Alumni Success StoriesScott Adelson, B.S. '84
Houlihan, Lokey, Howard, & Zukin
What kind of business did the entrepreneur start?
Scott Adelson has actually started and subsequently sold two businesses. The first was somewhat of an apparel company that sold specially designed backpacks to school children. When the demand for his product far exceeded his capacity to produce, Scott sold the business to a large Japanese clothing company. Recognizing the limited amount of choice in home delivery food, i.e., pizza being the only real option at the time, Scott started a Chinese takeout restaurant. He started this venture with a partner and eventually sold out to that partner.
How did the entrepreneur get the idea for starting this business?
While attending college at USC, Scott Adelson enrolled in a program called "Semester at Sea." SAS gave students the opportunity to travel the globe and experience its wonders and riches while maintaining their studies on board the ship. Students are able to see a variety of cultures and customs, meet interesting people and explore new territory. Such an opportunity filled Scott’s mind with vivid pictures and ideas unimaginable before. SAS reinforced Scott’s desire to become an entrepreneur.
While stopped in China, Scott came across a few schoolgirls wearing backpacks that had Chinese ornaments around the top and Chinese writing emblazoned along the side. Impressed with the design and logo, Scott decided to make his own replica of the Chinese backpack and sell it domestically in the United States. However, Scott first had to find a way to fund, manufacture, market, and carefully strategize this potential opportunity. Scott does not believe in being highly leveraged in debt, nor did he want to give up an equity stake in this promising venture. Therefore, he solicited the help of his friends and immediate family for the necessary funds. Although Scott's family provided the necessary capital, he still had to put together a sound business plan that detailed the finances, manufacturing, and return on investment (Scott would not say how much everything cost).
Scott's second problem was how to manufacture this unique item. Scott's uncle owned a small manufacturing company in Long Beach, California and, at the time, the plant was not running at capacity, thus, his uncle agreed to spare a dozen of his workers. The major cost, however, was that Scott had to pay for the employee wages, machine use and the initial purchase of the backpacks. Scott bought pre-made, ordinary backpacks from a major distributor and subsequently had his uncle's employees add the necessary ornaments and exquisite Chinese writing onto them.
Scott's goal was to manufacture about 200 backpacks and then test market them hoping that retailers, department stores, and wholesalers would have the opportunity to see the creativity and uniqueness of his work. That opportunity arose when Scott gave away some of the backpacks to kids at a summer camp in Beverly Hills as one of his predetermined/scheduled litmus tests. Fortuitously, a parent of one of the children who received the gift was an owner of a large clothing retail store. The owner was so impressed with the design of the bags that he literally ordered hundreds of them from Scott and subsequently signed a long-term deal with him to produce more.
Scott’s backpacks were so original and marketable that they caught the eye of major retail stores such as Macys and Bullocks and soon Scott was selling hundreds of his customized backpacks. The production and demand for Scott’s product became overwhelming and finally, a huge Japanese clothing giant that specialized in making clothes, belts and watches approached Scott. Apparently one of their [the Japanese firm] sales representatives was in a retail store were Scott's backpacks were being sold. Impressed with the design and logo, the representative demanded to know who was the manufacturer. When the Japanese firm found out it was a young entrepreneur, it was immediately impressed and subsequently offered to buy the business from Scott. Scott knew he could not keep up with the mass production needed to meet demand and he wanted his quality product to be manufactured and marketed by a quality firm, with a huge capital base and major distribution outlets. Thus, Scott decided to move on and sold the business (would not disclose amount).
After the sale of his apparel business, Scott basically did nothing but play golf and hang out for about nine months. It was out of pure boredom that Scott had the idea for his next major endeavor. Scott’s second business was a takeout Chinese Restaurant. During the early Eighties, in Los Angeles, the only type food that one could have delivered to one’s home/business was pizza. As Scott said, "it was Dominos or nothing" and he was extremely frustrated with the notion that no other type of food was available for delivery.
Los Angeles is a diverse city with different cultures and customs whose citizens enjoy eating a variety of foods. Scott saw this opportunity and exploited it. Scott’s takeout Chinese restaurant was probably one of the first in all of the greater Los Angeles area (pretty hard to believe, I know). Scott chose Chinese food because of the variety of dishes that could be ordered. He felt Chinese food would be ideal for people who were working late, students that were up studying, or families that just did not want to go out. The market, in Scott’s eyes, was huge.
