* * *
With this much capital, we'll figure things out.
If you're trying to build a business, you certainly don't want to have to worry all the time about where the next dollar is coming from. Explaining to landlords, the phone company, your suppliers, and other creditors why you can't pay them this month is no fun -- and saps energy from other pursuits. But whether you realize it or not, too much money can be a different kind of curse. Unless you guard against its effects, it will tempt you to approach problems in ways that don't necessarily provide value to your customer. You'll hire people you don't need. You'll lose touch with what the market wants. Bit by bit, you'll weave inefficiencies into your business that will be difficult to get rid of.
* * *
I was sick to death of bureaucracy.
That's why I started this company.
Flat organizations are swell. Evidence abounds that too much structure and needless hierarchy can harm market-driven organizations and turn self-starters into dispirited clock punchers. But to pretend that companies can go on forever without setting up channels for making decisions and resolving problems is, in a word, nave. Once you have more than a handful of employees, people will begin looking for direction. So will customers. If the buck keeps floating around with nowhere to stop, the business will suffer.
* * *
We're so small, everybody knows what I think.
This may sound corny, but in small companies "vision" counts for a lot. It can be the ingredient that differentiates two seemingly similar companies -- and enables one of them to thrive while the other one sputters. If you don't want people to work at cross-purposes, you need to go out of your way to make sure they all understand what the goals are and how you aim to achieve them. Just as top-notch salespeople have to be able to pitch their products clearly and succinctly, CEOs should be able to spell out their objectives to their employees. Some people, like John Freyhof of the Enterprise Corp. of Pittsburgh, recommend developing a crisp three-sentence version that sums things up for employees, suppliers, even bankers. "If you can't be clear about what you're trying to do," Freyhof says, "it undermines people's confidence that you really know."
* * *
Me, sell equity? No sir, I don't want to give away control.
We've heard plenty of company owners sounding off about how crazy it is to sell equity to "vulture capitalists" when they can fund their young businesses "just as well" with debt and keep 100% ownership. The assumption is that the company will grow and that paying off the loans out of cash flow will be a breeze. But in their calculations, they usually gloss over the fact that -- especially in the wake of the problems that banks have experienced in the past few years -- debt and equity are two very different things. "The bank isn't your partner, it's your lender," says Steven Roth, chairman of CR Management Associates, a Lexington, Mass., turnaround firm. When a bank gives you money -- as opposed to when an investor does -- you promise to pay it back. If you can't, you may lose your house, your car, and almost everything you own. Late one night, you realize you might have fared better with an equity partner (which, in your weakened state, may no longer be an option).
* * *
Afraid of me? People tell me what they think all day long.
Every week hundreds of people start businesses to free themselves from the restrictions of the corporate environment. But in going off on their own, they soon find themselves in their own bubble -- too isolated for their own good. Open-door policies notwithstanding, it's easy to send signals to employees that you really don't want to hear opposing views. The result is that CEOs frequently have no one they can talk to. If you feel you don't have people inside who can help you focus on the gritty problems of building a business (and face it, there are some issues that you may not want to discuss with your employees or managers), then it's critical that you find some trusted advisers somewhere else. If you're like other entrepreneurs we know, your first impulse may be to turn to your accountant or lawyer. But many CEOs find that the most valuable input they get comes not from those kinds of professionals but from other CEOs who have grappled with the same messy issues somewhere else.
* * *
It's a big family. There's my brother, my two cousins. Oh, and I almost forgot Aunt Ida.
Don't get us wrong. Family businesses have many virtues. But unless you're prepared to run a family business like a business, you're asking for trouble. (Turnaround expert Dave Ferrari of Argus Management Corp., in Natick, Mass., even has a name for it, derived from restructuring dozens of family-owned companies: "Too many people named Jones.") The most successful family businesses are those that hold members of the family to the same performance standards they'd hold any employee to. They accept that some people are well suited for the business -- and others aren't. If you're not specific about the expectations and responsibilities of family members and you can't stomach making the painful choices, be prepared. In almost every language, there's an expression for what can happen: "From shirt-sleeves back to shirt-sleeves in three generations."
