An Oasis of Hope

My experience at Vistage’s annual Chair World conference.

People often look at entrepreneurial icons such as Mark Zuckerberg of Facebook and look at their lives enviously.  What they often don’t understand is the emotional stress and mental exhaustion that goes into building great companies.  The ups and downs on the roller coaster ride are often dramatic.

As an entrepreneur, I think I know the other side.  And in today’s world, some of the stress is exasperating.  All the change in Washington brings uncertainty.  And while this can create opportunity, it also compounds the difficulty that entrepreneurs have making decisions with imprecise information.

We don’t really escape this state of mind.  It just is what it is.  We learn to thrive and survive on it.  We sleep and think it 24/7.

Yet somehow, last week in Orlando, Florida of all places, I seemed to step away from it all into a community that offered an Oasis of Hope.

I attended the annual Vistage Chair World conference.

Vistage is a membership organization that is comprised of small CEO advisory boards across the world.  Once a month, CEO’s from non-competing industries get together, share ideas, and collaborate and challenge each other.  The group is facilitated by a Chair, who is often a retired business owner or executive who enjoys bringing their insight and experience to their groups.

Once a year the Chairs from around the world get together and share ideas and learn together.  What is rare about the experience is to be surrounded by a community of givers whose mission and purpose is to make the role of a CEO a little less lonely.

I am a member of a Vistage group, and the experience of these monthly meetings is terrific. I don’t think you really realize the power of the organization until you’re in a room with a few hundred people who have dedicated this stage of their careers to this mission.

It is a calming and exhilarating experience – all at the same time.  You realize that there is an organization dedicated to helping.

I have returned from Orlando and I am back to the grindstone, but feel fortunate for the experience of attending this conference.  The perspective and pause were very helpful.

If you’re a CEO or entrepreneur who feels like you’re alone, consider joining a Vistage group.   It may provide an Oasis of Hope for you as well.

Has Your Business Hit a Speed Bump?

Adjust before it is too late.

One of the first questions I like to ask entrepreneur’s and CEO’s when I meet them is what stage of their business journey they are in. I present four categories: the contented, the growers, the speed bumpers, and the exiters.

Building a business is rarely ever a straight line up to the top. There are twists, turns, and bumps along the way. Sometimes the adjustments are small and easy. Occasionally you will hit a big one, and major shifts can be required. These are speed bumpers and about ten percent of the entrepreneurs I ask this question to fall into this category.

Speed bumps are survivable. As hard and painful as they are if you handle them well your company can end up stronger and better on the other side. But if you don’t adjust and respond, you will find yourself in serious trouble.

About two weeks ago, I landed in Omaha, Nebraska late at night. I had forgotten to charge my iphone earlier in the day, and I was out of juice when I landed. So instead of waiting to power up to order an uber, I did an old-fashioned thing and jumped in a cab.

My cab driver was sure happy to see me. He had been waiting for a ride for four hours. Before uber, his average wait was 45 minutes. The $20 I gave him for the $10 dollar ride did not really seem to make up his pain.

I asked him about shifting his life around, and he could not comprehend the thought. Although he was young, he had been driving cab for nine years and it was all he knew how to do (in his mind).

This young cab driver had hit a speed bump, and he keeps driving over the same one. He can’t make a change. In this case, technology had moved his world. In other instances, an entrepreneur might lose a major customer or a supplier. Something shifted.

The next time you hit a speed bump (and you might not see it coming) don’t follow the example of the cab driver in Omaha. Adapt and flex. Or it will be a long wait on a cold night for your next dollar.

Trying to Solve a Financing Challenge?

Choices will help you make a better decision.

As I write this column, I suspect there are hundreds and thousands of CEO’s and entrepreneurs at this moment who are trying to solve a financing challenge.

Sometimes they are stuck because they are exploring one path and can’t get out of their own way. A simple tool to get out of your own way is to push for a very different solution. Usually there are a couple of ways to skin a cat. The contrast in the choices should help you make the best decision.

I want to share three examples with you.

Yesterday, I spoke with an entrepreneur who is working hard to get a new start-up off the ground with a partner and they need a few hundred thousand dollars to do it. He has been fighting with the bank for months to get it done and start-up loans are incredibly tough.

This entrepreneur has an alternative. He owns an existing business that is cash flowing and could easily get the loan – and then lend the money to the new company. It’s far from a perfect solution, because if they follow this approach only one partner is taking the risk.

He has a choice. Keep fighting for Plan A or reach an agreement with his new partner that compensates him for taking the risk and get going with Plan B.

Today I spoke with another business owner whose business is eligible for an SBA loan at a low rate and a long amortization. He liked the terms, but was not happy with the personal guarantee or lien on his house.

I explained that his option was to get an investor and dilute his equity in the company.

The contrast made him think.

And as a third example today, I talked to a client who has been struggling to get a term loan for his business that had a tight cash flow year last year.

His option, which he didn’t realize, is to get an Asset Based Line secured with his Accounts Receivable and inventory. It will give him more money, and the opportunity to grow and expand.

Usually, there is more than one way to solve a problem. Push for a Plan B, or Plan C. Stare at the alternatives, and you will make the best decision.

