“I have raised over a billion dollars in capital. I’ve done about three-quarters of a billion in mergers and acquisitions. “

Interview by Mike Sullivan

Mike:
Hello, I’m Mike Sullivan for M.O., where we feature small business owners and entrepreneurs and then bring you hints, tips, insights, and perspectives on what it takes to be successful. Today talking with us is Carol Roth. Carol’s a business advisor and an author. One of her accomplishments is that she has collectively helped her clients raise a billion dollars in capital. Carol, thanks for joining us today. Can you tell us a little bit about how you got started, your background, and what led you to where you’re at today?

Carol:
Sure. Well, I’ll start way back in the day. I’ve always been interested in business. In fact, one of the key stories is that I used to take my sister’s stuffed animals and set them up in my room and sell them back to her. I was always very, very interested in business even at a young age. In addition, one of my nicknames was Lucy, as in Lucy van Pelt from the “Peanuts” comic strips. She always had that doctor’s booth. “The doctor is in. 5 cents for advice.” For some reason, I’m just that person. I could be in the grocery and someone’s coming up and asking me about questions about groceries. Walking down the street. I’ve been in airport bathrooms and people are talking to me. For whatever reason, I am giving off a vibe to the world that you should ask me for advice. Eventually I just stopped fighting that. In high school and college it was fashion and boys, and then eventually when I went to Wharton and started as an investment banker after that, it became about business.

Over the course of advising companies, I have raised over a billion dollars in capital. I’ve done about three-quarters of a billion in mergers and acquisitions. I’ve done joint ventures and licenses and partnerships for my clients, with everybody from Disney to Paramount to the pop singer Katie Perry. I’ve designed customer loyalty programs. I’m just out there doing the business thing. Now a New York Times bestselling author and frequent media contributor on MSNBC and FOX and ABC and the like, and just continuing to put hopefully highest quality business information out there, because one of the challenges, Mike, that I saw as I was in investment banking and working with much larger companies is that they were getting really high quality advice, yet the people who really needed it the most, the early-stage entrepreneurs, the small business owners were really not getting that quality of information because the people who could afford to pay for the good information were the bigger companies. So it was a little bit of a challenge there, and so I decided to see if there was a way that I could come up with a model that would allow me to dispense this fantastic, high quality advice to those people who needed it the most.

Mike:
You’re well known as a tell it like it is, straight shooter, no B.S. business woman. Is that part of your personality, or does something about business stir that up and draw that out of you? Are you like that in your personal life or just your business persona?

Carol:
No, I’m a tough-love kind of girl. I’m the kind of person if you’re being an idiot, I will tell you you’re being an idiot. Then I’ll give you a hug afterwards. So we get the tough and the love in there. But when I was in investment banking and earlier in my career, I was in these situations where I really felt stifled. I felt like we were in sales mode and a lot of times forbidden to say what was on our mind. That just killed me because I am, just all the time like, “This is what you get. Take it or leave it. I don’t really care.” It’s very self-selecting and it works for me and so it was really binding to me to not be able to speak the truth. It’s very much driven by my personality, but it’s also driven by the fact that I think I’m doing people a favor. I don’t think that blowing smoke up people’s behinds does them any favors, unless that’s what they want. Sometimes I will ask permission. I will say, “Hey, do you want me to just agree with you, or do you want the truth?” I think once I get that permission, then I’m inclined to give them the truth. But sometimes people don’t want to hear it. Sometimes they’re in an emotional state where they just want the shoulder to cry on. If that’s the case, then I’m fine to play that role just as long as we’ve set the stage that this is what we’re doing and that this isn’t reality.

Mike:
Tell me about your FIRED-UP assessment and how accurate that’s proven to be over time?

Carol:
FIRED-UP was really a precursor to “The Entrepreneur Equation.” It was something that dealt a lot with timing as it related to starting a business. It stands for: do you have the right finances; do you have the right inspiration; do you have the right responsibilities, the right experience and the right dedication and unbridled passion to be an entrepreneur. The interesting thing when people go into business is that they forget that even if it’s not right for them right that second, that doesn’t mean it’s not right for them ever. That there are things they can actually do to stack the odds of success in their favor. Really simple things. Like, hey, if you’ve never worked in a restaurant before and you want to open one, go work in one for three months. Just really simple things that you can do to make sure that you know what you’re getting yourself into and that you get a little bit more experience and that you can pass “shiny new thing” syndrome up a little bit, have a little time to let that settle in and hopefully pass.

