12/1/2009 by Wayne Nelson

Since September 1999, Daryl Erdman has shared a lifetime of lessons learned in business — triumphs and failures — with our readers through his monthly Business Mentor advice column. He’s pulled it all together in a new book to be released in early December. By definition, Daryl Erdman was born to be a “serial” entrepreneur, one who keeps building new businesses. Among his stand-alone and partnership ventures: a restaurant chain; a retail menswear store; a medical device company; and a venture capital firm.

Many of his MBA peers at Michigan State University (class of 1962) ventured into big business, taking assignments with Fortune 500 firms or exotic international development posts with the federal government.

Instead, the Rochester, MN native returned to his hometown to manage and expand his family’s chain of Erdman’s Supermarkets. During the 23 years that followed, he also developed six other successful business ventures.

“My MBA taught me the skills to manage other people. But what I’ve always really liked was creating my own structure and organization, that’s what really thrills me. For that, my MBA taught me nothing,” he said recently.

Washed away

In his new book, Scar Tissue Lessons: From the World of Entrepreneurship, (Brio Publishing), Erdman recounts his own mistakes, including his “bet the farm” misstep in 1978 when the South Fork of the Zumbro River washed over Rochester in a 100-year flood, destroying one of the four Erdman’s supermarkets.

It would have been easier to file for bankruptcy for the store and walk away. Instead, Erdman leveraged the entire chain to rebuild the store. He nearly lost it all two years later when interest rates spiked to 21 percent, and his lender essentially called his loan. A friendly community banker stepped forward to help, and Erdman averted a near failure.

His book details other lessons he learned the hard way. Among them:

• A disastrous venture to create a statewide commercial radio network. The cost: his entire $100,000 investment. Lesson learned: “Choose your partners and key people very carefully,” he said. “Personalities change when money is involved.”

• A failed weekly shopper he and other Rochester grocers started in response to what they viewed as excessive display advertising rates charged by the daily newspaper, the Post-Bulletin. The newspaper countered by launching its own shopper with rates well below those of the upstart competitor, driving it out of business. That $50,000 lesson: You can’t outmuscle an established player by simply charging a lower price. Beware of potentially overwhelming competition.

Erdman liberally sprinkles anecdotes throughout the book about his own missteps, along with classic mistakes he’s observed other entrepreneurs make. “I’ve mentored 76 businesses along the way and I’ve seen the same mistakes over, over and over again. I’ve tried to catalog these bad choices and judgments people make that don’t have to happen,” he said.

Entrepreneur turns academic

Erdman nurtured those startups and observed their mistakes in a new academic role that began for him in 1983 when he joined the business faculty at the University of St. Thomas in St. Paul, teaching entrepreneurship, and serving as director of its Center for Entrepreneurship.

Later, he moved on to the University of Iowa where he developed an entrepreneurship certificate program tied to the College of Engineering. Today, both programs are ranked among the Top 35 nationwide, and viewed on each host campus as a major asset.

There were only a handful of such programs then, and faculty reaction on both campuses was predictably hostile. The conventional view then was that entrepreneurial talent is innate, and can’t be taught, Erdman said.

“In the early 1980s, we were the campus pariah,” he said. “I’d counter by asking, are you telling me you don’t need to develop skills in law and medical schools to be lawyers and doctors?’”

Erdman concedes some predictors of entrepreneurial success are innate, among them, the ability to deal with ambiguity, and follow a definable, structured path. “That’s a big hurdle, about 50 percent drop out of the classes over that,” he said.

“But there’s really more nurture than nature involved, not unlike any other occupation,” he said. “Securities law, defining early market niches and (developing private) placement documents, all are teachable.”

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