Funding The Pivot

We live in a world where we are bombarded with advice to “follow your passion” and stories of people who wonder about the road not taken.  In fact, more people in their prime earning years are taking steps to fulfill their “dreams” before they reach the brass ring of retirement- a time normally associated with doing all of the things you didn’t have time to do.

What happens when you aren’t close to retirement and want to make a career switch or start up a new business? What is realistic? How should you think about the risks so that you avoid a crippling financial decision?

As clients and friends have come to me with this issue, I have taken my personal experience and some financial planning concepts to put structure around what can be a high risk, but high reward decision.

The Assessment and the Plan

Many of us daydream about a better tomorrow . . . better finances, more control of time, health and family happiness, a clearer path to professional or extracurricular achievement and establishing a legacy. These things don’t come without costs and the risk of failure. Therefore, you need a plan.

The first step is to assess the situation at hand.

Are you running from something or running to something?

Do you have an idea that will change an industry (or the world)? Do you want to start a business (and the hell that being an entrepreneur can bring) or do you just want to enjoy the trappings of a well-oiled business machine (already put in place)?  For those making career decisions because of an unpleasant work environment, I would think twice about running headlong into entrepreneurism.  It is a long and lonely road.  You have to “really want it” and be prepared for sacrifice both personal and financial.  Can the same itches be scratched while being traditionally employed? If your current situation is dissatisfying, could the correct change be a move to a firm that is more in keeping with your goals and principles?

I had a little of both in my life and used parts of the creative process, the entrepreneurial experience and a corporate situation to move my situation ahead.

My situation at my previous employer was suffocating.  I enjoyed working with clients, solving problems, identifying opportunities and being relevant to successful people. However, while enjoying success, I was not participating in the equity or direction of the business and I was not developing.  My career trajectory was flattening and the principles by which I worked were shifted by new management priorities. It was time to go no matter what.

I also had a nagging feeling that I had more to bring to my clients, my firm, the industry . . . and myself.  I became involved in podcasting and speaking- two things that I enjoyed.  On the strength of that and my extracurricular interest in writing screenplays and essays, I felt like I had a book in me.

Change is good, right? Change brings growth. Generally speaking, that’s true, but change also occurs when you are laid off or when a company closes down. To that end, change is effective when you are the architect of the change. When you are driving new circumstances, you have more control over its effects. In my case, I spent a year writing the book, finding a publisher and getting ready to be an author. I had the collateral to be something more than a job description. This leads to an important question.

What Does Success Look Like?

It is important for anyone making the pivot to understand what their definition of success is. For almost everyone, this will be an evolution.

Ask yourself if you have the talent and the drive to make your new endeavor your life’s work.

Am I a writer?

In my case, the book was originally going to be TV pilot filled with smart, funny stories and I had over 200 pages of notes. I had written a variety of blog posts that were well-received and had a lot of other positive feedback. I thought I could make a go of it.

Am I an entrepreneur?

I looked around and saw that my path to success either as an author or in the world of TV was going to be a long shot at best. I spent long hours talking to my publisher and others about what success for my “outside endeavor” was going to look like. Early on (and fortunately), I was disabused of the idea that I was going to be the next Michael Lewis. The structure of the industry made the likelihood of success remote, especially at my stage of life. Making a huge life change on the narrow definition of being a (highly paid) writer/media personality was going to be an enormous risk.

Could I turn a talent into something else?

My thinking changed. The return on investment was going to be in the form of a major personal Everest climbed and of a new career trajectory, both wider and more upwardly sloping.  I changed the direction of the book from wickedly funny entertainment to intelligent decision-making for the one-percent, an area where I had significant professional experience and where I could make a meaningful difference to people (and their advisors) who need help.

I encourage everyone looking to make the pivot to:

• Speak to others in the field and determine potential realistic results and
• Write down what their success will look like.

This leads to the next question.

Do you have the tools and resources to achieve your goal? (The Pivot Fund)

Whether starting a business, finding a new job, or embarking on a new adventure, you have to find a way to land the plane back on the carrier safely. Financial and career stress can create a difficult decision-making environment and can have devastating effects one’s family and personal legacy. The first way to mitigate this risk is by taking an inventory of the tools and resources you have at your disposal.

Step #1: Be confident that you have the talent to be successful- if you aren’t 7 feet tall, you probably aren’t going to be an NBA center, no matter how good your hook shot is.  Talk widely and broadly to people in the field to get an honest appraisal of your skills. Do things in your new field in bite-sized measures to make sure you enjoy the process. Find a mentor to help you learn the ropes and then a sponsor to give you the push your career will need (these may not be the same people). Join industry groups to get engrained in the culture.Beware: One of the most common pitfalls I see occurs when people assume that success in their current field will automatically translate into a different one.  Investment banking does not guarantee success in venture capital. Being successful in the public sector does not make someone a great businessperson. Being a TV star doesn’t necessarily make one a great author.

