From the moment you decide to start a business you are signing up for adversity, problems, and challenges.  Many will tell you your idea is horrible.  Resilient entrepreneurs accept such criticism as proof of concept!  You will make many mistakes, but resilient entrepreneurs call that experience and improve themselves as a result.

So, is resilience just trying to shed a positive light on negative things?  Absolutely not.  It is much more than that.  My definition is that no matter how hard things get, no matter how dark the scenarios, not matter how painful the process, those that are resilient figure out how to overcome and thrive.  Entrepreneurship is really problem-solving on steroids, isn’t it?  Only it’s legal and arguably even more productive, in the short and certainly the long-term.

In looking through a few online resources, here are some words and phrases that many associate with resilience: rebounding, springing back, buoyant, returning to its original or better form, recovering readily from illness, depression, adversity, or the like.  Sounds like entrepreneurship to me.

The example I shared above has a happy ending.  That entrepreneur went on to build another successful business, and he continues to be an example of entrepreneurial resilience.  I’m not sure if you can teach it, but it sure is an admirable trait.

Feel free to share any examples of entrepreneurial resilience or your thoughts on resilience as a necessary attribute of all entrepreneurs.

In a recent training retreat I was reminded of this experience as well as the phrase that I kept playing over and over in my head to help me keep my cool while I was attacked: “Feedback is a gift!”  I honestly tried to appraise the situation and understand if there was some way I could learn and improve based on this feedback – the only way feedback can ever be a gift.  If you fail to try and learn and improve from it, then it will seldom add value to your life.

Once this man finished saying what he wanted to say, I communicated my surprise and I told him what I thought I might be able to do in the future to be better based on his feedback.  In fact, I swallowed my pride whole when I said: “Thank you for this feedback.”  My response completely dis-armed him and we finished with a healthy conversation wherein he admitted he was at fault and we resolved to move forward and make things better.

The point of the story is this: whether it is good or bad, feedback is a gift.  If the feedback is neutral or you receive no feedback at all, then you really don’t know where you stand and if you should be changing or improving something.  If you receive sincere positive feedback, then you will know you should do more of the same in the future.  If the feedback is negative, then you know what you should change in the future.  And, let it motivate you to make sure you never get that feedback again.

Either way, it is a gift of knowledge with which you can make the right decisions and take the right actions.  No feedback or insincere feedback (which, in my opinion, is the worst kind of feedback) is useless and should leave us wondering how we are actually doing.

When running a business, feedback should be the number one source of inputs you consider when crafting your strategic and tactical plan to build a successful enterprise.  You will take in qualitative feedback from conversations with and surveys of customers, employees, contractors, suppliers, and vendors.  You need to process quantitative feedback in the form of monthly financial statements, budget vs. actual analysis, daily and weekly dashboards, cash flow projections, and so much more.  Not receiving this information, whether good or bad, is crippling – you have no idea if you are doing well or n0t.

In my experience, the best entrepreneurs and CEOs are those who recognize that feedback is a gift.  They become empowered with real and actionable information from all of the appropriate sources.

So, why don’t many people view feedback as a gift?  Because it is painful.  It is making yourself vulnerable and exposing your weaknesses and strengths to others, and sometimes they will come at you with more negative than you think you can handle.  But if you truly consider feedback as the gift that it is, it will always work to your ultimate benefit.

Believe it or not, getting an MBA degree is a lot like building a tree house.  Let me explain.  Two brothers, while in their childhood, spent an entire summer building a tree house in their backyard.  They experienced unforgettable feelings of joy and satisfaction when they finally were able to enjoy the fruit of their work.  The two brothers climbed into their finished masterpiece, and, after a few minutes, climbed down from the tree – and never returned.  The completed project, as wonderful as it was, could not hold their interest for even one day.  In other words, the process of planning, gathering, building, and working – not the completed project – provided the enduring satisfaction and pleasure they had experienced (Thomas S. Monson, “In Search of Treasure”, Ensign, May, 2003).

Tonight, at the conclusion of the MBA summer of our lives, we have completed what we set out to accomplish – graduation.  Interestingly, we will all climb onto this stage for a few minutes and then leave – and most of us will never return to this scene again.  Our graduation will not hold our attention for much more than the duration of this ceremony.  It is not the piece of paper that brings our feelings of joy and satisfaction – it is the very process we endured to get here and the relationships we formed along the way.  The process, not the product, has helped us grow and develop.  Moreover, our growth and development have been directly correlated to what we have put into, or given, to the program.