Scott used the money from the sale of his apparel business as well as additional funds raised from family members and friends to start his Chinese restaurant. His initial investors (family & friends) were so impressed with the apparel business that they gladly supported Scott on this particular venture. However, Scott deviated from a previous belief of not having a partner and decided to partner 50-50 with an old associate/friend from USC. Scott wanted someone to complement him, as well as, shoulder half the risk. He secured a nice area in the heart of Westwood, began advertising, hired the appropriate number of employees, and brought in a manger that would be his tutor and guide.
Scott knew nothing about where to order his food from or the what various kinds of dishes to offer and the manager that Scott hired had previously worked at "Chang's Chinese restaurant" located in Brentwood. The location had been a favorite of Scott's for years and, over time, Scott and the manager became close acquaintances. Scott was able to entice the manger to work for him by giving him a premium salary plus a percentage of the profits. The manager’s job would primarily be to handle the day to day operations of the restaurant.
In the mean time, Scott and his partner would spend a majority of their time advertising. Scott primary handled the UCLA campus and passed out flyers, advertised in the Daily Bruin and approached students who were eating in the School's quad. In addition, Scott gave discounts to all students, thus, enticing them to order. Scott and his partner also focused their attention on corporate employees and residential homes located in and around the Westwood/Wilshire district. Scott's partner was in charge of residential and would travel to almost every home in a 10-mile radius of the restaurant, dropping off flyers/menus under doors and in mailboxes. Scott, however, focused his attention on the corporate clientele. Scott would find out who was staying in what building, what was their line of business, and who was in charge of human resources. Scott would try to get into contact with any H.R. person and try and make his "pitch" as to why the company should order from his Chinese restaurant as opposed to an ordinary pizza place. Scott felt that the H.R. people were the most influential in this area and could sharply change the eating habits off their fellow employees.
Although the Chinese restaurant started slowly--very few people knew of its existence--success dramatically increased as students, business people, and families, took delight in Scott's Chinese restaurant as a substitute for pizza. Scott eventually sold his 50% stake to his partner because he wanted to pursue other goals that probably would shock most entrepreneurs: Scott was going to go back to corporate America.
What is the background of the entrepreneur?
Scott is truly blessed in the sense that he comes from a long line of entrepreneurs. His father is a writer and lyrist, and according to Scott, all artists are entrepreneurs. In addition to his father, his stepfather and cousin have enjoyed tremendous success as entrepreneurs. His stepfather owns a cable TV company and his cousin founded Lorimar and Lacostes Pictures. Scott was born and raised in Los Angeles and attended USC, graduating with a degree in Business Administration and an emphasis in entrepreneurial studies. Although Scott currently works for Houlihan Lokey Howard and Zukin, immediately after school, Scott dreaded the idea of working for corporate America and; therefore, started his own businesses. Although these businesses were only mildly successful (Scott’s financial gains have come form working at Houilhan), the knowledge and experience he gained in starting/running businesses would be of help to any entrepreneur.
After selling his two businesses, Scott pursued his MBA at the prestigious University of Chicago where he majored in finance and marketing. Upon graduating, he took a job with an investment banking firm, Houilhan Locke Howard and Zukin where he has risen to the position of Managing Director.
What did the entrepreneur do to start this business?
After Scott sold his businesses, he enrolled at the University of Chicago's prestigious MBA program. There Scott excelled at his studies and graduated with a degree in finance and marketing. Upon graduation, Scott was torn between being an independent entrepreneur and joining corporate America. Scott loved the independent, risk like nature and thrill of being a successful entrepreneur; however, he also thought there could be a lot of opportunities in working for a big company. He was also skeptical about the lack of potential advancement due to having to answer to superiors and play office politics. However, Scott saw a profession that would incorporate the pros of both corporate America and of being an independent entrepreneur: investment banking. Investment banking allowed Scott the opportunity to work with a variety of different companies and in a variety of industries such as retail, biotech, entertainment, healthcare, and electronics. In addition, most salaries/bonuses of investment bankers are determined by their own deals, thus, the profession also allowed Scott the independence he craved.
