I just met a dynamic company with a big future, perhaps like your company. The CEO, Max, addressed a market pain with such a high performance solution that he had been able to gain acceptance by a number of Fortune 500 customers and attract an impressive Board of Advisors.
Sounds like a dream situation—but it was not. Max was operating from assumptions about money that were holding him back.
Max had given up 40% ownership in exchange for several rounds of funding from family and friends that had contributed $4 million but only resulted in $750,000 in revenue after 3 years of operation. Was lack of cash the problem, or a symptom? I explained to Max he could not continue to raise money like this or he would not have enough ownership left to attract the deep pocket investors appropriate for his global rollout, much less to earn an entrepreneurial return on his own investment of sweat and equity.
Max was misusing his entrepreneurial genius: anyone that can raise $4 million can sell! But Max was giving up equity without achieving value escalation; he was not applying that powerful entrepreneurial talent to building his business. Unfortunately it happens all too often: Max is an industry expert but Max was not yet schooled as a business builder. No one ever told Max how to capitalize on the power of his entrepreneurship to get cash and keep control.
Max, like too many entrepreneurs, was blind to the value he was creating for clients, vendors and even investors so each time he needed cash he begged for it. He had no other way to think about his situation in the context of his world view—until I challenged his core assumptions about resources being scare, expensive, and his company was not worthy of hard cash.
By the end of the conversation, Max had opened himself up to a new way of thinking about the value he was creating. “I’m really inspired- I never thought of my own entrepreneurial solutions as the scarce resources and cash and as the commodity”. Max was excited, but a bit afraid to believe my “fairy god mother” promise of financial self-sufficiency. Until the next day when Max called me to say he just got $400,000 and it cost him nothing. Something before our conversation he did not believe was possible.
A favorite client had called to place a new order. Normally Max would have apologetically asked for 30 day terms, knowing this big company would not actually pay for 60-90 days. Instead, this time Max, applied his mind shift of entrepreneurial power and asked his customer what the customer could do to help alleviate Max’s cash flow pressures. Without a pause, the client offered to pay 100% of his order in advance- $400,000. After picking himself up off the floor to accept the offer, Max made a call to thank me for his new mind shift about the value he had to sell.
Max had seen the future of financial self-sufficiency and he liked it better than his past view of financial scarcity.
When you don’t understand your entrepreneurial power, you will give it away. That’s how you lose control, lose capital appreciation and lose the entrepreneurial return you deserve. For Max, it was not a lack of cash, but Max’s own limiting perception of the value he was creating that was holding his company back. What about you? Are you undervaluing the value you create?
Stefania Aulicino is founder and president of CapitalLinkUSA which in 2008 celebrates 20 years of helping business owners to get cash and keep control so they can take their company to its next level of profitable growth, faster, safer than they ever thought possible.
