Where Are You in Your Entrepreneurial Life Cycle?

Just as we experience spring, summer, fall and winter each year, there are a similar number of cycles for entrepreneurs. It’s extremely important to understand into which cycle you presently fit, because it determines how you approach growth, helps pinpoint your most comfortable financial options and makes evident your tolerance for risk.

So, what are those four cycles?

Here are some easy-to-remember names: Growers, Gliders, Speed-bumpers and Exiters.

Consider the case of John, a man in his early 60’s whose software company has coasted along for years. The business is growing steadily, although at a much slower pace than 20 years ago.

John’s financially set for life and wants to enjoy retirement by traveling with his wife and spending time with his grandchildren. Although there’s no immediate hurry, he’s looking to cash out from his company, which is now largely in the hands of his capable daughter.

As you might guess, John is an Exiter.

At a social function, John strikes up a conversation with a husband-and-wife team named Jason and Tara who run a fledgling software company of their own, although they aren’t direct competitors. Jason and Tara have just won a significant contract and their products are receiving good reviews, but they need capital to meet their demands.

These classic Growers ask John for advice, figuring (correctly) that he’s seen it all. So what does John tell them?

An aggressive businessman all his life, John essentially tells Jason and Tara to be bold – which is the only way to successfully get through each individual entrepreneurial cycle.


A Grower is the type of entrepreneur typically depicted in film, on television, in books and all other forms of media. These are the businesspeople looking to expand their operations, often rapidly. They generally have a healthy appetite for assuming risk and are loaded with self-confidence.

John tests Jason and Tara by asking them what they’d do if they received a $1 million gift. Would they invest all (or most) of that money directly into their business or would they hold on to it, essentially saving it for a rainy day?

John’s happy to hear that his newfound friends didn’t hesitate before saying they were confident in their business and figured that investing the money would go a long way toward solving their growth issues.

John tells them that since their business prospects are solid, there would be numerous financing options available for them ranging from the tried-and-true Small Business Administration (SBA) loan to the ancient practice of factoring to everything in between.

While John is speaking, his audience grows, enthralled by the wisdom he’s imparting. One of the listeners is a long-time friend named Mary whose small custom-framing chain of stores is stable and profitable. She is a Glider.


Mary tells the group that she’s reached a happy point where she’s making a solid amount of money, expects her business to remain sound and is loath to wreck a good thing.

John’s been somewhat of a mentor to Mary over the years, so he poses the same hypothetical $1 million gift question he just asked Jason and Tara.

That led Mary to waffle a bit. She first said she would place a significant chunk of that gift into mutual funds, happy with a smaller return, but still available to be used if need be. After more thought, she decided to place about 75 percent in her business because she realized she was already generating a higher return than what a mutual fund offered.

John approved, noting that keeping a business on an even keel is never a bad thing, especially for someone like Mary, who is beginning to consider retirement options. He also pointed out that since her business was doing well, there’d be no shortage of palatable financial options available if the need arose.

The conversation lurches in a different direction, however, when a frazzled-looking entrepreneur joins the discussion. That would be Derek, the founder of an online sporting goods store. Derek’s business was growing at a double-digit rate, but he overestimated his market and is now stuck with a warehouse full of unsold goods – not to mention his bank wants to pull its line of credit and is demanding repayment.

Derek, a textbook Speed-bumper, asks John what he should do.


John points out that a little rain falls on most people’s lives at some point and entrepreneurs aren’t immune.

Again, he brings up the hypothetical $1 million gift.

It doesn’t take long for Derek to gain clarity when he says that he would plunk most or the entire hypothetical $1 million gift into his business. While some non-entrepreneurs might consider that foolish, Derek realizes that for any business to succeed, it requires the stomach for at least some risk along with overriding confidence. By stepping back, he realizes that—missteps aside—his company and business model are viable and will need some fine tuning.

John cautions that challenges might lie ahead because some financial options will be closed to him. And the options that will be open may carry a greater risk (or interest rate) or even the possibility of surrendering some equity.

Having provided his sage advice to the others, the group of entrepreneurs questions John about his plans.


John replies that even the most-fervent entrepreneur will walk away at some point. The reason why doesn’t really matter.

The group then turns the table on John and asks him what he’d do with the hypothetical $1 million gift.

Not surprisingly, he says, he decides he’d invest half of it in mutual funds, but put the rest back into the business, noting that it would help his successor daughter.