When Should You Take on an Investor vs. a Loan ?

There are times when this choice is necessary and appropriate.

I have always been a big proponent of the principle that at whatever stage a company is in, when there is a need for capital it is wise to consider both debt and equity alternatives and then decide which is best for you.

I have an inherit bias towards debt. It’s almost always cheaper then equity if things work out as planned, and allows the entrepreneur to stay in control of their company and avoid dilution.

Today, I was asked an interesting question when I was conducting a Vistage workshop for a group of CEO’s. A member challenged me (which is great) and asked me if there are scenarios when equity is better than debt.

And my answer is that I think there are three scenarios when it’s better to take on equity vs. debt.

1. If the company needs more money, and has maximized its borrowing capacity.

2. If the CEO / entrepreneur feels that they have maxed out on the personal risk they are willing to take with the company and want to take some chips off the table.

3. If there is an investor that brings significant strategic value to the business (more than money) and you feel can help grow and support the business that you want to build.

None the less, I offer two cautionary notes.

1. There is probably (and usually) a way to do what you want to do with a lot less money than you think. Challenge your assumptions hard and think through different scenarios.

2. Consider your courting with an investor like a marriage, and don’t fall for the Shark Tank myth of love at first site. Have serious conversations with the investor about the business you want to build, and discuss good and bad scenarios and how you would both respond to them.

Remember that when you take on a loan, you’re obligating yourself to pay it back. And when you take on an investor, you effectively just got married for the life of your company. This decision is worthy of a lot of thought and consideration.

What Business is Your Hero?

Take some time to think about whom you want to emulate.

Remember when you were growing up? At different points in our lives we all had heroes and they probably changed over time. Who was your hero and why did you want to be like them? Think about it. Was it a sports star, a rock star or maybe a politician?

I think every entrepreneur should think about the same exercise in a different light. What company is your hero? Who do you want to be “like” when you grow up one day.

As we think about our businesses – there are many metrics that come to mind. EBITDA, Growth Goals, Market Share, Funding Rounds — just to name a few that come to mind.

What makes you tick and why? Try not to think of a competitor. Consider companies in entirely different industries than your own. Perhaps businesses that you frequent could also be a role model.

I thought about this exercise the other day when I dropped off my car for service at the local Exxon dealership in Maple Glen, PA. I have frequented them for years, and my son was getting ready to drive. I handed them the keys, asked them to “do whatever was necessary” and I jumped into an Uber and headed to the airport.

I returned two days later. I picked up the car and paid the bill which was reasonable and fair. Exactly what I expected. The local Exxon business is built on good old fashioned trust.

I want my company to be like the Exxon station. I want it to be that way today, tomorrow and as we grow. I will compromise speed and fast growth for trust and longevity any day of the week.

What company is your hero and why? Who do you want to be like when you grow up?

What is Holding You Back from Growing Your Business?

The answer might not be so obvious.

Have you ever had a significant amount of pain and decide to go for a massage to get it “fixed”? I recently discovered “trigger point massage” and learned that often the point in the body that is causing the pain is nowhere close to the pain. An experienced “trigger masseuse” knows how to find the root of the pain, and hopefully solve the problem.

“Trigger Points”, are prevalent in business also. Let’s face it, running and building a business involves a constant complex set of decision making. As entrepreneur’s we are constantly playing “offense” and “defense”. Our days and nights are filled with ups and downs as we deal with issues. What is clear today might be ambiguous tomorrow.

If you have a sore shoulder and go get a trigger point massage, you might be surprised if they spend the time working on a point in your lower back. In business, if you have a customer service issue, you may focus on hiring or firing the people in that department. But if they’re good people, and the issue is bad quality products – then you’re not focusing on the trigger point.

Always look for the “root” of the issue or the “trigger”.

Often, when it comes to growing a company, the trigger is a fear of investment, taking on debt, or ruining the status quo. If you know what you need to do to grow your business, have a strong thesis for the return on investment, can borrow the money to do it, and the expected return is higher than the cost of capital, what is holding you back?

If the answer is fear or risk aversion, that is OK. Understand the trigger and be comfortable with it. If you can overcome your fear, make a move and get your business growing.

A Soul Searching Question Every Business Owner Should Ask

And a perfect New Year’s exercise.

As the clock strikes midnight tomorrow night, one chapter will end and another will begin. And during this time of reflection – I think there is one critical question every entrepreneur should honestly ask and answer – is your company providing a valuable product or service to your end user – or customer.

The question about how the customer benefits, and the focus on the customer – is often a deciding factor between which ventures will succeed – and which will fail.

It’s very easy to build an organization, or get an organization sidetracked by a proposition or promise that has little to do with the customer.

I often see this in technology or web companies. The entrepreneur is more focused on the building a web enabled platform, or a marketplace, or whatever it might be, without any focus on whether their innovation or solution is making their end users lives better in some way.

When the technology or “the idea” becomes the focus, instead of how the customer is benefiting there will likely be high attrition rates and the business must eventually shift or die.

