Can You Be an Entrepreneur?

D.A. Jim Trotter: In what way are you qualified?

Mona Lisa Vito: Well, my father was a mechanic, his father was a mechanic, my mother’s father was a mechanic, my three brothers are mechanics, four uncles on my father’s side are mechanics…

D.A. Jim Trotter: Your family is obviously qualified, but have you ever worked as a mechanic?

Mona Lisa Vito: Yeah, in my father’s garage, yeah.

Quote from “My Cousin Vinny”

I often ask business owners (both brand-new or in business for many years) whether or not they believe they are qualified to be entrepreneurs.  Many respond citing family history, friends, other role models or previous experience they believe helped make them qualified to take on this important role. Many have had success but few have redeemed themselves as well as Ms. Vito did in this classic scene from My Cousin Vinny.  So, I thought I would highlight just five traits to consider when you are evaluating yourself as a current (or potential) entrepreneur:

  1. Experience.  As Jimi Hendrix sang in “Are you Experienced?,” the virtue of experience will free your mind (not sure exactly what he was referring to) and leave you open to new ideas.  And, when it comes to getting funding for your venture, the infamous “been there done that – and got the tee shirt” is often the difference between a “yes” and a “no” from potential investors.
  2. Solo.  If this is how you like to fly, being an entrepreneur may not be for you.  Think about it – while single engine planes carry very little luggage they also carry precious little cargo.
  3. Procrastination.  In most cases, being a successful entrepreneur requires quick action especially when major issues arise.  Not doing today what you can put off until tomorrow is not a healthy attitude if you want success.
  4. Control.  If you must have it and are uncomfortable when you don’t, entrepreneurship can be a real scary ride.  A certain level of control is required to keep the ship on course but you need to take your hand off the tiller every once in a while and let your venture set its own course.
  5. Failure.  If you always view the glass as half empty (this isn’t going to work) versus half-full (another exciting new opportunity) and you are not energized by risk, you have to reconsider the course you have chosen to be an entrepreneur.

It is important to recognize that one of the most difficult things in life is to objectively complete your own self assessment. That being the case, surrounding yourself with true friends and advisers who will tell you, honestly, how they think you are coping with the stress of entrepreneurship is one of the best things that you can do.  At times, I have advised clients to get out of certain businesses when the level of risk they have to cope with is not commensurate with what I believe is their personal risk profile.  While it might have its economic rewards, the lack of sleep, impact on family, social life and worst of all, your health may not make it all worthwhile.  Remember that before you can manage others, you have to learn how to effectively manage yourself.  Failure to do so will not only result in a painful experience, it will probably prevent you from truly enjoying your success.


I Am In This Business, But I Have To Get Out

Partial quote from Young Frankenstein by Mel Brooks

Dr. Frederick Frankenstein: . . . No matter what you hear in there.  No matter how cruelly I beg you…  Do not open this door or you will undo everything I have worked for.

Inga: Yes, Doctor

(He goes in and the monster awakens)

Dr. Frederick Frankenstein: Let me out.  Let me out of here.  Get me the *#*+ out of here. . . .  Mommy!

For many owners who have been in business for some time, talking to them about an exit plan is often a non-starter.  Most are comfortable with where they are, business is stable and life is good.  So, why upset the applecart?  But, some face the unplanned event or crisis or perhaps come to the realization that they have to get out and when I speak to them, it is like this scene from young Frankenstein.  Panic sets in.  But, there are alternatives available, each of which is a subject unto itself.  For now, just to give you an overview, let’s do a quick tour of some:

Sell to outsiders – at this time, there is a record amount of cash (in the billions ) sitting with private equity sponsors and strategic buyers, so some would say this, combined with a decent market creates a unique opportunity to go to the outside for exit.

Sell to insiders / management – this is a common route for what are often referred to as lifestyle businesses.  Franchisees, dealers and distributors with geographic markets and certain service businesses fall into this category.  As an owner, you need to have some flexibility to make this work.  You may not get a premium price and you may have to help finance it.  You also need a good management team in place but it is an alternative.

Transfer to the family – similar to a sale to insiders, it is a way to get yourself out and to have your heirs enjoy the risks and rewards of being the boss.  It is often gratifying to see your family carry on the tradition – even if they do not do it your way.

Do a partial transaction – you borrow money, use current funds or recruit an investor to finance your ” taking some chips off the table.”  This can become a more complex deal, but it can be an alternative for you.  I will cover this alternative further in a future blog.

ESOP (Employee Stock Ownership Plans) – this has become a common technique in a number of more substantive transactions.  It has some administrative costs and structure considerations, but real potential tax benefits and financing options so it should be considered in any deal involving insiders, management or family.

