Scout First
In the spring of 1931 the first phase of the war that would later be called the Castellammarese War came to an end in New York. The winner, Salvatore Maranzano, got what he’d been after: the other bosses recognised him as chief over them all. He decided to celebrate with a banquet in Chicago. A ticket cost six dollars. A thousand of those tickets were sent to Al Capone, and Capone, showing his respect, replied with a cheque for six thousand. Other bosses made similar gestures.
If Maranzano had been a businessman, he might have told himself: excellent, demand confirmed, people are paying in advance. That’s the best test there is, after all. Not words, money.
On the tenth of September that same year he was killed in his own office on Park Avenue. The men who bought the tickets weren’t buying Maranzano. They were buying time and safety until they were ready for a different solution. Money handed over out of fear tells you nothing about whether people will want to pay once they stop being afraid.
Remember that banquet. I’ll come back to it.
What You’re Really Assuming
Every new business rests on a few assumptions, and without them it falls apart. Not dozens—usually three or four. People want this. People will pay so much. We can make it for so much. The neighbours won’t crush us. The trouble is that these assumptions are rarely written down. They’re felt. And a feeling of certainty makes a poor bookkeeper.
Besides the laundries, Don Vincenzo had a small wholesale trade: olive oil and cheese for the restaurants in our part of town. Once he took it into his head to bring oil straight from Sicily, from a single olive mill, in big tins, every week. Before signing anything with the mill, the Don sat me down at the table and made me write out what we believed. It came to three lines. At least twenty restaurants are ready to buy oil from us rather than from the wholesaler at the market. They’ll pay no less for Sicilian oil than they pay for ordinary oil. We can ship it so that every tin tastes the same as the first one. That’s all. If even one line is wrong, there’s no business.
Selling Before There’s Anything to Sell
The most honest way to test the first two lines is to try to sell. Not to ask “would you buy?”—everybody answers “of course” to that, because it costs nothing. If restaurants paid for every “of course”, we’d have got rich before the first tin. Try to take money.
I went round the restaurants with one tin and little cups for tasting. I said it straight: the business is new, the first oil arrives in November, when they press the new harvest in Sicily. The price is the same as the market wholesaler’s, but whoever wants to be in the first twenty leaves a deposit on two tins. We didn’t have any tins yet, or a contract with the mill either. In two weeks twenty-six restaurants said yes, and seventeen left a deposit.
The deposit—that’s the difference between scouting and dreaming. A man who has handed over money has voted. A man who nodded was just being polite.
Now go back to Maranzano’s banquet. His guests paid in advance too. How is that different from our deposits? In that our restaurant didn’t have to pay, and nothing would have happened to it if it hadn’t. It could have gone on buying its oil at the market. Maranzano’s guests couldn’t. The money test only works when a man is free to say “no”. If you collect your yeses by mentioning the Don, you’re measuring not demand but fear. And fear, as September 1931 showed, changes faster than any demand.
The Smallest Business That’s Still a Business
Seventeen deposits in hand, no mill. What now? The Don didn’t go to Sicily to sign a year-long contract. He made a deal with an importer who was already bringing in oil from those parts: we’d take the first two shipments from him, pour them into our own tins, deliver them ourselves. It was awkward and made almost no profit. But it was a real business, and real restaurants were paying for it.
That’s what’s called the smallest offer: the simplest thing you can already sell for money and deliver. Not a mock-up, not a promise, but a working deal, crooked as it may be. It tests the third line—whether we can do it—and brings in money while you learn.
Add One Thing at a Time
A month later we knew the restaurants were keener to take frying oil than the expensive kind for salads. We signed a contract with the mill for the frying oil only, and went on getting the expensive oil from the importer for another six months. Then we added cheese from the same supplier. Then wine vinegar, because the cooks kept asking for it. Each new line came only after the one before it had paid for itself and proved itself.
That’s how a business grows without needless debt: a small step, a check, the next step. Each new opportunity is added to a business that works, not to a dream of one.
The Field Test
One last thing. No amount of scouting replaces real work with real people on an ordinary, boring Tuesday. The first few weeks everything goes well, because you’re standing at the front counter yourself and apologising for every delay yourself. Then you step away, and it turns out the delivery notes get mixed up, the tins leak in the heat, and the loader at the port doesn’t work on Fridays: on Fridays, it emerged, he has a business of his own, and a far more profitable one than ours. So every new line we first ran “in the field” for a month, counting returns, complaints and repeat orders, and only then did we call it part of the Family.
Scouting is cheaper than war. And don’t mix up money given out of respect or fear with money given for the business. A cheque for six thousand dollars told Maranzano nothing about September.