Chapter 19

MONEY AND RISK

THERE ARE A GOOD NUMBER of business owners who, when asked about money, say with pride that they’ve never borrowed money or owed a dime while building their business. While I appreciate the feeling of being debt free and have found immense satisfaction in my own bootstrap moments, this mindset is potentially limiting, particularly with regard to business. Since small enterprises don’t often have the backup resources afforded to larger corporations, how we as owners approach the issue of money and risk is crucial if we’re to pursue a big-vision small business way of operating.

The fact is, many small-business owners manage their business finances not much differently than they manage their personal finances—or even manage them seemingly backward. Whereas many people are perfectly comfortable borrowing tens or hundreds of thousands of dollars for a car or home that could be reduced to scrap in a matter of minutes, or sitting in a classroom for several years to earn a degree that may or may not turn out to be useful, fewer are comfortable borrowing a fraction as much to build and learn through their business. I mention these not to suggest that a home or academic degree is less valuable than a business but rather to establish the sharp contradictions in how people view risk and assign value to things. A small-business owner might casually talk about his $400,000 mortgage but look nauseated if asked if he’d borrow that much to develop his enterprise.

A humorous bit of advice regarding risk and money comes from Paul Hawken in one of my favorite practical business books, Growing a Business. Along with some other practical gems, Hawken tells a story about one of his own forays into business financing, where he concluded that the best thing to do, in his experience, was either borrow big or not at all.¹⁰ The gist? When you’re in for a sizeable sum of money to a specific lender, they’re less likely to call the loan and more likely to treat you better than they might if you were a much smaller borrower. Of course, you have to know your threshold—the amount that constitutes “big” for you—and have both the skill to adeptly manage the debt and the iron stomach necessary to deal with the risk without making yourself physically and mentally ill.

But what exactly is risk, and why is taking risks such a big deal when money and material possessions are at stake? A business adviser of mine recently said that risk doesn’t mean you lose all your money and belongings but that you’re comfortable with volatility. When risk relates to finances, I’d add that, in addition to comfort with volatility, you have to have confidence in your ability to responsibly manage the debt and create ways of paying it off. And you have to believe in your business if you’re going to find the energy and inspiration to propel you through one valley to the next peak.

Another reason for pause regarding risk is that, in our culture, risk takers are glorified (when they’re seen as succeeding) or vilified (when they’re seen as failing), so perhaps it’s not too surprising that taking risks, despite being glamorized, still isn’t easy for many people.

In talking with a wide variety of business owners about money, debt, and risk and thinking through my own experiences with these issues, I’ve realized that the fear is rooted in perception and mindset. In cases where someone has a high level of anxiety about money or debt or of fear caused by perceived risks, how often is the issue really about external perception: “What would others think of me if I had to sell my luxury car or big house for more modest ones?” In cases where individuals have a higher comfort with volatility and more confidence in their ability to either avoid or deal with any negative consequences, borrowing money, being in debt, and paying it off is simply a routine part of business. For these business owners, it’s more a matter of integrity, ingenuity, and commitment than it is a cause for extreme stress.

“I think many small-business people start a business from their house, so they impose their household budget and household ability to borrow,” says Jim Amaral, a baker who founded Borealis Breads in Wells, Maine, which now has four locations. “In New England, there’s a mindset that you don’t borrow money. But in this day and age, with the business market changing as quickly as it does, even when you’re talking about a basic necessity like making bread, it’d be hard to run a business without financing.”

For Amaral and other business owners, myself included, taking on the risk of business debt to finance the evolution of the company can have an unexpected benefit. In addition to funding growth and developing your credit history, debt, like feelings of obligation to those who count on you for employment or expertise, can be a real motivator to persevere through challenges that might otherwise cause you to quit or settle beneath your potential. For the duration of the debt, you have to find ways to make the business more viable, efficient, and profitable so you can honor your agreement to repay the loan. In doing so, you realize where you’ve been lazy and complacent and where you have underestimated not only your own and your employees’ ability but also the value of your product or service. That process can have undeniably stressful moments—my own personal threshold making itself evident in one night of insomnia when I was frozen with what seemed like white-cold terror coursing through my veins that we wouldn’t be able to repay our loans. Despite such moments, you have the opportunity to focus, recommit yourself to your big-vision adventure, and creatively “work the problem” to emerge through it more confident and mature about your priorities and business acumen. A big-vision small-enterprise owner would not recklessly pursue debt but would recognize that responsible financing may be both necessary and beneficial.

Why are money and the risks associated with it such a cause of stress in Western culture? Perhaps because we too often believe that we should have more than we do, thus allowing us to buy more of everything—from cars to homes to gadgets to employees to happiness—than we currently have. This raises at least two good questions we might ask as we reflect on issues of business evolution and financing: what exactly is wrong with what we have at any given moment? And what makes us think that having more will make us feel better?

The answer to the first question is subject to personal reflection, though I’d suggest that the ubiquitous nature of psychologically manipulative advertising deserves some fault (or credit, if you’re in advertising). Just take a look around you. The purpose of almost every commercial, Internet banner, billboard, radio, television, or print advertisement is to play on your insecurities and make you think that you’ll feel better after you’ve purchased the product in question. And you may, briefly. Unfortunately, the elixir of “new” evaporates quickly, leaving you vulnerable to the next wave of not so subtle suggestions about what you lack and why you’ll feel better once you’ve bought it. While advertising is a business and cultural reality, being asleep to its effect on you is neither healthy nor wise. And this provides context for a response to the second question: incessantly desiring that which you don’t have is a key cause of misery and suffering, and so is the insatiable pursuit of perpetually escalating quantities of material wealth.

Every ancient wisdom tradition suggests the former, and recent research verifies the latter. According to numerous studies by Richard Ryan and Tim Kasser, professors of psychology at the University of Rochester and Knox College in Illinois, respectively, individuals who seek satisfaction through material wealth or status symbols, be it money or cars or beauty, have a higher degree of anxiety and depression; are more likely to use substances such as alcohol, cigarettes, or drugs; and have greater problems creating lasting relationships.¹¹ This research strongly suggests that the age-old maxim is true: Money can’t buy happiness or health.

For big-vision small-business owners, faith and wisdom practices help you to appreciate what you have and to know what is enough, making you less vulnerable to the very powerful forces compelling you toward mindless acquisition or accomplishments that in the end mean nothing to you. That doesn’t mean you stop setting goals or buying products. You just don’t expect a goal based on someone else’s standard of success, or a material object of any price, to provide a sense of worth and fulfillment that can only originate from within.