Monday, June 27, 2016

The "Devil You Know" Principle

“Family love is messy, clinging, and of an annoying and repetitive pattern, like bad wallpaper.”
-PJ O’Rourke

In the last episode, I explained the importance of allowing your baby to leave the nest. This is an important thing to always keep in mind, because many entrepreneurs have a hard time “letting go”. There are many of us who don’t have this problem, but who also have a hard time “letting go” in a different way. I’m talking about you, as the entrepreneur, allowing yourself to leave the nest.

I know it’s extremely tempting to keep family and friends as close as possible to assist you in launching your business. After all, better the devil you know than one you don’t, right?

Unfortunately, when it comes to business, almost all great entrepreneurs will tell you the same thing: don’t go into business with friends and family. There are many reasons for this old adage.

From my personal experience, I know how complicated this can be. I made the mistake once of going into business with my fiancée. I thought that, since marriage is for life, this would not be an issue. Boy, was I wrong. Our relationship quickly deteriorated, and not because of the business, but because of other issues that are not relevant here. Suffice it to say, when the writing was on the wall and time came to decide how we were going to handle running the business together, it became a very delicate situation. Ultimately, I decided to cut my losses and move on; I left the business to her, but I kept many of the debts.  So, if my story is not enough to detract you from doing the same mistake, consider this:

First, like with going into business because you like the product more than you like money (see my first post), running a business with family can blind you to issues with your friend or family member’s performance. It is very easy to look the other way when a minor transgression occurs, when performance is lacking, or when the person is just a screw-up. Don’t fool yourself into thinking that because the person is a good employee somewhere else, they will do well as your partner or employee; the sad fact is that many people are not cut out to be entrepreneurs, and behavior on the job will reflect this attitude.

Second, there is a risk of you having to discipline or worse, fire, your loved one. This can cause a permanent rift between you and your loved one. Remember that, especially if you’re the person’s boss, they often expect you to give them special treatment. Think of all the times you’ve seen, in person or on TV, someone say, “my brother owns this place. Get out!”, or, “my father owns this hotel chain. Go screw yourself.”

This can leave a very bad stain on your business’s reputation with customers or the public in general. And although I usually say there’s no such thing as bad publicity (there’ll be a future post detailing this), this is one of the exceptions. You do not want to be known as the business owner who hires family members that abuse customers or other employees.

Furthermore, if you decide to discipline or terminate the business relationship with this person, they may take it as a personal assault. The person may become vindictive, destructive to your business, or worse. Don’t ever underestimate how someone you love and think you know would react if they feel you’ve betrayed them.

Third, there is the problem of money. Nothing can tear even the most tightly-knit family apart quicker than a fight over money. Money decisions, business decisions, and more, can become a point of contention if you own a larger share of the business than your loved one. Some people will also suspect that you are not being completely honest regarding the business finances, even if there is no skullduggery going on. Anything can set these beliefs off in a person, whether it’s a dream, advice from another friend, or a book or TV show the person sees.

So, if you haven’t gotten the point of this article yet, it’s don’t ever go into business with family or friends – the “Devil You Know Principle” works backwards in entrepreneurship. If you do decide to go into business with a friend or family member, plan ahead for these issues by: having an escape/action plan set; drawing up a contract for the partnership; discussing the possibility of a need to end the business relationship before you dive into the madness. And if after reading this you’re still not convinced it’s a bad idea to mix business and blood, watch “The Godfather” all the way to the end. Really, do it.

 If you have any comments, questions, or wanna hear the full story of what happened with my tanning salon, please leave a comment or email me at

Sunday, June 12, 2016

Avoiding Business Abortion

“O God! Can I not grasp
Them with a tighter clasp?”
                                -Edgar Allan Poe, A Dream Within a Dream

Let The Bird Leave the Nest

In keeping with the theme from last week, this week I wanted to discuss another important aspect of starting your own business. This one, however, may be even more controversial than last week's post because it will probably feel like I am attacking your family; particularly, I am about to attack your baby and it's not gonna feel good.

Being an entrepreneur myself, I know the pride that comes with starting your business or creating your product: seeing your logo on a sign, seeing reviews on social media, reading your awesome title on a business card out loud. Owner. President. It's as good a feeling as having your kid become POTUS.

BUT  I am about to take that business card and rip it into hundreds of little pieces right in front of your face. Well, not me but I'm gonna ask you to do it. Go ahead - try it.

How did that feel? I bet it was a devastating feeling. But as an entrepreneur, you're gonna need to get used to it, but not always for negative reasons. Let me explain.

My first business was a tanning salon. Yes, I actually sold sunshine in the Sunshine State. I planned for over a year, researching the industry, trends, viability in my market, competition, location, and much much more. I wrote a 65-page business plan, and I was very proud of that. Even the bank loan specialists were impressed with the plan and many asked for copies to keep, even after denying me a loan. I'll get into more details on that in another post, but there are two important points here. First, I opened the business with my fiancée at the time (again, a future post will focus on starting a business with friends and family). My second problem was actually related to the first: my fiancée felt all those giddy things I mentioned in the second paragraph above, and she wanted to avoid feeling what I mentioned in the third.

When the business grew to a point where I felt it was time to expand (i.e., a second location, franchising the brand, etc.) she did not want anyone else to have a controlling interest in the company. Not even 5%. And to avoid a lengthy discussion or fight, I went along with it.

Then, about a year later, our relationship came to an end. We had a brief discussion about the business, and I told her to keep it. Most of my family and friends believe that was a mistake. But, an entrepreneur needs to be able to see when a decision or product or service is going to create a hemorrhage that could prove to be his or her own personal extinction asteroid. I had cut my losses and moved on; I knew I could open another tanning salon if I wanted to, and eventually buy her out - but I never cared for the tanning business.

Had I tried to fight for a share of that business, I'd probably still be fighting for it ten years later, and only the lawyers would be making any money off of it. Thing is, I had planned for this (and many other crazy scenarios) in my business plan. I'd even planned for an often-missed "best case scenario" (in which the business grows too quickly to be sustainable). The tanning salon is still afloat, but it's not making my ex a millionaire by any means.

So, learn to kill that baby. I recommend giving away a precious possession or buying a graphics tablet like the Buddha, Adesso, or Crayola, then write or draw something amazing every day or every week, and wipe it clean (or let it clear itself). You can even get a dry-erase board and do this on a budget. If you get a sweetheart deal from a "White Knight" investor like those on TV, weigh the options objectively and do it. It's usually for the best.