Linking yourself to your business, emotionally or financially, is fraught with danger.
Start-ups usually require a motivated, dynamic entrepreneur to create a successful, sustainable business. But once a business exists and is growing, it's often more useful to take the entrepreneurial personality out of the business.
Of course, a growing business needs a strong CEO, and often the entrepreneur can successfully transition to a CEO of a growing business. Start-up entrepreneurs, however, are typically emotionally driven visionaries, which may become detrimental to the health of a larger, growing business.
Once a business is sustainable and growing, the CEO and the management team need to take an objective, investment-oriented view of the business. Personal ambitions can get in the way of that. For many entrepreneurial-minded individuals, bigger is always better. But what if the business is more profitable and more successful as a smaller company? It's important to separate the analysis of the business from the needs of the individual.
As an entrepreneur, there are two things you can do to separate yourself from your business as it grows:
1. Don't tie your own ego to the success of the business.
Many entrepreneurs start out by building a business for themselves. They have a personal, emotional need to build a bigger personal fortune. In some cases, this can lead a company to grow at a pace it can't comfortably support. The individual entrepreneur may have an ambition to buy a plane and build a yacht, while the business is best positioned to grow modestly. Fill your emotional needs by stepping away from the business and looking for other businesses to create, rather than risking the health of your current business.
2. Don't tie your personal balance sheet to the success of the business.
Many entrepreneurs fail financially because they don't insulate their personal finances from those of the business. If you are building a bigger house or a personal lifestyle that you can't afford, you may be putting a strain on your business. These choices may bias you toward loading up your balance sheet with large amounts of debt. As a start-up entrepreneur, tying your own finances to the business is often unavoidable, but a profitably growing company gives the CEO more options. Build a conservative personal balance sheet that is able to withstand a doomsday business scenario.
Skilled entrepreneurs are wired to build businesses with their hearts and minds. But once a business gets off the ground, cooler heads should prevail. Separating yourself from the business will, in the end, make your business more successful.
KARL STARK AND BILL STEWART are managing directors and co-founders of Avondale, a strategic advisory firm focused on growing companies. Avondale, based in Chicago, is a high-growth company itself and is a two-time Inc. 500 honoree. @karlstark