Upon deciding to enter the investment banking profession, Scott had to choose for what firm he wanted to work. Recognizing that the larger firms, such as as Goldman Sachs, Morgan Stanley, and J.P. Morgan, were too big and too bureaucratic, Scott wanted to join a firm with which he could grow, be a major player and leave a lasting legacy. Thus, he chose Houilhan Lokey Howard & Zukin, a small investment bank in Los Angeles, California. When he arrived at Houlihan, the company had approximately 40 employees and only two offices. Scott quickly made his presence known and brought his expertise, knowledge, intellect, and entrepreneurial attitude to the small firm. Under his leadership, Houlihan's clients went from small boutique firms to powerhouses, such as Wolfgang Puck, SAIC, QAD, and Calloway. After seven years, Scott became Managing Director and, in addition to his normal responsibilities, Scott is responsible for most corporate responsibilities, and specifically for being the caretaker of the firm’s brand image. In addition, Scott is responsible for running the company’s information system network, which has a variety software, a major company wide database, and an elaborate wide area network that enables Houlihan's various branches to connect. Today, Houlihan has over 240 employees with 10 offices nationwide.
Joining Houlihan has been an extremely fruitful experience for Scott. Being able to invest the firm’s money in a variety of businesses is a perfect opportunity for an entrepreneur. Scott learned everything about investing/running other companies from his glory days of being an entrepreneur and it was in that short, yet imperative period, that Scott attained the skills necessary to become what he is today. He loves working with different companies as it reminds him of the not too long ago days when he was a successful entrepreneur himself. However, Scott is very careful in choosing the clients he will represent. "I choose clients like I choose my friends, they have to be people that I can admire and want to be around."
What advice would the entrepreneur give to someone thinking about starting a business?
In retrospect, Scott Adelson has a few business tenets that he feels are absolutely critical. He believes that one of the greatest gifts a young entrepreneur can have is to be full of ambition, passion, drive and naivete. Coming out of college, Scott had no idea how hard it actually was to start a business. He was oblivious to everything from raising initial capital to sales and marketing to hiring employees. However, his ignorance was in actuality a blessing. Being inundated with negative information can sometimes overwhelm an entrepreneur and force him/her to change their minds which is why sometimes knowing only a little about an industry/business that one is entering can be alright, as long as the passion and willingness to work hard are there.
Why was the entrepreneur successful at getting into business?
Initially, starting a business from scratch is extremely difficult and this can be exacerbated if the venture requires exuberant sums of start up capital. The probability of success is higher if this figure is kept low. In both the apparel and restaurant businesses, initial outlays were small and financing was achieved internally. Scott stayed away from commercial banks and from giving up equity ownership. Most of the money was attained from immediate friends and family.
Sometimes entrepreneurs take on larger ambitious plans without realizing all the intermediate steps that need to be taken in between. Going from point A to point B is more important than figuring out how to go from point A to Point C. Companies should grow at small levels, allowing the entrepreneur time to familiarize himself/herself with the different stages of growth.
Business is dependent on a successful marketing campaign without which prospective customers will never know of the company’s existence. With the Chinese restaurant, Scott advertised in the daily bruin, dropped off menus at hundreds of homes and called various office managers in downtown. In addition, Scott personally went to Westwood and distributed flyers and menus to whomever and wherever he could.
Surrounding yourself with ambitious and talented people is a key factor in ensuring the success of business. "Although the initial "idea" is important, it is people, not the ideas that make money. A great idea will not work if implemented by lousy people, however, an average idea with phenomenal people will find much success." Finding hard working, motivated individuals to join a small company is difficult which is one aspect that Scott did not quite understand in the beginning and regrets. In retrospect, Scott would recommend wide spread ownership which would reduce the risk potential while simultaneously motivating the co-partners to work just as hard.
Scott recommends just trying anything. Just do it he says, try almost anything. "One way to increase your success rate is to quadruple your failure rate." However, when starting a business, "don’t do analysis until paralysis. "Business plans are important but you can’t think of every step or problem."
Having mentors to emulate/look up to is also very important in Scott’s eyes. "Guidance and support are one of the most important things in the entire world, regardless if it’s in a business sense or any other aspect of life." Scott has always tried to surround himself with motivated and talented people and his mentors have primarily been his family, particularly his father.
All entrepreneurs are successful for a reason; however, some common traits are noticeable in all of them. Variables such as hard work, intense analysis, leadership, vision, and perseverance are just a few characteristics to be mentioned. However, when trying to study/emulate why an entrepreneur is successful, one should look at a variety of factors outside the proverbial business plan or reputable college education. External factors such as a psychological and social perspective also play a large role. Most envious people would like to believe that success is derived from luck and chance and, although these factors do sometimes happen, they are never the primary reason as to why an entrepreneur makes it. Success happens for a reason.
