M & A 101: Lessons learned from decades of deals Nov/Dec 2018

Profile of an Entrepreneur

by Loren Smith

During the years I owned a wire harness manufacturing business, I was often asked what would prompt someone to leave the security of a large corporation and risk acquiring a marginally profitable business in the middle of nowhere. At the time, I could answer only for myself. But now that I am in the third phase of my career––having put deals together for dozens of other entrepreneurs––I see that my personal response aligns with the answer most entrepreneurs would give.

Contrary to the stereotype that individuals become entrepreneurs to get rich, the vast majority take the plunge for freedom and independence. Even when that means sacrificing outstanding job security.

Conversely, those who consider becoming their own boss but wind up not taking the risk find the prospect of giving up a regular paycheck too painful. Or, in many cases, their spouse cannot tolerate the lack of security.

The seeds of my willingness to take a shot at becoming an entrepreneur may have been planted long before I began the first phase of my career, working for a multinational corporation. I was still a kid when one of my uncles sat me down to offer some life advice: “Don’t ever work for anybody,” he told me, explaining that I couldn’t control the degree to which he or she might be reasonable and fair. I shouldn’t ever want to be in a position where my future was dependent on my boss.

I had deep respect for my uncle, and his advice echoed long after. Despite early success in a corporate environment, his words were always ringing in my ears. So much so that I eventually risked all to move my family from the East Coast to buy a small wire harness company in a town of 1000 in rural Iowa.

This was not an immediate “everyone lived happily ever after” story, however. I discovered that the wire harness company was in much greater financial distress than had been apparent. My life was thrown into disarray as I struggled to right the ship.

A year later, still in the throes of maintaining a company under siege––no cash and no bank credit, but plenty of customers tightening their quality and delivery requirements while looking for price reductions––I received a surprise call from a headhunter looking for somebody with my corporate experience. The opportunity sounded like a perfect fit, and it would be a ticket back to all that city life offered, on a healthy income. Because my family had still not adjusted to a dramatically altered lifestyle, the opportunity seemed a panacea for all of us.

I flew to the interview and thought it went extremely well. I had the background the connector company wanted, and I knew the company to be highly reputable. I was feeling a great sense of relief.

But then, as I reflected more fully, not only on the interview but also on what I really wanted, I could not get past one fundamental reality. Despite the arduous road that still lay ahead to make the wire harness business sound, I could not get comfortable with once again working for somebody else. I liked being my own boss, especially because I was blessed with a group of employees who knew the meaning of commitment and work.

When I got to the airport I called my wife to tell her if I did get offered the job I would not be taking it. The wire harness company was still treading water and still located in an obscure town, but it was my company, and my hard-won freedom was something I would never give up.