The Myth of the Fast Buck
We all hope that it happens to us. We hope one day we'll open the newspaper and read about how our company was sold at a fantastic price to Big Shot Corp. It is the dream of many an entrepreneur, and it is woven in the fabric of the country. It is what makes the United States different from all the other democracies in the world. Only in America do companies get built and sold for fortunes in short periods of time. And only here do we publicize and make it known when somebody wins the entrepreneur's lottery.
In most of the world, companies are built and, if successful, they are passed on from generation to generation. Here in the United States we have a history of being able to build companies that we can sell. Our thoughts about entrepreneurship are shaped by all of the stories we hear about people who started businesses and then made themselves a fortune, from Martha Stewart to Donald Trump. Late night TV and bookstores are inundated with get rich quick ideas about how anyone can make a fortune quickly. We all want the American dream, but now we want it as fast as possible, too.
One of the surest ways to wealth is to become an entrepreneur. However if you are going to become a business owner, there are three realities you'd better understand before you get carried away with the dream.
- There is no fast buck. I had the good fortune of interviewing dozens of successful entrepreneurs for Start It, Sell It & Make a Mint (John Wiley & Sons, June 2004) and could not find one example of a person who achieved wealth in less than five years. While some business owners built big companies they sold for a mint, more typical were entrepreneurs who worked hard to build businesses that paid them modest incomes but never created the big pay day. Even those that sold for a real value took many years to build.
- There is no easy buck. All entrepreneurs shared nightmares about running out of money, having a competitor get the best of them or simply finding themselves with a product that was no longer desired by the market. All successful entrepreneurs have had the "oh-my-gosh" moment waking up at three in the morning with sweaty palms wondering how they would make payroll or questioning their own sanity. Being a business owner is a test of your endurance — it's lonely, it's scary, and it's exhilarating all at the same time. Most of all it will test your creativity and your staying power.
- Sometimes there's no buck at all. For some business owners, all the work and endurance in the world simply never creates the opportunity to sell. Perhaps they are in a business sector that is deteriorating, or they simply could never leverage themselves well enough to create a viable company, but it is important to know that over half of all the businesses that start up in this country (that's around one million companies a year according to the Small Business Administration) fail within the first two years due to poor financing, inept sales ability, or a lack of basic entrepreneurial skills. The odds might be better than a lottery, but so is the commitment!
I had the good luck of building a company that was sold to General Electric's GE Financial for what most would consider a small fortune. Certainly any passing acquaintance would have thought I had hit the jackpot. After all we built and sold the company in less than ten years. But while my partners and I made millions of dollars for ourselves and our investors, what most people didn't see were the crisis moments during the decad: those times when we weren't sure if we'd make it. Personally, I'd wake up at 2:30 am with my heart racing and in a panic, night after night, for weeks on end. I know that my partners were doing the same.
During the dozens of interviews I conducted with entrepreneurs who had successfully built large and thriving independent businesses, including those I conducted with people who had sold their companies, I learned that one thing was common: while everyone felt incredibly lucky, none of them achieved easy or fast success. Every single one of them had suffered through moments of immense crisis and years of work before they were lucky enough to win the entrepreneur's lottery.
Building a sellable business is one of the surest ways to capture the American dream. But making the "fast" buck will require having the right mindset and doing some good old fashioned hard work. And, of course, a little luck doesn't hurt.
With excerpts from "Start it Sell it & Make a Mint" ©John Wiley & Sons June, 2004.
Copyright © 2004, Joe John Duran CFA
