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Do You Have What It Takes to Be an Entrepreneur?

“The difference between involvement and commitment is like ham and eggs. The chicken is involved; the pig is committed.” – quote attributed to Martina Navratilova

There seem to be more blogs and advice pieces today preaching of the coming evolution in entrepreneurship. It appears more graduates are trading in the traditional path of a career in a larger institution where they can learn a skill set for the opportunity to uncover some unwanted need in society and building a solution that can make them rich. For those of us who remember that famous scene in “The Graduate”,  “entrepreneurship” has replaced “plastics” as the one word of advice for a college graduate. We are also seeing more experienced people trading in that one final job in Corporate America for the chance to “be their own boss.” Entrepreneurship seems to be alive and well with role models like Bill Gates, Mark Zuckerberg and Jeff Bezos leading the way. (I guess it helps they are three of the four richest people in America.)

What is it that makes some of those who choose this route more successful than others? Many have written books, blogs and articles on what makes an entrepreneur. I have posted two blogs – “Can You Be an Entrepreneur?” (March, 2014) and “What is an Entrepreneur?” (April 2014) but it took a reminder from my sister (thanks, Ro) about the quote above to focus me on what it takes to make it as an entrepreneur. So, let me expand a bit further.

First, too many people use the word entrepreneur to describe anyone who is in business. I do not mean to disparage anyone, but the carpenter who works for a construction company and decides to start a small business and do a couple of jobs on his own when he is off is not what I consider an entrepreneur. An entrepreneurial venture should involve some risk taking; something that is disruptive and that creates value. It is not an avocation but the desire to solve a pressing problem.

I had the honor of having a front row seat to a cavalcade of successful entrepreneurs. I was fortunate enough to be involved for years in the EY Entrepreneur of the Year Program in New Jersey. Each year, we would be witness to dozens of successful stories from all walks of business. We had immigrants who came to the U.S. with no money or job or even a place to live but were committed to their vision and accomplished great things. We had a receptionist who learned her boss’s business so well that she bought it from him and made it an amazing success; and a toy manufacturer who introduced a product four times and after three failures, it became one of the best-selling products of all time. But none of them did it part time; the stories of sacrifice were emotional but inspiring. At the end of every EOY Gala, you could feel the excitement in the room; a renewed sense of commitment. A few winners announced they were inspired by what they had witnessed at previous galas and went on to accomplish great things. The common theme was one – – commitment.

So, if you have the real desire to be an entrepreneur, ask yourself if you are willing to sacrifice it all for what you believe in. Because the road to success is long and hard and those who are only involved will have a hard time making it to the end of the journey.

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Leadership; You Will Know It When You See It

“I always admired a subordinate who could stand up and say ‘you said it, chief.’” – quote from a long-time entrepreneurial client

We have all had experience with leaders, and I would be the first to admit that I openly copied the leadership traits of those I admired. The above quote came from a client years ago as I was asking how he instilled the “followship” that is an important part of leadership. His backhanded comment was a reminder of the fact that without some respect (admiration and even fear), the effectiveness of a leader can be somewhat diminished.

I thought about this when I recently attended a session / presentation on leadership. A panel of successful leaders responded to questions and provided some guidance on this topic to the audience. As enlightening as it was, I was somewhat taken aback by the commonality of the message on leadership. While each took their turn at eloquently explaining what they believed a leader was, none captured more than one or two elements of what I thought made a leader. It was at that point that I realized that no definition could capture the wide range of effective leaders I have known.

What I also began to realize as I reflected on my role models was that it was an event or opportunity that allowed that person to become a leader in my eyes. It was action more than executive presence that defined them for me. While I had known most of my leaders and knew what they were capable of, it was an event that brought out their best. Two situations, both related to initial public offerings (IPO) come to mind.

If you have ever been involved in an IPO process, you know it is one of the most intense processes known to man. While not quite like sending someone to the moon, it relies on very timely coordination and execution from a diverse team to come to the right point in time where everyone can “sign off” and give the go signal. At times, that window is only open a day or two at best and if you miss it, you have to revisit the process. At the time of this decision, expectations are high as are the attendant professional fees.

