Of course, being single, Bayless can bear more financial risk, and she concedes that. Her more traditional investments are in no-load mutual funds -- primarily growth and technology stock funds -- in which someone else can do the driving. Bayless says, "I spend so much time on my business, I probably don't spend the time I should on my investments." Nevertheless, both halves of her portfolio have done well. "I've got a large enough nest egg that if something went wrong tomorrow, I would feel pretty secure for about four years. Right now the money is not enough to retire with, but if AnswerSoft succeeds, I'll be lying on the beach somewhere."
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Can an entrepreneur ever really set aside money before the company is thriving? Ask Pamela Barefoot. Nobody needs to remind her of the risks of investing your life savings in the business.
Nearly every weekend, Barefoot enjoys scouring deserted beaches in search of seashells. She uses the shells as decor in the baskets of crab dip and other specialty food items produced by Blue Crab Bay Co., the company she founded 10 years ago, and which she estimates accounts for 90% of her assets.
Barefoot, 44, has a small amount set aside in a savings account and would love to be able to put money into other investments. But right now Blue Crab Bay demands all her attention -- and funds. The company has 10 employees and expects 1995 revenues of about $800,000; it's one of the largest employers in Onancock, an out-of-the-way Virginia coastal town. So far, it's no rags-to-riches tale; on several occasions Barefoot has had to use her personal savings to rescue the company. She's well aware of the risks she's taking: "I took out this home-equity loan. My father died two years ago; I was left a little money, and I lent that to the company. My life savings, too. Everything I have is at stake. I wake up in the middle of the night and ask, 'What if this doesn't work?' And I have to go, 'Well, that's OK, I've learned a lot.' "
In recent months Barefoot's business has been looking healthier; sales are up more than 60% over last year on the strength of Blue Crab Bay's new Sting Ray Bloody Mary mix, and Barefoot thinks it's the breakout product she's been looking for. But it doesn't change her personal-finance picture. The company suddenly faces the problem of managing growth, and although the Sting Ray mix is helping Barefoot sleep better, the profit it's generating is going back into the business -- into an additional 800 square feet of warehouse space, a bigger shipping table (with a conveyor), and a computer network to improve order processing. "We want to be ready for growth, but I'm trying to be cautious," explains Barefoot. "We have a new line of credit and a loan that we haven't had to touch yet. We finally have some breathing room. I feel every move I make right now is critical."
* * *
Barefoot's drive to capitalize on the Sting Ray mix shows the extent to which personal investing for the entrepreneur is a catch-22. Michael Troy is caught too. He wants to preserve some savings, but if he doesn't invest in the business, he may be limiting its ability to grow. Although KnowledgePoint is profitable, with three products out and 50% average annual growth for the last three years, the company needs substantial equity funding, of $2 million to $3 million, to continue to grow. So Troy is talking to venture capitalists and to institutional investors to avoid having to use his personal funds. "The road to capital is much harder than I thought it would be," he says.
Troy's sport is white-water kayaking, and he sees many parallels between river running and business. "When you see a big drop ahead -- water flying up into the air -- you pull over and scout it. Then you lock yourself into the boat, and soon the rapids start. You hit a hole, you brace, sometimes you roll and you're under water, you come back up, then you hit another drop. When you make it through, there's a sense of exhilaration that you did it. Business also is a rush of excitement, followed by the calm water, then another rapid to go down."
That imagery also speaks volumes about why many company builders don't invest more actively outside their businesses. There's a thrill to business, and for most entrepreneurs (especially those who revel in their popular image as swashbuckling risk takers) investing in treasury bills and bond funds just doesn't quite cut it.
In the end, Michael Troy -- like most entrepreneurs -- is thinking of his business first. He knows his is a risky endeavor, and he's well aware that he needs a security fund on the side. For now, he's on a calm stretch of river, and he can take time to savor his accomplishments and scout for what's ahead. But he can't forget that he's on a wild ride that doesn't forgive anything less than total commitment.
* * *
Michael Troy
The careful adventurer
President: KnowledgePoint
Age: 45; married, with one child, age 9
Philosophy: Focuses on the business but tries to set some money aside, most of it in diversified, growth-oriented mutual funds
Investment adviser: A brother who is a stockbroker
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Maynard Howe
The superentrepreneur
Founder: Soundadvice for Sports
Age: 48; married, with one child, age 21
