In my opinion, building a business is the ultimate expression of one's creativity. It is an honorable, rewarding, and worthwhile pursuit that requires one's full investment of mental, physical, and emotional capacity. Many of the most successful entrepreneurs admit that they did not start their business primarily to get rich or make piles of money, but rather, to solve a problem or inefficiency that drove them to sleepless nights until they took action.

However, it is important in my opinion, that for the sacrifices you and your family are making to employ others and provide value in the marketplace that you end up as rich as possible in the end.

Below are the tough financial lessons learned over the last 17 years starting and exiting, starting and failing, investing and exiting, investing and failing, and a few rules of thumb to make sure that you don't end up tired and broke at the end of your entrepreneurial run.

Hold on to equity

Nobody has ever gotten rich on a salary, but everyone in the 1% has gotten rich on equity. As the entrepreneur, investor, founder, etc. the key balance to strike is between how to grow the pie as large as possible while being able to participate in the future rounds (via options or continued investment) to offset your dilution in the winners.

Pursue the money in ideas

You are going to be earning a fair market salary for your talent doing something regardless of whether you own the company that pays it. Too many young entrepreneurs fail to understand the dynamic three-pronged law of compensation. It is made up of these three tenants:

  1. The need for your solution (how big or small is the need)
  2. Your ability to fill that need in comparison to other competitors
  3. Your replace-ability (how easy or difficult will it be to avoid doing business with you in the future?)

You will trade your life (which you only get one of) for something. In business make sure that you trade it for the highest potential ROI with the most reasonable likelihood to last market shifts and trends.

The eggs should be diversified but don't disturb the chicken

It takes business maturity to really focus and keep distractions at bay. At the same time many early stage entrepreneurs have multiple things in play. How do you reconcile this paradox? Easy. Realize that the most important thing to develop is a core business "cash machine" (i.e. a chicken that lays eggs). Never disturb, harm, or neglect this chicken and learn to diversify the eggs into a mix of uses such as near term cash and asset purchases (eat them), medium term experiments (incubate and invest in new ideas/R&D) and longer term succession (nurture them through gestation to produce new chickens to lay eggs in the future).

Opportunity cost is the most costly

As stated earlier you only get one life, one mind, and one body. The most costly expense in your entrepreneurial career is opportunity cost. This is the cost of what you are not able to invest time, energy, and money into because those resources are deployed in prior decisions. When analyzing your business or a new idea, start by realizing that everything good takes your full effort and a minimum of 3-7 years to harvest. As you get into your second and third decade of this game you begin to realize you only get so many turns at the wheel. Make each one count and assess the opportunity cost before you engage.

Have someone you trust be very boring with your windfalls

If you are fortunate enough to have success, build enterprise value in your businesses and generate liquidity events that exceed your personal financial needs at present, make sure that you look into boring and predictable 5%-a-year-type low risk investments.

Look into things like Jumbo-Roth look-a-likes as an example. Buy term insurance to cover your gap while the cash values build in your whole life policies in the event of an untimely end. Get with an RIA (Registered Investment Advisor) as your fiduciary and build a plan for when you are successful. There are even new experimental financial fitness clubs like The Financial Gym popping up in places like New York City to build and hold you accountable to a financial fitness regimen.

Keep the drama out of your investment strategy. You are already swinging for home-run balls daily in your enterprise. Have a single-bunt-single strategy when you are putting your money at work for you outside of it.

Play with house money on your empire building

Quantify your dream life and what it actually costs by adding up the total monthly and aggregate nut of your ideal home, annual vacations, cars, savings, etc, and your ideal monthly income after taxes for the rest of your life. Then make that your minimum break even.

When you sell your first business don't buy anything crazy for yourself until you have pre-funded and own all that stuff. Then, whatever is left over you can put back on the table to start your next entrepreneurial adventure. Once you have been successful, you also have a real value to other people's money and should leverage your track record to capitalize with less and less of your own dough.

My last few nuggets of advice

-Don't marry the wrong person (divorce kills net worth). This life ain't for the faint of heart.

-Realize your greatest strengths can at times be your greatest liabilities.

-Hire a great tax team and stay abreast to how you can minimize your liability,

-Have fun.