In two separate cases, we were at that go or no-go point and each CEO stepped up and determined the time was not right and the deal was pulled. In one case, it was an experienced professional manager who had been through the process before, but in the other case, it was a business owner with a very unsophisticated business who saw certain parties in the process being pushed to the edge of the envelope. While he was not sure what was going on (and he had the most at risk) he sensed it was not right and stopped the presses.

Crisis, personal issues, conflicts, financial distress, loss of major customer – – I have seen various owners respond to these traumatic events, but it was the true leaders who did not let the situation control them but stepped up to show they were leaders. It was obvious to all present that they saw leadership.

So, as an owner, be prepared to show you a leader. You may in fact be a good mentor and coach to your team, but when the opportunity presents itself, be prepared to step up and do the right thing. The ultimate success of your company may depend on it.

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Entrepreneurial Loneliness – Learning to Share

“It’s lonely at the top of Olympus” – quote from Emperor Nero (Dom DeLuise) – “History of the World” – by Mel Brooks

Some would say that today, we live in the age of the entrepreneur. As someone who has been in this space for over 40 years, I must say I tend to agree. When we first formed entrepreneurial services at EY, it was considered by most to be just small business. There was no Bill Gates, Jeff Bezos, Mark Zuckerberg or Steve Jobs back then. Each entrepreneur we met seemed to be possessed by this passion to set out to create something that big business wouldn’t (or couldn’t) do. They were the outliers; jousting at windmills and looking to accomplish the impossible. Looking back on all the innovation, financial success (can you say unicorn?) and social good, one can only say thank goodness for those early pioneers. It has been quite a ride and the juggernaut continues.

However, I see something a bit different in many of the entrepreneurs of today. While I still believe that deep down inside they want to change the world, they start out motivated by something a bit different; the ultimate vision of being their own boss. They raise questions like, “Why be creative for others?” and, “Why put up with all the office politics, infrastructure and chains which will keep me back?” Perhaps they just can’t find a job. But they love the image of that ultimate dream – – waking up in the morning and looking in the mirror and realizing you have nobody to answer to but yourself. Ah, nirvana.

So why the concern? To me there is an important part of the message of success that does not get delivered as forcefully as the image of the entrepreneur on a stage by himself or herself explaining their success to the world. Lost is the importance of the support cast. Where would Steve Jobs had been if Steve Wozniak had not been there? While every entrepreneur loves the fact that they answer to themselves, that same scenario conjures up visions of fear and uncertainty – – most feel personally responsible for the success or failure of their company. The immediate reaction is usually to do “whatever it takes” to make sure the business is successful. Learning to build a team and share some of that responsibility and “pain” with others does not come easy.

I am surprised that with all the business coaches and organizations that offer advice and the plethora (thank you “Three Amigos”) of guidance on team building that is prevalent in business media, I still get introduced (on more occasions than I care to admit) to successful business owners who believe they are on their own and who are feeling the strains of “being alone on Olympus.” My role with them sometimes morphs into a form of pseudo psychological therapy, but mainly it is just that of an objective observer offering advice that often reinforces what the entrepreneur believes but feels they cannot share with those close to them.

So please, as you build your business, find people to share your successes and your challenges – – key employees, advisory board members, advisors or peers. Many of those in your personal network are more than willing to help and support you on your journey. As the famous saying goes, “No man (woman) is an island,” and for an entrepreneur, no truer words were ever spoken.

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Do I Let My Company CFO Into My Family Office?

“Badges; we don’t need no stinkin’ badges.” – quote from “Blazing Saddles” by Mel Brooks. (Believe it or not, this is a “misquote” from a 1948 movie.)

There is no doubt that in any business a CFO can be a very valuable asset. The ability to translate the vast array of data into understandable, user-friendly and actionable information for both internal and external stakeholders is truly a highly-valued capability. In most cases, there is an unwavering trust in the CFO and having him or her in the Family Office just seems like an extension of their fiduciary responsibility. In addition, in many cases the CFO believes they have earned the right to take on this responsibility – that in fact they “don’t need no stinkin’ badge” to assume this role.