So, there you have it.  Some ideas to consider when you feel the time has come to exit.  If you decide to exit, just keep in mind there is a process which I have blogged about in the past and the more time you have, the better.  Just keep one thing in mind –  it is difficult to successfully manage a business when either circumstances or mindset tell you it is time to move on.


Quote from Airplane! The Movie: Airplane!

Dr. Rumack: Can you fly this plane and land it?

Ted Striker: Surely, you can’t be serious.

Dr. Rumack: I am serious . . and don’t call me Shirley.

So, you are talking to an advisor about how things may have stagnated in your business or how it might be the right time to sell.  They mention it might be an appropriate time to do a SWOT analysis.  Your mind is racing and you immediately envision some paramilitary type group traversing through your business lead by Samuel L. Jackson. Another day; another misunderstood acronym.  But, what is a SWOT analysis?

SWOT stands for Strengths, Weaknesses, Opportunities and Threats and I believe it is one of the more worthwhile exercises a growing or mature business can undertake.  However, to do one properly is not a brief or simple task.  One of my favorite clients used to classify it as a “says easy; does hard” type of activity.  The process is rather simple but it does take some discipline and planning to do it effectively.  Here are some guidelines that can help:

  • A team approach works best.  This is definitely a situation where two heads are better than one – and three or more are even better than two.  Don’t be discouraged by differences of opinion amongst the group.  Reconciling differing individual perspectives is part of the process.
  • Be inclusive.  In a group exercise, less experienced members may defer to more established members and they may not want to upset the “boss.”  As a leader, you can encourage that honest interaction by pointing out some of the weaknesses or threats that you see.  You know the saying “sometimes out of the mouth of babes.”
  • Keep it focused. The first time through this exercise, ideas may be raised which are just that – ideas.  Maintain the focus on a true SWOT assessment of your business.
  • Stay disciplined.  Maintain a written list so all can see and keep everything in a SWOT format.  Also keep in mind, elements can overlap – certain strengths can also be weaknesses and threats can create opportunities. Put good ideas which might not fit this exercise on a separate “parking lot” or “more to come” list.
  • Leave time to summarize.  Highlight the real consensus items and try to clarify any “outliers.”  Make sure you use the words participants used; it gives them identity and shows the items raised are from the group and not just you.
  • Consider an “action plan.”  This is the perfect exercise to develop some next steps to capitalize on what you have learned.

A SWOT analysis can be a great tool.  You may also want to consider using a “moderator” to conduct a session.  Many have found this has added to the process.  However, don’t be afraid to venture on your own.  With just these few guidelines and some patience I am sure you can carry off a great SWOT analysis of your business.

Do I Need a CFO?

People make money; they want to know how much.  People lose money; they want to know how much.  You will always have a job. – Rose Leone

When I was a teenager in the early stages of considering a career, I found myself taking a liking to math and business.  Accounting seemed to be a natural fit and I mentioned it to my mother one day.  Since my dad had passed away a few years earlier, the woman with the fourth grade education provided this sage advice.  For those of us in business, this role takes the form of a CFO and in honor of my mother’s recent 98th birthday, I thought I would pass it along to those entrepreneurs who wrestle with this question.

Well, coming from a CPA who helped place loads of CFO’s, the answer is an unequivocal yes.  And, the good news is that today the profession has evolved to the point where no matter your stage of development, a CFO is available to help.  You just have to know where to find them.  Maybe some clarification will help.

To begin with, a CFO is really a function and not a person.  Without too detailed an analysis, suffice it to say that this function has two key components – compliance (financial reporting, tax filings, etc.) and advice (strategy, funding, etc.).  At different stages of a company’s evolution, this function can take different forms.


The financial reporting can be handled by owners (usually using software like QuickBooks or Xero); and a CPA can help with the tax reporting and the advice part of the equation.  Those CPA firms in this space may offer this service at a very discounted rate.  There is also a group of complete outsource capabilities available.  The unfortunate point is this function is usually seen as a cost center versus a “value add” so owners often delay for too long the step of getting this function filled.


At the early growth stages, some of what is outlined under Startups may still be applicable here.  The good news is (again) fractional CFO services are available and, at times, you can get some real, experienced and trusted advice from someone you only use a couple of days a week… a great value to you, the owner.

At the later stages, especially if your funding becomes more sophisticated (venture capital or even IPO), you need that appropriate financial partner and should hire a full-time CFO.  Again, at times, the fractional CFO groups sometimes offer a “temp to perm” service which has great benefits.


In a lifestyle-type business, I tend to see models similar to startups with a bookkeeper-type person handling the basic financial reporting and the CPA covering taxes and advice.  For other mature businesses, I have seen more fractional CFO’s who can also help with succession planning and even the exit of the owner from the business. CPA firms are also playing this role.

So, my simple advice is to make sure your CFO function is covered regardless of your stage of development.  Doing so is a best practice and will help ensure the success of your business.