John points out that succession planning is important, but too many businesses either overlook it or give it short shrift. After all, who wants to be thinking about the distant future when the thrill of running a business still looms?

He notes that eventually that day comes, however, and transitioning power is a delicate process, especially when you consider your legacy, not to mention tax concerns, heirs (whether or not they’re taking over the business) and dozens of other things that often aren’t considered.

John does say that the exiting process, which should be a joyful time, can become burdensome and require professional financial assistance.

With that, the group begins to break up, each having gained a bit of clarity in regards to their particular situation.


What have you learned from this hypothetical situation?

No matter what cycle they’re in, entrepreneurs are a fascinating breed; they represent much of what makes the American business world so great.

That said, entrepreneurs don’t know everything and tend to look at the big picture and forgo some of the fine details. That’s why they sometimes need outside help.

The key to providing that help is recognizing that no two businesses – and their financial situations – are alike and can’t be addressed with a rote game plan.

Early Financing Decisions Matter – A Lot

Take time to think two steps ahead.

Starting a business is an exciting time in anyone’s life. And often when we’re in those “early moments,” we make decisions that have unintended consequences in the future. This is particularly true when it comes to finance and partnership decisions – which are often extremely difficult to unwind.

It’s important to slow down and think ahead. You need to think through how you imagine your business evolving, how quickly, and what your ongoing capital requirements will be. And you need to make sure that you talk about long-term financing issues and possibilities with your partners to make sure that everyone is in sync.

Let me share three true stories to help illustrate the point.


Are You a Tortoise or a Hare Entrepreneur?

And why it matters.

Do you remember “The Tortoise and the Hare,” one of Aesop’s Fables, written by the ancient Greek storyteller and slave? In this seminal tale, an arrogant hare ridicules a slow-moving tortoise. The tortoise challenges the hare to a race, which is readily accepted. When the race begins, the hare jumps out to a huge lead, but over confidently decides to stop to rest and inadvertently falls asleep. He awakens to find the steadily moving tortoise has won the race.

What does this have to do with business? Plenty, it turns out.

It seems when it comes to entrepreneurs, there are two kinds – hares and tortoises.

Which kind are you? Read on to learn more.

Tortoise Entrepreneurs

As you might guess, tortoise entrepreneurs are more likely to be cautious and less likely to take risks. Their goal is to pursue gradual growth over a spread-out time span.

Debt financing tends to be the preferred form of financing for this kind of entrepreneur. That’s not necessarily a bad thing – debt financing is less risky than granting equity positions to investors and allows the entrepreneur to retain a greater degree of control over the business.

Entrepreneurs who want to go this route need to keep a few things in mind.

First off, keep your business books in pristine order. No lender wants to work with any business owners with suspect bookkeeping.

That also means paying attention to your personal credit, especially in the start-up phase. Your personal history will carry more weight with lenders because your personal finances will be viewed as a longer-term snapshot of your ability to keep money in check.

Meantime, create a path to bankability – the things a lender is most likely to peruse. That includes business profitability, credit history, collateral and cash flow. The more details you can provide, the better.

A couple other points:

  • Open a home equity line of credit to tap into cheap and easy money.
  • Review your debt regularly. What makes sense now might not in six months. Always look to structure loans for maximum flexibility.
  • Ask yourself if you really need the money. Loans aren’t always the solution to every problem.

Hare Entrepreneurs

There’s nothing wrong with thinking big – and hare entrepreneurs want to grow as big as possibly as quickly as they can.

More often than not, that means equity financing; that money could come from venture capitalists, angel investors, private equity or other outlets.

To line up that money will mean time spent on crafting management teams and business plans that appeal to those investors. That wooing process will become a part of your everyday business game plan because you’ll be answering to those new masters who have agreed to bankroll you.

That process isn’t for everyone, so hare entrepreneurs need to think carefully before choosing the equity path.


You might be able to tell that my preferred modus operandi is the tortoise entrepreneur.

While the media likes to focus on those companies that skyrocket out of nowhere, it isn’t reporting on all the companies that choose the fast growth path only to crash and burn.

Far more businesses succeed by moving slowly and steadily. Remember that many companies take years to mature; rare is the company that matures immediately and shows a healthy bottom line.

A 2015 American Express OPEN Small Business Growth Pulse survey of entrepreneurs with at least $250,000 in annual sales found that growth was a priority for 72 percent. Still, 63 percent of those surveyed said they preferred the slow, steady approach, while just 25 percent planned to be aggressive.

