How Do I Learn To Be a Better Entrepreneur?

“God grant me the serenity to accept the things I cannot change,

The courage to change the things I can

And the wisdom to know the difference “ – The Serenity Prayer

I have had the chance to reflect on some articles about a recent survey conducted by The Alternative Board. The survey appears to be pretty robust.  They question some 500 entrepreneurs on very relevant topics.  My purpose here is not at all to take issue with the survey (I think it is great), but to focus more on my view as to what an entrepreneur can really learn and change based on these findings.

One principal finding of those surveyed appears to be that 60% would have raised more money.  While this sounds great, I have met only a handful of entrepreneurs (there are 4 leaf clovers) who have had the chance to raise more money but turned it down.

Another major finding is that 40% would have spent more time.  Now, I have been around entrepreneurs for 40+ years and when a bio break is a scheduled event, I am not sure how you accomplish this (unless someone comes up with a way to get more than 24 hours out of a day.)  I think for now we are all stuck with this model, so I’m not sure what can be learned to this point.

Let’s focus on what we “geeky accountants” call controllable costs.  The number one place entrepreneurs say they would have spent more time (and money) is sales and marketing.  Bingo!  In the plans I review, I often see a significant underestimation as to what it takes to get customers to see, understand and buy a product or service. The world is a crowded place and you need the dollars and a solid strategy to get (at least) your “15 minutes of fame.”

A final major finding: A total of 42% of those surveyed would have sought out better coaches and mentors. There is a lot written on the preponderance of male entrepreneurs and I think it is in our DNA to figure it out for ourselves.  Yes, that old image of not stopping to ask for driving directions when lost (thank you GPS) is alive and well.  My female clients have always been more collaborative and, I think, more effective in getting solutions to problems by involving others.  Just understanding that good help is worth its weight in gold is a great first step.  There are so many knowledgeable resources today it is almost foolish not to take advantage of at least some of them.

So, what lessons can we learn from these findings?  I think the key takeaway is to take the opportunity to learn from those who have gone before us and work on understanding what we can and cannot change and adjust our approach to make sure we are doing our best to take our businesses to the next level.


Caution – Those Equity Promises Can Really Hurt

 “Nudge, nudge, wink, wink; say no more, say no more” – from a skit by Monty Python’s Flying Circus

My partner and I have been making the rounds in a series of Lunch & Learns at various co-working spaces around NYC.  Our normal fare is to discuss the pertinent accounting and tax issues startups and early stage growth companies face (after all, we are CPA’s) but we also discuss ownership issues and in particular equity splits or as it is commonly known, how to “divvy up the pie.”  This topic seems to dominate the conversation (it seems to be more popular than tax credits) and we are always intrigued by the questions and issues that get raised.  It is clear to us there is more education needed in this area and this blog is just one small attempt to fill this void.

It is important to emphasize the basic fact that if you give someone something of value, even if it is not cash, there are usually tax consequences to the individual.  Reducing this to its simplest form, what did you give and what was it worth?  This is one of those “says easy, does hard” moments.  So, let’s look at an example.

Joe has started to develop a social media app and is in the early stages of proof of concept.  Joe works on this for a month or so and realizes he needs technical help.  He recruits in Jane, a tech pro who really accelerates the app development.  Joe appreciates her contribution and tells Jane he will give her 10% of the Company (for those of you following, that is the wink, wink; nod, nod part.)  A few months later, Joe and Jane present their concept to an angel who invests $100k for 10% of the company.  A couple of months after that, another investor approaches ready to write a big check.  He asks us to do some diligence, part of which is reviewing the cap table.  We see Joe at 90% and angel at 10%.  We ask about Jane since she appears to be a key player and find she was promised 10% but there is nothing issued or in writing.  You know what then hits the fan.  The investor now wants to know what other promises were made.  When someone invests, there is one thing they want clear – who owns what before and after the deal.

So, this has now created a credibility issue.  In addition, Jane now has a problem.  If she is to get her 10%, she can only get it at current value.  And, what about vesting; does she get credit for past time and effort?  There is nothing worse than getting a big tax bill with no cash to pay the tax and that is what is going to happen to Jane. The plan to give her an incentive has just become a disincentive plan.

So, I will state this as simply and strongly as I can.  If you decide to either give equity or have a partner invest in your Company, please get the right professionals involved to make sure it does not become a painful experience and that it accomplishes what you want it to.  With that, I will “say no more, say no more.”