For example, everyone who worked with Dr. Hofer on national business plan competitions would agree that we worked harder and put more into that class than any other MBA class or project.  And each of us agrees that we learned more and got more from that experience than any other in the program.  As a bonus, all four teams enjoyed recognition and success on a national level, a tribute to Dr. Hofer’s commitment.

And herein lies a true yet often overlooked principle – when we focus on giving, not only is our experience more meaningful, but also the getting will take care of itself!  If we give of ourselves to our respective organizations, the “getting” will come.  If we look for ways to serve and give to those we lead, we will be successful leaders.  This principle applies to our personal lives as well.  By striving to give to, not get from, our personal relationships, those relationships will be more fulfilling.

My father understood this concept while I was in my youth.  When our garage door needed replacement, my father saw an opportunity to spend quality time with his boys.  I called it free labor.  Even though our newly re-built garage door fell apart within days, my dad held firm to his decision: “I’m not building a garage door, I’m building men.”  Hopefully his “men” will last a little longer than his garage door!

The northwest entrance marquee of my undergraduate university reads: “Enter to learn, go forth to serve.”  That marquee stands as a poignant reminder that we should use our education to focus on giving, on serving.  Max De Pree, in his writings on servant leadership, made the same point when he wrote: “the first responsibility of a leader is to define reality.  The last is to say thank you.  In between, the leader is a servant.”  Whether in professional or personal environments, the person who focuses on giving, on serving first, will succeed in the long term.  President John F. Kennedy was really inviting the American people to focus on giving when he implored: “Ask not what your country can do for you, ask what you can do for your country.”

Ralph Waldo Emerson understood the need to give.  He penned: “What wouldst thou have from life?  Then pay the price, and take it.”  Whatever price you had to pay to be here tonight, you now take your degree, your education, your relationships, and your experiences with you.  While we each have our own unique ambitions for our lives, the formula to achieve those ambitions is the same – we need to pay the price of giving of ourselves to our organizations and our relationships in order to obtain our ambitions.  So I ask, What wouldst thou have from life?  Then pay the price of giving of yourself, and the getting will almost always come in greater portion than you hoped.  May God bless us to be successful in our various endeavors, and may those endeavors improve the world in which we live.  Thank you.

Then, when times get tough, they struggle to let people go because of this same sense of pride and responsibility.  These same entrepreneurs don’t hesitate to sell equipment, downsize their office, or cut other non-human expenses.  So why can’t they just look at their employees as an asset or a piece of equipment to sell or dispose of when they need to lean-up their operations?

I know, this question sounds silly.  Obviously we don’t build much of a real relationship with a piece of equipment, and we don’t personally know of a wife and five kids that the piece of equipment is trying to support.  So, what does this have to do with our ongoing high levels of unemployment in this country?

We have all heard the statistic from the SBA that that just over half of private employees are employed by small businesses.  And I would argue that the small businesses are those that have more of a tendency to view their employees as real people and real families – in fact, sometimes a good portion of their employees are family members.  In this context, I submit that owners and executives of the small businesses of America are still wounded from having to let people go during the recession.

Where a few years ago it was common to see entrepreneurs hire a new person at even the prospect of the need, these same entrepreneurs, still bruised from some tough times, are much more hesitant to pull the trigger on new hires.  Phrases like: “Let’s hold off on hiring until we are absolutely certain we need another person,” and “I’m fine to authorize overtime until we can really justify adding to the staff,” have become the new norm.

Even though the Business Outlook Survey published in CFO Magazine is predicting double-digit rates of growth in both earnings and capital spending over the next 12 months, it is also predicting much slower employment growth.  When asked why employment would lag behind other positive trends, two of the top three responses highlighted the reliance on :

- 44% plan to increase productivity per employee

- 37% will increase production efficiency

Entrepreneurs are simply asking for more from their current employees and looking to technology and automation to grow.  They learned their lesson and, as a result, are accelerating our economy’s change to a more efficient playing field, relying on people to add high-level value than fulfill lower-level tasks.

So, as the economy rebounds, it only makes sense that employment will lag behind.

1.   No Operating Agreement - many states do not require an LLC to have an operating agreement, and, therefore, many business owners and entrepreneurs do not understand the importance of this legal document.  The operating agreement is the agreement between all of the owners, or members, on how the business will run, who will be in charge, and so much more.  Let me share one brief example to portray the need for an operating agreement.