In wrapping things up, remember that there’s never just one path to success. Both the tortoise and hare approaches have positive and negative aspects, and your kind of business may dictate the path you take – tech companies might be a common example. Just be sure to weigh everything before making your decision.

Cutting Through The Fear of Publishing A First Book

You must believe that your content will help others.

Typically, when I sit down to write a column, I spend some time reflecting on my interactions with entrepreneurs over the past week, and I look for an experience that I think has a universal lesson that I can share.

Over the past few weeks, I have struggled to do this.  And the only logical explanation I have for lack of clarity is that I am immersed in the petrifying and exciting process of getting my first book into the market.  In about two months, The Growth Dilemma, will hit a bookshelf on a browser near you.

In today’s column, I have decided to share my emotional state as a first-time author.  I hope this will help others push through the process, and put ink to paper.

It’s been about a year and a half since I started working on the book, and as it gets closer to being released the pit in my stomach grows.  Will people care?  Will I break through the noise of the other 300 books published on Amazon every day?  Will readers like it and post good reviews?  How should we market it?  The decisions and the emotions go on and on.

I have helped launch dozens of new products over my life, and yet somehow a book is different.  There is nowhere to hide, this book represents me and what I believe in. Secondly, a book is different to building a website, as an example.  If you launch a website on a Monday, you can wake up on Tuesday and decide to change the font color from blue to green with the click of a button.  With a book, you can’t do that.

Over the weekend, I sat with a friend and explained my nervous state of mind.  He pushed me to calm myself down, and explain to him, in a few words what I hoped my readers would glean from The Growth Dilemma.

After a few rounds of back and forth, the description was clear.

I told him that one of the biggest and toughest decisions entrepreneurs struggle with is how to finance their businesses.  The Growth Dilemma is intended to help them challenge their assumptions about how they think through their financing decisions, and either find a new comfort zone or be comfortable with where they are.

My friend then asked me if I thought a book like this existed.  I told him that I did not.

He encouraged me to shake my nervous anxiety, and enjoy the excitement that I would help my readers.

My best advice to any aspiring author is to be confident in your purpose, and the rest of the pieces will fall into place.

Are You Managing Your Business Like Your Household Budget?

It might be time to expand your thinking.

At the end of one of my Growth Dilemma workshops last week, I asked the participants for feedback about what they had learned. One woman commented that she learned to “manage her business more like a business, and less like a household budget.”

What did she mean?

If you think about managing a household budget, you have to match your expenses with your income. And hopefully, there is something extra at the end of every month to save and splurge on something special. While the budget can create pressure and tension, the math and process is relatively simple.

Many entrepreneurs’ choose to manage their businesses like their household budgets. They spend as they can afford to, and are reluctant to consider or make any investments that don’t meet their monthly cash flow.

“If I can’t afford it, I can’t do it – or I have to wait until I can.”

This is one approach to managing and building a business. There is nothing wrong with it, and you can be successful. It is conservative and valid.

However, for many entrepreneurs’ there is a different approach. If there are specific investments that you want to make which you think will help you achieve your objectives faster, you can choose to raise equity or borrow money to make these investments faster.

Let’s take an example. Let’s say you have a business with a $1,000,000 of sales and $100,000 of profit that you take home as a salary.

If you think with an investment of $100,000 you grow your sales to $1,500,000 and your profit to $200,000.

If you follow the “If I can’t afford it, I can’t do it” approach, you will never make this investment.

If you choose to borrow the money through the SBA, you would have a monthly payment of approximately $1,100 a month for ten years.

If the investment fails miserably, you will lose approximately 13 percent of your income to debt service.

If the investment works, you will double your profits, and likely pay off your debt in about two years.

This is using leverage to grow your business.

Leverage doesn’t work in managing the household budget, but it does when building a business.

So how are you managing your growth plans?

What Prompts Change for You?

Sometimes a shock to your system brings clarity.

It’s not easy to sit down and write a column about entrepreneurship the night of an unspeakable national tragedy in Las Vegas. What could I possibly say that would be relevant or useful tonight?

All I can suggest and hope is that some entrepreneurs might be able to take the shock of the Las Vegas massacre and try to use the event to bring some positive changes to your life.

Entrepreneurship is an all-engrossing lifestyle. Despite all the books and philosophies that teach us work/life balance – the reality is that there is not much of it. We push forward at an incredible and intense pace, and the focus and discipline that is required to reach our goals can often bring us tumbling down.