Step #2: Explain what you want to do with your family and other interested people. You need to have family buy-in when you are financially responsible for them. Without their understanding, the distance between former financial stability and the current uncertainty of success could destroy your project.  Real life is expensive: mortgages, educations, healthcare etc . . . you should not undertake a pivot without deep consideration of these expenses. Communication is vital in keeping your support structure behind you and it will help your team make your pivot a bigger success.

Step #3: Determine the important constituencies affected by your decision. This is directed at your employers, customers, community members etc . . . To those that matter to you, their understanding is important as you take on the stress of going through this new challenge. This process is also useful in establishing your allies as you embark on your new adventure.

Step #4: Establish your anchor tenant. To go out on your own naked is scary and dangerous. In a new business, having the anchor tenant can be the difference between success and failure. Having an established customer(s) or constituency interested in your success will help get your endeavor off the launch pad and bring instant credibility to your efforts.

Step #5: Plan your time for the first year . . . In detail. A huge issue for retirees is understanding what to do with all of the new unstructured time. For many it leads to aimlessness and depression. The same applies to people making a big pivot. You will have a huge surge of energy when your project lifts off. However, momentum is a fragile commodity. Once you settle in and become accustomed to an unstructured situation, uncertainty and procrastination can be dangerous enemies. What are you going to do the first month? The second month? The third month? The sixth month? Then a year out? The more structure you have in place, the more chance you can keep the momentum of your project going until it fuels its own success. Additionally, from my experience, however long you think it will take to get your project moving, double it.

Step #6: Establish the Pivot fund. The start of any new project has to be done in conjunction with the financial resources at hand. One should detail the assets and liabilities of one’s financial position in detail. What have you got, what are your family’s costs and what is necessary to make your pivot happen? As discussed, a frank conversation with your family and other important parties is important.  If there is any backward move in your family’s lifestyle or breached commitments to others as a result of your initiative, those interested parties need to know upfront. Otherwise, your curiosity may be interpreted as selfish. As a matter of experience, I put aside a year of living expenses and dollars related to my pivot- I would have been happier if I put aside two years.

Step #7:  Protect Your Assets.  So far, our discussion has baked in the notion that your pivot will be wildly successful.  What if it collapses? What if you get sued? What if you file your taxes incorrectly? It is worth getting proper legal and accounting advice to make sure that you are structured properly and following the forms and functions required. Don’t forget to get the opinion of insurance carriers to make sure that you are covered in the event of a catastrophe in your new project.  A lawsuit could be crippling in a new initiative.

What happens if you don’t make it?

There is always the risk that trying something new will end in failure. That’s why they call it risk. Here are a few that you should be aware of as you go forward.

Reputational Risk– I think if you have communicated with the people that are important to you, most of the reputational risk is illusory.  Fortune favors the bold. As long as your decision is considered and your conduct is above board, very few people will hold your decision to try something new against you. In fact, I think it adds an element to a career if you are willing to invest in yourself and take a risk.

Career Risk (Re-Entry)- This is a bit trickier, but manageable with planning. Traditional corporations abhor change . . . until it shines a light on something that they can capitalize on. That said, the higher up the ladder you go, the fewer positions that are available. Absence from a traditional track can be seen as disinterest or distraction by some. My suggestion is to have an in depth understanding of your financial requirements and a heightened self-awareness of your career path, your age and where you fit into the traditional model. Maintain the lines of communication into the traditional career ecosystem. If the decision-makers understand the context of your path ahead any discussions, the objections should melt away. If you are able to add a modern toolkit to an industry that needs it, your value will be enhanced if you re-enter your industry.

This aligns closely with Step #6 and understanding the role of career risk in the decision-making process. By prioritizing the issues that the pivot is meant to address and establishing the criteria and likelihood of success, you can better ascertain your financial risk. Taking a serious look at your liabilities, how you are going to fund them and the time requirements of your new venture are vital. After taking all this into account, setting aside a buffer of cash and building a conservative financial safety net should mitigate the risk of a major pivot.

The Purpose of the Pivot

American poet, John Greenleaf Whittier wrote “Of all sad words of tongue or pen, the saddest are these, ˜It might have been.”  In a world where we are all encouraged to live our best lives, it is not wrong to direct the sacrifice and hard work we use to accomplish our financial goals in a direction that maximizes out talents and enjoyment.  It isn’t easy or else everyone would do it. However, well-considered and well-funded pivot can be the key that unlocks our potential and helps us accomplish our goals for our family and ourselves.