Reality vs. theory in a high-growth, bootstrapping business

One of the real lessons of getting older is seeing more and more of my idealistic proclamations of youth blown out of the water.  These are things like:

• I will never work for a large, multinational oil corporation (I wasn't an employee, I was a consultant - does that count?)
• I will never feed my kids sugar until they are 10 years old (HAH!  Any parent is laughing aloud at this one, as no two-year old in their right mind would ever behave without some forbidden bribes)
• I will never buy my clothes at Target or Walmart. (The slightly humiliating fashion truth as you get older, maternal and suburban is that the whole secret to temper-tantrum free excursions is minimizing multiple stops to the store.  So if you can buy a case of toilet paper, thank you cards, shoes and refried beans in one place, you do it, fashion rules be damned)
  
• I will never allow myself to get in a tight financial situation in my business (which is said in a cocky manner when business is good and the economy is cooperating)

All fits into what my college professor Jeff Unsicker explained to us fresh-faced 19-year olds when we were about to go on our six month "world study" assignments in rural Mexico, Nepal and China:

"Before you go out in the field, you study economic models and theories and create a nice picture of what reality will be as you go into your village stays to work on your projects.  This reality is represented by something like this," he said, drawing a clean and straight line on the whiteboard:

   "However," he continued, "Once you actually get on the ground, you will find that no theory plays out exactly as it does in textbooks, and each situation is different.  The reality is more like this," he said, taking his marker and scribbling without abandon:

I have never received truer or better advice.  It was worth the $50,000 I spent on my liberal arts education just for that nugget of wisdom.

This is exactly what happens when you move from an idealized view of your new business into the actual, practical reality.

And I have found it to be true, once again, as I work side by side with my husband in his rapidly expanding construction business.  True to our plan, we have done a number of things this year to grow and expand his business:

• Get certified with multiple agencies as a minority-owned business (my husband is Native American, and getting certifications can open some doors to large government contracts).
• Network with large local and national general contractors who are working on large-scale transportation projects (he has hit the street and met with many, many new companies, who are beginning to call with new projects)
• Buy more heavy equipment
• Hire more employees so my husband can work full-time "on" his business, as opposed to "in" his business (following Michael Gerber's mantra in all the "E-Myth" books)
• Double the business each year from 2005-2007

The nice thing is that we have accomplished everything on the list.  But the unanticipated side of this plan is the general slowdown in the housing and construction markets coupled with the added bureaucracy of working with larger organizations. These conditions have had the following impacts on our idealized plans:

• Sudden shutting down of long-term projects with little or no notice (one day you think you have work for 6 months, the next day, the project is totally shut down).
• Cash flow problems that trickle from developers to general contractors to subcontractors.  Invoices that are usually paid in two weeks are paid in two months which has HUGE impacts on the credit requirements to fund ongoing operations.
• Large government projects start very quickly and require a big upfront investment in employee payroll and equipment rental.  But payment for these projects can range from 6-8 weeks, which requires the big cash and credit cushion, referenced above.
• A ten-fold increase in "paperwork" requirements to be qualified to work with a number of large companies, and to ensure that all proper bonding, insurance and financial obligations are met.  Each new client or governing body seems to request information in a whole new way, requiring a cadre of very patient and talented resources to help with the mountain of paperwork (thank you Suzanne and Laura for saving our skin multiple times this year!  I will never forget your kindness and support through this time!)

And to add to the mix, I decided to have a baby in the middle of all this and to stop working on my business for awhile to have some "downtime."  Hah!  That has been a big joke, since I have had to pinch-hit non-stop in my husband's business.  The first day I was back from the hospital, I spent most of the day on the phone and in front of the fax machine, since by some quirk 5 new projects started that same week.  When I tried to explain that I was slightly delayed in completing things since "I just had a baby 3 days ago," some people understood, and others were just annoyed that we were late in filling out required paperwork.  So much for idealistic, quiet bonding time with the new baby!