Sometimes our systems need a shock, to make positive changes.

I wrote about this in 2013, when I found myself in the Emergency Room one day. I talked about some steps I took back then, to try to bring some balance to my life.

And sometimes despite all of our efforts, we can find ourselves out of rhythm again. Just two weeks ago when I sat down in synagogue to celebrate the Jewish New Year, I was shocked and saddened at myself to realize that I had not been there for one whole year. I was too busy traveling, building, and running the marathon of building my company. And as I sat and absorbed the “shock” of the moment I decided to make some changes the following week.

The truth of the matter is that there are things we can all do to “de-stress” our lives. Think carefully about what you spend most of your time on, and how you can either delegate it or make it more efficient. Invariably, there is almost a way to make changes; you just have to be willing to “shock yourself” out of your routine.

My trip to the Emergency Room a few years ago and my experience in synagogue this Jewish New Year were my shocks. That being said, events like Las Vegas this morning can have a similar impact if you think about it and want to make changes.

So how will you use this shock to improve your life?

That’s a Stretch

Let’s talk about your business stretch goals.

As you grow older, you’ll recognize the increasing value of stretching your body. And as you plan to grow your business, you also should be thinking about stretching – as in your goals.

While entrepreneurs are thought of as a freewheeling lot, that isn’t necessarily the case. Sure, there are some big-time risk takers out there, but there are just as many (if not more) business owners who are unsure of their future or are overly cautious.

Let’s start by defining a stretch goal.

Simply put, a stretch goal is a target that might be a bit beyond what’s considered a reasonable expectation. For example, if your business has grown by 5 percent annually and you expect steady growth, 8 percent might be a reasonable stretch.

Experience shows that often those stretch goals become achievable. Sometimes market conditions change. Other times, the value of a product or service that is slow to catch on is suddenly recognized. And often, entrepreneurs are unaware of the many funding options open to them; securing additional funding to bolster inventory, add a sales team, increase product development or multiple other needs may be the missing key to increased success.

Let’s try a brief exercise on stretch goals that looks two years ahead to 2019.

First, what are your stretch goals in terms of revenue and earnings before interest, tax, depreciation and amortization (EBITDA), as well as the numbers for the most recently completed financial year and projections for the current year?

As a reminder, remember that EBITDA measures a company’s operating performance without factoring in tax numbers, accounting issues and financial questions.

From there, describe three things that are hindering your business.

That might entail anything from a weak distribution system to the departure of key management members to a competitor introducing a better product or service to limited inventory. Theoretically, the number of hindrances is unlimited – these are just a handful of examples.

Now, what’s a ballpark figure for the amount of capital infusion you would need to accomplish your goals?

All this information, combined with questions used to judge risk tolerance, will enable a lending expert to pinpoint lending options that are best-suited for you.

Remember, the idea isn’t to push you out of your comfort zone. It’s more to show you that, from an outsider’s perspective, you have a chance to make real gains. And it’s about adding clarity to your business goals while removing doubts you may have harbored about your operations going forward.

To further assuage any doubts, “stretchers” can be classified into a few different categories.

Conservative stretchers may be happy with 5 percent annual growth, while moderate stretchers fall in the 5 to 15 percent range. So-called aggressive stretchers push for 15 to 25 percent annual growth, a rate that will have those entrepreneurs, by necessity, planning and investing ahead of the curve.

And for those striving to top 25 percent – let’s call them “rocket ship” stretchers — prepare for an exhilarating but potentially bumpy ride.

Has this given you the tools you need to clarify your realistic expectations?

Golf and entrepreneurs seem to go together, so think about this: If you’re on the green, you’ll never sink a putt if your shot doesn’t reach the hole. As long as you hit the ball hard enough, it may go past the hole, but at least there’s a chance it goes in.

Similarly, if you never stretch a bit, you may never reach that potential that may not be so far out of grasp.

How Should You Invest Your Next $1,000,000?

Take some chips and focus on testing.

In workshops that I do across the country, I ask participants what they would do with their next $1,000,000 – and how they would split investing it between their business and a mutual fund of their choice.

It’s an important question – because while it’s tempting as entrepreneurs to go “all in” in our businesses, it’s always wise and prudent if you can to take some chips and move them to the side. Trees don’t grow to the sky forever, and despite our businesses being our babies, it is smart to diversify some of the risks.

