clients wanted that service, they would call Jon.

Many good selling options exist. A startup can’t pursue them all. Pick one and own it.

Now that Rise Interactive has grown, Jon and his team have time to pursue other sales techniques. Many of these would work great for any business:

  1. Host free training seminars. This will get potential clients to come to you.
  2. Host a conference. This is a tremendous amount of work but can pay big dividends. Rise Interactive hosts an exclusive, invite-only event called the Internet Marketing Leadership Summit. Attendees must be directors of marketing and have an online marketing budget of $1 million or more. Can you imagine a better audience for a digital marketing firm to have access to?
  3. Go to networking events that your customers go to. Early on, Jon went to marketing events even though ad clients didn’t–too many agency reps are there to harass them. But those agencies were exactly who Jon was targeting for his partnership marketing. Most cities are loaded with networking events, so get out there and find ones that work for you.
  4. Trade shows. Every industry has trade shows and these are great places to meet your customers. You don’t need a fancy setup—you can close sales with some handouts, a table, and a friendly, knowledgeable representative.
  5. Digital marketing. This would include things like search engine optimization (SEO), content marketing, pay-per-click advertising, email campaigns, and more–this is what Rise Interactive specializes in. But if you’re a startup with a small budget, you can do a lot of this yourself—it just takes time. Jon recommended several websites and thought leaders. You’ll find links to those in the resources section at the end.
  6. Speaking and/or writing. Jon currently writes a column for Inc. Magazine, speaks regularly at conferneces, and offered up an hour of his time for this interview. Not only is this great exposure for his company, but it allows him to give back to the business community. This is something he is passionate about because, in his own words, “My mission is to help people.” Maybe you’re not big enough to write for Inc. Magazine yet, but I know Technori is always looking for good writers. So are many other digital publications.

If you’re going to blog, Jon has a piece of advice: “Come up with something compelling and engaging. It could be one little thing, but that will be the thing you own and are known for.” The blog will be your hub, and social media your method to syndicate that content. Facebook, Twitter, Google Plus, or the plethora of other social networks are not where you generate your content–they are where you share it.

It starts with quantifiable goals and your budget

It’s not surprising that an analytically minded Booth graduate would be talking about budgets and measurements. The process of setting and measuring sales targets is pretty straightforward, and most businesses do that. But what about measuring the return on the time and dollars you spend advertising? This is very doable, but a lot of small businesses fail to set targets, collect the data, and run the math on ROI. They should.

Even before you start your business, you should be running numbers. How big is the overall market? What’s the annual growth rate? How big is the niche you’re going to carve out? How much will it cost you to get started? How long can you survive on your initial investment? When will you have your first sale? At what point will you have the revenue to hire? All of these are either goals or things that can, and should, be measured.

What about company culture? How do you measure that? At Rise Interactive, they have an annual survey that all employees fill out. I have no doubts this survey is quantifiable and their head of employee services is responsible for achieving a certain score–with a set budget. How are you going to measure your company culture? How much money are you going to put behind making it great?

Jon Morris and the rest of Rise Interactive have spent a lot of time thinking and answering these questions, and the results speak for themselves.

Jon’s Resources

The following are the three books on company culture that Jon highly recommends:

  1. Delivering Happiness
  2. Tribal Leadership
  3. All In

Three recommended blogs:

  1. SEO Moz
  2. Advertising Age
  3. Search Engine Watch

Thought leaders on digital marketing:

  1. Rand Fishkin
  2. Danny Sullivan
  3. Avinash Kaushik

Have some suggestions of your own? Feel free to leave a comment below.

If you’d like to learn more about Jon Morris and Rise Interactive, you can follow them on Twitter at @riseinteractive.