Why do I share all this with you?

Perhaps I am milking you for a bit of sympathy.  Forgive me.

But the larger, more interesting reason is that it is truly astounding how much there is to learn about running a business, even after having done so for years. If you would have told me a couple of months ago that I would be running around scrambling for financing for this period of unprecedented growth in my husband's business, I would not have believed you.  Our "plans" were to keep things on an even keel, working on the scheduled projects that we had in the pipeline, developing infrastructure and spending time with our new baby.  But the reality is much different. 

A couple of months ago, almost all our work dried up.  After some moments of intense panic, my husband got busy "shaking trees," as we call it (our humorous term for networking and meeting with new people, alluding to a windfall of cash from the "money trees"), and created the base for the current flood of new work.

And I was wrapped up in finishing things in my own business before the baby came, so I missed some opportunities to be better prepared for the influx of new work. 

So for any of you who have either been in business for a few years and are ramping up for growth, or for newbie entrepreneurs who think you have things all figured out in your neatly tied up plans, I offer this advice:

• Always have a contingency plan.  As a consultant in Silicon Valley in the years before, during and after the dot.com crash, I learned a lot about the perils of tying your business to one booming industry, and the limits of optimism and "out of the box thinking" as a business strategy.  If things seem too good to be true, believe it -- and have a back-up plan for your business in the case that your "sure thing" implodes. (Obviously, there was more for me to learn as our local housing and construction industry went through changes and I didn't anticipate enough of the impacts.  As they say, lessons you need to learn will be repeated until you learn them.)
• Explore and get access to as much business credit as you can before you need it. As much as you plan, there are always unanticipated expenses, changes in work plans and work schedules.  Be prepared before you need it, as it will be easier to secure financing when you are in a strong and stable financial position.
  
• Manage your expenses conservatively.  This is a lesson I feel doomed to repeat for the rest of my life.  When it comes to careful budgeting and reigning in expenses, I am very lazy.  I can't decide if it is a tremendous learning opportunity or a character flaw.  You will put yourself through unnecessary stress if you live beyond your means.  And you limit your opportunity to grow your business if you are overextended financially.  I think I need to spend a few hours with my head bowed in shame in front of my young friend Ramit to shake me into action in this area. 
• Think through all the implications of growth. A naive view of business is often "if it is growing, it is good."  Sometimes, fast growth has very negative repercussions like cash flow crunches, employee management headaches and the disappearance of work/life balance.  So before you sign up for double digit growth, make sure you envision what your life will be like as an entrepreneur managing that business.  You DO NOT have to create a multi-million dollar business to consider yourself a successful entrepreneur.
• If you can't see yourself as a superhero bounding through challenges, maybe you signed up for the wrong adventure.  It is hard to explain how terrifying it is to go through intense market shifts, payroll panic and new challenges every day as an entrepreneur.  If you don't have a dose of insanity, and a delusional sense of yourself as the Matt Damon character from the Bourne Identity movies, you will have a stroke from the stress.  Truly.  You have to have some fun on the journey, and see your race to market, or stable cash flow, or fame and fortune as one of those nail-biting scenes where the hero diffuses the ticking bomb just before the city is blown to bits.
• Don't underestimate the power of faith and optimism.  While all the financial basics I mentioned above are critical, belief in yourself and the greater good in the universe is essential to get through tough times.  On a practical level, you come across as a confident and positive business partner as you are wooing new clients and financial institutions.  And on a metaphysical level, why not call upon all the good, magical, miraculous energy in the universe to help make things happen?  On many occasions, I have witnessed unanticipated "miracles" manifested in the form of money coming out of nowhere, the right friends showing up at the right time, and new business opportunities coming from unexpected places.  One thing is sure ... worrying all the time will do nothing to move your business forward.

So for now, I say "bring it on!"  Growth can be terrifying, but it is good.