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.
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.
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.