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Chapter 2

Do You Have What It Takes?

WE ARE ALL DREAMERS OR RISK TAKERS or you wouldn’t be reading this book. We all think we know our strengths and weaknesses, but do our assessments correspond with reality? Assessing ourselves to see if we have “the right stuff ” is becoming a science. There are many psychological testing services that can accurately assess your strengths and weaknesses. These and other tools are just another component to use in self-evaluation as you propel yourself forth in your quest.

Being bold is a prerequisite to success, but we cannot let it carry us away. We must critically assess our capabilities and understand the financial runway; we have to pass each checkpoint on the flight to our destination. Running out of gas—or money—to propel the machine forward is an obvious but essential self-critique to be undertaken. To be caught in the frustrating netherworld of having a great strategy on the drawing board but not being able to implement it is painful beyond words. Thousands of promising plans for start-ups or existing companies’ initiatives die on the infertile plains of non-funding. Having the flight plan to success can be as much as a curse as a blessing without growth capital.

Owners and executives often retreat into a world of secrecy and suspicion thinking their brainchild will be stolen or shanghaied. Better to share your initiative with a potential partner who can take it to market quicker through existing channels than to let it languish until it becomes dated and eventually eclipsed by a more open-minded competitor. Speed to market is the key to success.

Do you have the financial resources to undertake this odyssey? Many first-time buyers or start-up entrepreneurs make a fatal judgment out of the chute. They all can calculate the cost of acquisition, but many do not focus on the follow-on cash needed to propel the business forward. Over a third of new or acquired businesses, in our experience, run into cash-flow issues by the end of year one of operations. Buyers usually have the cash to pay at closing the agreed-upon terms, but the road to heighten profitability eludes them.

In contrast to an acquisition, a start-up needs an even longer runway to reach profitability as it has no existing sales. Start-ups’ main issues lie with time to market and ability to keep plowing ahead, despite the maddeningly slow pace of generating sales, let alone cash flow. To run a start-up with all its inherent risks, you must have the ability to carry on financially month after month. You must examine your reserves, understand your limitations, avoid signing up for debt you cannot pay back, and learn to use others at no cost to the mother ship!

This may sound cruel, but the best start-up operators are the slyest foxes in the forest. Telling the story, entrancing executives of influence in the sector, and trolling through their connections are absolutely key undertakings in your quest. The experienced players involved in start-ups understand and admire those founders that whittle and cajole others to do their bidding for no apparent up-front compensation. Creating an aura of excitement will attract talent and have “influencers” drifting along in the hopes that, if and when the company leaps forward, their services of the past will be rewarded. Many a time have I sat back and laughed with admiration about a founder or team member of a promising company that has me doing their bidding gratis.

To grow a business, you must be a storyteller. Learn to turn your dull widget into a fascinating oracle of the industry. If you are new to the business, show fire and enthusiasm that will be welcomed by the established players on the field. Let them find renewed fun in the industry from you by mentoring and showing you the path. These existing players can cut years off your learning curve and provide contacts and venders that you would stumble past in your ignorance. The existing firms in the space are all going through their own life cycle, and who knows how you could fit into their grand plans? You could be a pawn on their board and not even know it. They could be looking for a hard-charging heir to their throne. You could be someone to unload product lines on, or your fledgling organization could become a vehicle for their marketing and sales. Do not try to show off how smart you are but, rather at times, consider using the old “Uncle Buck” or “Mickey the Dunce” syndrome to endear yourself to all.

Making a world-shaking start in a new game is to awaken your potential rivals and put them on guard about your entrée into the arena. Better to let them eye you with wary but benign interest and not try to block you when you’ve hardly advanced the ball! Business is fierce competition, and until your strategy starts impacting the marketplace, keep your plans and strategies to yourself and your key players.