It’s also important to take the question one level deeper. Let’s say you were to decide to invest $800,000 into your business, and $200,000 into your mutual fund – what should you do with your $800,000?

If you are lucky to have a formula in your business that you know you can make money with, it’s tempting to pour your money into the model, with the hope and intent to “do more of that.”

Putting all your money into “what is working” is also short-term thinking. It’s wise to take some of the chips that you will put into your business, and experiment with speculative and new ideas that will hopefully diversify the model.

Do you have one sales channel that works the best? Do you have one customer that makes up the majority of your sales? Is there one product that is your home run.

We work hard as entrepreneur’s to get to these points. And then when we’re finally there and are making money, we want to keep doing it, and at the same time should be worried about concentration risk. So we need to take some time and money to try new things.

So what would you do with your next $1,000,000? My first suggestion is to take some money and put it on the side and put a good chunk of it in your business. But then go one step further – use the bulk of your money that you are going to put into your business and put it into what is working, and use some of it to try new and experimental ideas.

Is a Family Business or Partnership Right for You?

Here are some tools to help think it through.

What does Harper Lee’s classic novel “To Kill a Mockingbird,” which was turned into an equally stellar film, have to do with business?

It gave us this quote: “You can choose your friends, but you sho’ can’t choose your family.”

And while relatives are the banes of existence for some people, that doesn’t stop many entrepreneurs from starting family-owned businesses–or entering into partnerships with close friends, who can be just as frustrating as relatives.

In my loan advisory firm, we frequently get phone calls about partnerships that have gone awry.

Let’s look at the pros and cons of a business with principals having close ties.

On the plus side, loyalty should be strong and the goals are likely to be similar.

As chron.com noted, “Having a certain level of intimacy among the owners of a business can help bring about familiarity with the company and having family members around provides a built-in support system that should ensure teamwork and solidarity. Other benefits of a family business include long-term stability, trust, loyalty and shared values.”

Don’t forget stability: Family members are far more likely to be there in the long run than outsiders who might bolt the first time a better opportunity presents itself.

In addition, family members are more likely to be flexible. Need to take your child to the doctor or soccer practice? Want to take a long weekend on your anniversary?

Family members are probably going to be more understanding than strangers.

It should be noted that family-owned businesses seem to enjoy extra cachet among customers; the personal touch appeals to customers, suppliers, and circles of influence.

And a family-run business tends to have lower starting costs because participants may well work for free or for little compensation until things get up and running.

Moving to the negative side, just because someone is a relative doesn’t mean they are right for the company. And because they’re family, it will be that much harder to remove them from the job if they prove to be inadequate. Balancing business needs with personal relationships can be tricky.

Meantime, sibling rivalries may rear their ugly heads. And differences regarding succession–what happens when the next generation has radically different ideas or simply isn’t interested in the business –may also wreak havoc both in the business and in your personal life.

Because everyone’s related (or at least the key members are), the corporate structure may well be lacking, which can lead to regulatory issues and poor professionalism. Employees who aren’t part of the family may feel resentful and neglected, especially when nepotism is obvious.

Also consider that a family business may lack proper perspective and alternative viewpoints. If everyone has similar life experiences, they’re also likely to have the same blind spots. Group thinking in this case won’t be helpful.

That leads to this question: What can be done to prevent problems and reduce the risk–there’s no way to completely eliminate it–family businesses and close partnerships pose?

Consider the previously discussed risk tolerance post.

Have each potential partner take the test, then compare answers. This will give you a compatibility gauge in terms of business philosophy.

If you score as “risk flexible,” but brother Tom is “risk neutral” and cousin Joe is “risk averse,” you’re going to clash. Conversely, if your scores are similar, you might expect reasonable good compatibility, which bodes well for your working relationships.

In addition, all partners might want to sit down and write out their stretch goals for the business three years from now, and then compare notes. Granted, it’s a bit premature if your business isn’t underway, but your answers provide another information point for comparing business philosophy.

Plenty of family-owned businesses exist in the world today, and there’s no inherent reason to dismiss the idea out of hand. That said, compatibility may well be the ultimate deciding factor in success, so be sure to consider working relationships before moving forward.

There are pros and cons to staying in a family-run or partner business. Pros: loyalty, trust, stability, familiarity. Cons: incompatibility, old sibling rivalries, divergent goals, dissimilar risk-tolerance levels.

How do you and your partners calibrate?