What is the primary focus of your organization? Sometimes I see companies become so focused on processes and procedures th[ak1] at the customer’s experience becomes secondary. The process folks win, but often without any focus on the customers.

Other times companies who are pushing to make a quarters number, maintain a loan covenant or keep an investor happy will sacrifice customer value or experience to meet their short-term goals. This ultimately accounts to short term gain for long term pain.

Perhaps a simple question to ask any entrepreneur friend this weekend is what do they care about most in their company? If their answer is not the customer value or experience, then it’s a worthy conversation. Ultimately, a happy customer is King.

Happy New Year

Preparing Your 2017 Financing Strategy

Think defensively and offensively.

As you prepare and plan for 2017, here are ten defensive and offensive financing strategies to consider:


1. Have you reviewed the mix between your fixed rate and variable rate debt, the impact of rising interest rates on your P&L – and decided if you’re comfortable with it?

2. Do you have a line of credit in place for your business that is approximately 10-20 percent of your top line revenue or 90 percent of your average accounts receivables?

3. Have you reviewed any short-term amortizing debt and looked at pros / cons of amortizing it over a longer period?

4. Have you utilized your line of credit for capital investments in your business instead of working capital? If so have you considered terming out some of your line?

5. Have you reviewed your personal guarantees and loan covenants to see if they still make sense?


1. Have you looked at / reviewed the SBA to determine if you are taking maximum advantage of the program?

2. Have you reviewed if you are taking full advantage of trade discounts?

3. If you are renting your business location, have you done an analysis to consider the pros/cons of purchasing?

4. What is the stretch goal for your business in 2019? What do you need to invest in in order to meet these goals and have you considered your borrowing options to meet these goals?

5. Are you planning to exit or sell your business in the next 3, 5 or 10 years and considered what you need to do to maximize the value?

What Is the Real State of Online Business Lending?

Some say the industry is maturing, but a bubble may be getting ready to burst.

There was a lot of activity and noise last week in the world of online business lending. The OCC announced that they will move towards chartering fintech companies, Harvard Business School released a comprehensive report on the State of Online Lending, authored by Karen Mills of Harvard and Brayden McCarthy of Fundera, and the Federal Reserve hosted a conference on Financial Innovation to Households and Small Businesses where I was honored to speak.

This activity paints a picture of a maturing industry that has come a long way with innovation and is doing a lot of good to help small-business owners. In fact, in the Harvard report, the authors recommend what they consider to be sensible regulations for the industry.

I think regulations are important, but they need to be based on a clear picture of what is being regulated and the current situation. That’s where I differ with the authors. They suggest that the Wild Wild West of online lending is winding down, and the industry is stabilizing and moving forward. Rather than a maturing industry, I argue that we are on the verge of a bubble that is showing signs of bursting.

It’s almost impossible to write about online lending with hard facts. The lenders are not required to report on their volume or activity so it’s often anyone’s best guess about how many lenders there are, and how much money is being lent or advanced. Nor is there published data on default rates, delinquencies or loan losses, making it that much harder to know the full impact to the marketplace.

What we do know is that most of the activity in the space takes place issuing short term high interest cash advances or loans to small-business owners with the promise of funding in 24 – 48 hours. If you’re curious, enter small-business loan into a google search, and you will be welcomed with dozens of very appealing offers. The ads won’t tell you that the price tag is 50 – 200% APR.

While on one hand, it’s fantastic that these sources of capital are available quickly, the converse is that they often create intense cash flow pressure for the business owner once they take them. They are forced onto a treadmill of multiple renewals that eventually catches them in a debt trap that is very difficult to pull out of. In my loan brokerage, we regularly get phone calls from business owners who have fallen into this trap, and it’s too late to pull them out.

The rosy picture of a maturing online business lending industry doesn’t address what happens to these business owners now. We don’t know what happens as the lenders in the space start heading for trouble.

Just in the last few weeks we’ve seen signs of trouble in the industry. It has been reported that Dealstruck, a company that made a valiant effort to offer better pricing and more innovative products than the typical online player has ceased new originations. An announcement of a management shakeout was made at one of the largest players, CanCapital, as they dealt with higher than expected delinquencies.

We’re getting phone calls from customers of these lenders who are afraid that their lines are being shut down, and that they will have to close their doors. From their perspective, nothing is rosy.

Karen Mills, Senior Fellow at the Harvard Business School and former Administrator of the US Small Business Administration commented that, “There is no doubt that the rise of online lending to small businesses has promise, and for that reason it’s important we ensure responsible growth. Small businesses need a loan market that guarantees transparency and fairness, and one that reins in bad actors. As we’ve said in our paper, regulators and policy makers need to take action, but they must do so by striking the balance between effective, commonsense safeguards that empower borrowers to make informed decisions, while not creating burdensome oversight that would stifle innovation.”

Perhaps my perspective is biased. The urgency and despair in the voices of the small business owners who are caught in the debt trap of these short-term high interest loans is difficult to hear. Yes, innovation is great, but any rational business person will tell you that APR’s north of 50% are not sustainable.

As point of reference, occasionally my firm does broker on-line loan products, but it makes up a very small percentage of our overall portfolio, and we highly advise against it.