However, the position specification for a financial/operating leader in a Family Office is much broader than what is normally found for a CFO of an operating family business. When there is an operating entity, the focus is on the mechanics of that business – pricing, people, profitability and cash flow. This is a playing field where most CFOs are very comfortable and where they have gained the bulk of their life experience. But in the Family Office, the CFO has to deal at a much more personal level with individual family members. The CFO may be seen as the older generations’ “person” and may find themselves catering more to the needs of that older generation when the real needs may be those of the next generation. The CFO may have little patience for those with limited financial experience and may not be able to provide the guidance required to all family members. The requisite tasks also become much more “treasurer” based, investment performance, dividend yields, capital markets, etc., versus operating profits. This experience may not be in their “bailiwick,” and while they may be able to provide some guidance, they actually may be somewhat lost in that environment. The need to understand taxes; estate planning and wealth management may be foreign to them and simple tasks such as paying family members’ bills or providing appropriate financial education can become a bit of a challenge.

So, if you are going to consider allowing your company CFO into your Family Office, you or an advisor should assess the overall skillset, including the interpersonal capabilities and the trust and confidence that various family members have in that individual. It is not a standard “rite of passage” that you allow your Company CFO into your Family Office. I had the honor of working with several CFOs as the NY Managing Partner of Tatum and I can tell you not all would fit in with what I envision as the CFO in a Family Office. Make sure you consider the real DNA of your CFO before making this decision. In the end, if there is a match, he or she does not need a “stinkin’ badge” to be a valuable and integral part of your Family Office.

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Don’t Let Excuses Prevent Success

“I coulda had class. I coulda been a contender. I coulda been somebody, instead of a bum, which is what I am…” line by Terry Malloy (Marlon Brando) from the movie “On the Waterfront”

I am lucky; every day, I get the chance to meet bright, enthusiastic young entrepreneurs just beginning their journey as well as those who have mastered the art of being a business owner and are enjoying the fruits of their labors. Whether they are just starting out and are driven by the hope of success or reflecting on their accomplishments, whether they are young or mature (I hate old), they all share one common trait – – they never let excuses hold them back. Every obstacle is only a challenge; every failure a learning experience. Unlike Terry, they never lamented over what could have been; they made their way and remained focused on what they wanted. So, a valid question is why do I wax nostalgic at this point? Like most ideas I share, the roots are in the commonality of my experience.

Many of us who offer guidance to entrepreneurs try to be as practical as possible. We all create lists of dos and don’ts. I am guilty of this as well; my blogs include the Top 10 Points of Focus for Success as well as the 10 Reasons Why Startups Fail. We believe that making it simple and formulaic somehow makes it easier to comprehend and perhaps spurs a reader to action. But as one of my favorite clients used to say, “Says easy; does hard.”

So in keeping with this, simple is better approach, I offer the following for your consideration. Most accept the theory (I know I do) that most problems can be solved with a combination of three resources – – time, money and people. We can always use more of each to help us through the day, but I am discouraged when I see entrepreneurs falling back on the lack of resources as an excuse. Just some examples.

I met with a startup tech company that was looking to raise money. Table stakes here are developing a Minimum Viable Product (MVP). They apparently had the capability and resources at hand to achieve this milestone but were so focused on the “raise” they did not take the time to take this important first step. Needless to say, their timeline to raise funds (if they ever do) is now much longer. Their view; investors just don’t get it. If I only had the time…

Entrepreneurs at all stages can always use additional money. When the topic comes up, I am sometimes amazed at the responses when I ask two simple questions: how much do you need and what for? Believe me, I have heard more than one lament as to how fussy or ignorant potential investors are for asking. Really?

Mature businesses often do not take the time to recruit/develop the next generation of managers, and then are shocked when they try to exit and potential buyers shy away. I hear how potential buyers just “don’t appreciate the value I have created.”

So if this sounds familiar, I suggest you take a deep dive and find out what is really preventing you from getting to the next level. We all know that with additional time and money we could have “been something,” but isn’t the real question, “How come so many others are?”

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Getting Your Pitch on the Right Page

“I am them, they are me, we are all singing, I have the mouth.” – a line from Fabiola, a Mel Brooks character.

So another week of reviewing pitch decks has passed, and as the saying goes, “The more things change; the more they stay the same.” I like to reflect on my comments on decks from the last week or two and search for commonality. This week seemed to indicate that founders are struggling a bit expressing their vision.