While at a social event recently with my wife, we connected with one of her friends from college.  He has started a business and his product is starting to sell and pick up some nice momentum.  He spoke for quite some time about how excited he was, how much fun he was having, and his new-found joy in finally pursuing his passion.  I asked if anyone else was involved with the business, and he said he had two partners.  The entire tone of the conversation changed as he described how his “partnership” had evolved, or perhaps a better description would be disintegrated.  It started with three friends getting excited about an idea.  They decided to split everything three ways and they failed to put anything into writing (namely, an operating agreement).  As time passed the expectations, time commitments, investment, and basically everything else related to these “equal” partners fell completely out of balance.  Arguments replaced friendship and greed supplanted a desire to share everything equally.  The problem – they never created an operating agreement that defined all of the important legal, financial, management, and time issues for their business.  The lack of an operating agreement has sent this budding partnership into a death spiral that will likely end in a painful and expensive divorce.

Please know that I have many more examples like this than I do of successful partnerships.  One thing all of the successful partnerships have in common – they have an operating agreement.  While certain online resources can help entrepreneurs organize their entities legally, special care and consideration should be paid to the operating agreement.  It is very wise to seek appropriate legal counsel as well as have healthy and lengthy discussions with your partners before you finalize this agreement. 

2.  Partner Pride -This is something that usually shows up when a partnership begins to have struggles and accelerates its demise.  Here is one real-world example of partner pride.  Two men started a business, each owned about 45%.  The remaining 10% went to other key employees.  As the business grew and became quite successful,  one of the 45% owners took great pride in the success of the company.  He began to tell his family and close friends that it was his company and that he was the major contributor to its success.  His pride allowed him to minimize his main partner and falsely establish himself as something he was not.  When this partnership began to fall apart and his partner extended a very fair offer to buy him out, he refused.  Why?  In his mind, he could not communicate to all of his family and friends that the business could exist after he left.  He was so infatuated with his fictitious position that he could not make reasonable or logical decisions.  The matter was finally resolved, but not without great distractions and damage to the business.

The best way I have seen to keep pride out of a partnership is to regularly review the contributions of all involved as well as discuss how each partner can improve.  If done correctly, this serves to keep everyone grounded and grateful for each other.

3.  Compensation and equity are confused -Let me be as straight-forward as I can with this topic.  Too often I see entrepreneurs, founders, and business owners that confuse equity and pay/compensation.  These two items must be separated in order to set your partnership up for success.  A few years ago I was introduced to a business with 50/50 partners.  12 months earlier one of the partners had become permanently disabled and unable to further participate in the business.  The partner remaining in the business was frustrated that the other partner put zero time into the business yet was still getting 50% of everything the remaining partner generated.  This partnership was about to fall apart until we set a fair and reasonable wage for the partner still working in the business.  The other partner’s wage was reduced to zero since he was not working in the business, although he was still entitled to 50% of the profits based on his ownership stake in the business.  Problem solved.

Ownership does not mean you should receive a wage or guaranteed payment.  Ownership means you participate in profits after all expenses are paid, including the wages of those working in the business.  In the spirit of understanding the difference between equity and pay, each partner’s compensation should be reviewed at least annually.  In this scenario, it would not be uncommon for one partner to receive a higher salary than another, especially if there is a difference in the amount of time put into the business.  Please note that the legal and tax structure of the business may determine the best ways to receive both wages and profits, but that should not dictate the separation, at least mentally and emotionally, of the two.

4.   Beginning without the end in mind -perhaps all of these points lead to this one – the need to contemplate every way the partnership will need to end or be dissolved.  Here is just a brief list of the different life events that could impact a partnership: death, disability, lack of interest, relocation, new opportunities, family changes, and more.  How will each of these situations be handled by the partnership?  An operating agreement and potentially a buy/sell agreement should contemplate these events. 

In addition, beginning with the end in mind implies that a partnership will have planned exits as well.  Selling a business can be very rewarding, and a partnership needs to look down the road to how each of the partners will exit.  For example, one partnership for which I serve as the part-time CFO consists of three partners under forty and the fourth partner is almost 65.  The younger three want to stay in the business for a long time while the older partner is hoping to exit the business and retire in a few years.  Orchestrating this partner’s exit while not hurting the business from a cash flow and leadership perspective take thought, consideration, and planning.  

The point is this – if a partnership does not properly plan for expected and unexpected exits, it will likely fail.

Do any of you have good or bad partnership experiences to share?