One of the best courses I ever took in graduate school I thought was a lark and would be an easy A. This course, “Work, Love, & Play,” actually turned out to be a fascinating depiction of how we must continually strive to balance our lives. Entrepreneurs and business owners with their helter-skelter lives truly are at risk of falling out of kilter. Maintaining balance makes sense, but as business owners operating in the unregulated and self-driven world of entrepreneurship, we must set boundaries, or off the tracks we go!

Keeping the balance between work, love, and play is a tough task for folks with an unregimented life. For those hard-driving men and women in the driver’s seat of their own business, work always has to come first, to the detriment of all else. As an owner, you have no off switch at the end of a day’s labor. Our minds keep grinding on, switching through multiple scenarios as the evening hours wear on. For many of us, the later at night, the more ominous the indicators are for doom and disaster. Winston Churchill called these hours “the black dog.”

Burning the midnight oil, entrepreneurs work long hours.

It’s hard work being an entrepreneur—they work on average 63 per cent more than other workers …

Ed Reeves, co-founder of Penelope, says … “Being the owner and operator of a micro business means taking on multiple roles and being everything to every customer.

“Many micro business owners are both time and cash-strapped …”

However, 60 per cent [of surveyed entrepreneurs] would prefer more money than more time.¹

As Jessica Bruder says in “The Psychological Price of Entrepreneurship,” “No one said building a company was easy. But it’s time to be honest about how brutal it really is—and the price so many founders secretly pay.”²

Would-be entrepreneurs have to do a self-check to see if they have the fortitude and even keel to navigate choppy times. Having a smooth life on the home front with no static or backlash for your long absences is a must for longevity. Sharing the exhilarating highs of the business should be paramount to a relationship. Too much talk about the business and ill tidings, on the other hand, can rock the boat of your partners or loved ones. Share the good news and mute the bad! Bad news oftentimes is over blown and dissipates, so let time run by before you alarm others. The captain of the ship must be serene and confident at all times, even though you are racked with inner turmoil. Today’s fears are tomorrow’s forgotten memories. Why share the pain before it becomes reality?

Do you have the primal work ethic to undertake buying and building an enterprise? Outside of an act of God or just blind good fortune, business owners work more hours than any other category of employment. You really have to critique yourself physically for the rigors ahead. We often recommend an actual physical before an acquisition that assists you in evaluating your health. Many people’s life energy starts waning at fifty, while others rip well into their mid-sixties. As your own boss, you can come and go as you please, so always find the time for exercise.

Stress is a killer! Entrepreneurs swap stories all the time of crippling health scares or even tragic collapses of business owners. This road less traveled becomes a test of how much pressure one can bring upon oneself and still function. Weight loss, false heart attacks, and other equally frightening incidents can beset an embattled entrepreneur. Most times, these events are in the beginning of business ownership when stress is the highest. Once a business reaches some level of operational equilibrium, it seems our bodies adjust to this new atmosphere, and the signs of pending health disasters recede. What doesn’t kill us makes us stronger!

— CASE STUDY —

When I initially purchased a small pet-supply company in New England, there were five smaller distributers my size, three larger regional players, and three nationals. I instinctively understood that I immediately needed to drive out of business or acquire my three like-size competitors and, once I had a bigger regional footprint, had to prep my company to be acquired. It was easier to compete than buy these competitors, so I eventually absorbed two of these companies. But the third small competitor eluded me. The remaining company had a new CEO and was hidden up in Maine. I spoke with him once and understood immediately he was a threat for the long term since he was lying low and gathering momentum, as my firm was. I eventually exited, but this third competitor, a relative newcomer, grew to twenty-five million dollars in sales before merging with another industry player. He is an example of staying out of sight, out of mind until bursting on the stage with a large merger. As an epilogue—or more fitting, his epitaph—he become the CEO of a fifty-million-dollar business that, for reasons covered later in this book, never successfully integrated and eventually crashed and burned.

NOTES

¹ Jack Torrance, “Entrepreneurs work 63% longer than average workers,” Real Business, August 13, 2013.

² Jessica Bruder, “The Psychological Price of Entrepreneurship,” Inc., September 2013.