Here are some ideas that may help:

  • Don’t be too esoteric. Much like the Mel Brooks character above, don’t hide your vision by burying it in language which makes the reader feel like they have to interpret Plato’s “Allegory of the Cave” in order to get your point. Instead, state clearly the nature of the problem you are solving. You may think the correct interpretation of your pitch will result in investment, but be careful. That sound you hear may just be indigestion.
  • Try to avoid repeating. Once you have outlined the problem and solution, assume the reader can follow and will move on. Having to repeat your key concepts more than once (save for in the body and closing) may not add value to the investment thesis.
  • Less is more. Related to the previous subject, a deck should be no more than 20 or so slides. It is a vision piece, not courtroom evidence or a master’s thesis. I would suggest a useful exercise from my college communications course – pretend each word costs you $1,000; then review your pitch with the goal of cutting costs.
  • Acronyms can confuse. In an attempt to show your market prowess, using abbreviations may showcase your industry knowledge, but is every investor as in tune as you are? You want people to know when you use AI that you are talking about artificial intelligence and not aortic insufficiency, so words may trump abbreviations.
  • Show a picture. I do believe a picture is worth 1,000 words but I believe value is conveying the right ones. Have a simple visual of the customer, your product and the problem with limited notes that highlight the interplay. When I explain succession planning, I now find it is easily understood when I show three intersecting circles representing family, management and ownership. We relate better to something we can see.
  • Practice, practice, practice. You have to start by making your pitch in front of family, friends or advisors. Start with the request that they point out at least one or two things they would do differently if they were making the pitch. Honest feedback is worth its weight in gold.

Please keep in mind that the more eyes who see and honestly comment on your pitch, the better it will be. It is crucial to make sure that while you do not want to lose your vision; if others cannot see it (aka be on the same page), you will probably be disappointed in the value your deck brings. Simple steps like the above can bring you an improved result.

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Stages of a Business Life Cycle – Why It Matters Where You Are

“Where you stand depends on where you sit.” – quote attributed to Rufus Miles of Princeton University

I have been privileged to serve businesses in all stages of their life cycle. For example, I am now helping an owner sell the business I helped him to acquire over 30 years ago. Over the years, I have helped companies deal with a wide variety of issues and realize the commonality is often the current stage of the life of that business. More importantly, focusing on “where you stand” in the cycle can help an owner address the typical issues they will probably face not only in this stage but the next. It’s the old “I am more afraid of what I don’t know” syndrome I see so often. So while a complete listing of what to consider at each stage is way beyond the scope of any blog or article, some brief highlights will get you thinking.

It may have been the Boston Consulting Group or another organization which introduced this concept (or a derivation thereof) years ago, but to me there are typically four stages of the business life cycle:

  1. Startup
  2. Emerging
  3. Growth
  4. Mature

Startups are characterized by developing proof of concept, they are pre-revenue, may have a minimum viable product (MVP) and the owners are usually trying to define themselves. Challenges are funding, funding, funding (angels, friends and family), sharing equity and recruiting team members (usually centered around those that believe in the founder(s) vision.)

Emerging companies do have an MVP, some traction, and are looking to develop an effective approach to the market. They have raised funds from friends and family and are looking for that next round. Challenges are more sophisticated funding (VC’s, etc.), honing the customer experience, the product and approach, expanding the team, more disciplined equity grants and trying to keep control over everything – – being a bit more “directed” but monitoring culture.

Growth is when you start to hit stride. Product is developed and is appealing to the sweet spot of the market. Financing is less of an issue and you probably have cash flow to fund basic growth: your balance sheet is your friend. Team members are now recruited with more specific objectives in mind. Equity is more guarded (like a fine wine) and delegation and timely reporting of Key Performance Indicators replaces informal chats as to “how things are going.” Discipline works its way into almost all aspects of the business and controls (versus control) is the key word of the day. Organic versus acquisition growth is a constant subject of discussion.

Mature companies have usually achieved stability in market presence, financial rewards and in management team composition. Thoughts turn to succession planning, risk management (protecting what you have built) and perhaps an exit plan. Processes are helping keep the business intact and acquisitions and dispositions are a more frequent part of the conversation.

So there are issues to address at each stage in the life cycle, and at times, owners get a bit ahead of themselves like adolescents tend to do. Hopefully, by identifying where you are in the process and understanding that where you stand depends on where you sit, you will be able to successfully see your way through it.