"The search perspective views inventions as a matter of effective search for ideas in a space of possibilities" (Effable Invention Pg. 317). This is quite true, since entrepreneurs do not blindly enter any business and, in actuality, they set parameters or guidelines to help steer their path. When Scott first decided to start his business, he was very conscious about the failure rate for projects with huge initial capital outlays which is why he undertook a systematic chance when starting his business. He only looked at businesses with small start up funds. Although Scott had more ambitious plans (starting a nation wide magazine and a venture-leasing firm), he understood there would be a sheer chance of success given the enormous complexities of these businesses. Even after Scott had concluded what type of business he would start, he expanded his search to include other variables such as market size and proximity to customers. This is one of the primary reasons that Scott decided to open a Chinese restaurant in the heart of Westwood. The start up cash was low and the proximity to customers was close.
In understanding an entrepreneur, one must look at the psychological attributes that they possess. Who played a major role in their life, what attitude do they harbor, and what motivates them. Scott Adelson comes from a long history of successful entrepreneurs, thus, at a young age he was encouraged to seek out his dreams, explore different places and ideas, take risks, and never give up hope. While in college, Scott joined the "Semester at Sea" program which allows students the opportunity to study abroad while seeing a variety of different countries and cultures. Very few students take advantage of such a program, however, Scott, with his entrepreneurial mentality, thought it would be an excellent idea. Sure enough, while visiting China, Scott had the idea for his high school backpacks with Chinese ornaments.
Scott is also successful due to his extreme patience and dedication and understands that a lot of planning and time is required to make a venture successful. Even though his backpacks were a great idea, a large amount of effort would be needed to market/expose them to huge wholesalers and retailers. Thus, Scott carefully targeted his retailers, spoke to the right representatives and gave away samples to various stores. "Many factors that figure in the success of everyday search count just as much in the quests of inventors: persistence, looking in the right places, questioning assumptions about where to look, being efficient about it, and so on" (Effable Invention pg. 318).
Scott's greatest attitudinal trait is his perseverance. "The notion of the inventive genius whipping up something in the basement overnight gets little encouragement. While such things happen, they appear to be far from the norm" (Effable Invention Pg. 319). Scott has a simple adage that he has followed throughout his entire life: you have to move from point A to point B, you can't go from point A to point Z and skip everything in between. This belief is consistent with the grain of progress and small win theory. "Everything does not fall together at once; rather, one aspect gets sorted out, another emerges, a problem erupts, gets solved, a new direction suggests itself, and so on" (Effable pg. 319). Some companies are too ambitious in their plans, trying to do too much in a limited amount of time. In contrast, Scott ensures that every task is completed before moving on to the next. When Scott opened his Chinese Restaurant, he made sure he prioritized and accomplished his goals in order (hiring a store manager, than moving on to marketing).
When an entrepreneur starts his/her own business, a large infusion of cash is usually needed and raising funds is an inherently difficult task given the risk factor of the venture. An entrepreneur has to be outgoing, articulate, and presentable to potential investors. Although Scott obtained a majority of his funds from family and friends, he still had to clearly articulate his vision, present a business plan, look presentable, and beam with confidence. "The Inventors were very sociable creatures, easy to get along with, articulate, and entertaining"(Effable Invention Pg. 327). Scott has benefited from being around institutions and individuals that promote creativity. Both during his upbringing and at USC, Scott was surrounded by friends and colleagues who loved to sit around the fireplace and throw out ideas. Rarely was Scott ever ridiculed or looked down upon for coming up with an idea. This type of encouragement/positive reinforcement allowed Scott's imagination to blossom into new heights.
Scott Adelson has been an entrepreneur throughout his entire life. He constantly thrives on the notion that the "idea" is the true foundation that governs and makes an entrepreneur successful. When Scott graduated from the University of Southern California (Class of 82) he rebuked the conventional wisdom which at the time was working for Corporate America. Scott felt there was an abundance more to learn by being your own boss in charge of your own destiny. Rather than work excruciating long hours for someone else’s dream (i.e. Corporate America), that same passion and energy could be channeled to help you achieve your own endeavors. Unfortunately, during the 1980’s, entrepreneurs were a rare breed (relative to today’s standards at least) and therefore, did not receive the same amount of respect and admiration that they do today. Such a scenario left many people doubting/criticizing Scott’s chances; however, his insatiable desire to become an entrepreneur, coupled with the brilliant ideas he envisioned paved the way for his success.
- Basel H. Nizam