So it really is focused mostly on the timing piece, where “The Entrepreneur Equation” also focuses on the opportunity and personality and mindset. But it’s been really effective. It’s funny, because what I say really isn’t rocket science. It’s just that sometimes people need that injection of reality. When people go into business, they’re so overcome by emotion, they’re so intoxicated by these ideas, I call it “business beer goggling.” The idea sometimes looks a lot better to them than it is in reality. There’s enough passion and emotion there sometimes you just need somebody to step in with the realistic point of view, and so that’s what I was trying to accomplish and so far so good.

Mike:
You mentioned your book, “The Entrepreneur Equation,” which by the way has a five star rating on Amazon. What will we learn by picking that book up and reading it? What insights will be revealed to us?

Carol:
I think there are a couple things. It’s very interesting because the book is under the guise of an assessment tool and a framework for aspiring entrepreneurs, but it’s very applicable to anybody that’s in business because I really believe that there’s been a paradigm shift of what it means to be an entrepreneur in our country. I think a lot of people are running around and still thinking that it’s 1930, the time when the American dream was coined. The reality is that technology has allowed us to make it so much easier to start a business, but that same technology that makes it easier to start a business also makes it more difficult to succeed in business because you have more competition, you have bad competition that can poison the well, and you have so many more things that you need to do now as an entrepreneur. And by the way, the work can follow you anywhere. Anywhere you go the work can follow.

Now, you have to compete with all these other businesses and do more work to get that reward. So it really is about monitoring the risks and the rewards and making sure that you have a business model where the reward is big enough to make sense for the risk that you’re taking on. If not, how can you tweak the business model or how can you, if you haven’t started, go back and rebalance those odds of success again so that you do have the best chance to succeed. Because if you’re going to bother doing it, if you’re going to give up your time, you don’t want to be in the same situation and be earning the same or less money than you’d be making when you had a job plus be working more hours and have more stress. That doesn’t make sense. I don’t think that’s what anybody has in mind. But it’s the reality of the situation. So I wanted to create that framework that was very particular to each entrepreneur. We all have different definitions of success. Some people, it’s about quality of life, sometimes it’s about money, sometimes it’s both. Whatever it is, it still has to make sense and you still have to have that risk and reward trade-off be in right proportion for you.

Mike:
What are some of the first things people should look into when considering starting a business?

Carol:
I think the first thing is that you have to ask yourself, “Why am I going into business?” I think that that’s the big question. Why? Why do you want to do this? If it’s to get rich quickly, if it’s to fulfill some void in your life, if it’s because some girl told you that you were stupid and you want to show her that she left you and boy, she made the worst decision of her life, whatever it is. Those are all really bad reasons to start businesses. Business is all about customers, finding that opportunity, finding the customer pain points, servicing the customer need. I think you have to find out why it is you want to be in business and make sure you have the right type of business to fit that goal. If you don’t know where it is that you want to get to, you can’t come up with a path to get there. So I think just right out of the gate, why are you doing this? Does it make sense? Is it the right reason? Then, okay, let’s figure out this goal and measure everything against it.

Mike:
Aside from being a business advisor and a bestselling author, you’re also a speaker. What types of topics do you cover in your speaking engagements?

Carol: I have this really odd background where I really span the life cycle of business. I start with the should you be in business, the grow your business, which is part of I talk about getting comfortable with being uncomfortable. That’s a mindset and feel-good thing. I call it the anti-motivational/motivational speech. We talk about customer loyalty a lot, and then I talk about exiting the business. So really, there’s something depending on what stage the business is at that I can speak to and those tend to be the topics.

Mike:
When a small business owner or an entrepreneur hires you as an advisor, what should they expect? What will the outcome be?

Carol:
The only thing you can expect is to expect the unexpected. I am very much a business strategist, so some people come to me thinking that I am a coach or an advisor or somebody that’s going to be there to hold their hand, and that’s not the case. I’m an in-and-out kind of person. I get there, we go deep, we go fast, and we get the job done. So I’m really going to come in and focus on problem solving, monetization, and high level strategy to get a return on investment for whatever it is you’re considering. A lot of that time is business time, but a lot of it sometimes is almost like psychiatry. Get your mind on straight. Are you doing this for the right reasons? Is what you think is your biggest asset really what’s holding you back? Just interjecting some reality in there and then setting some goals.

What I will do is after we have come up with this high level plan is turn it over. If they need someone to monitor and coach them on an ongoing basis, I’ve got great relationships with people who do that. But where those people are there for accountability, I’m in there to tell you what’s wrong. A lot of the advisors would say, “Oh, well, what do you think is wrong?” and be self-diagnosing. No. I’m going to give you my opinion. There’s no one right answer. It’s only pros and cons, so we’ll give you the pros and the cons. I’ll say, “Based on what you’re telling me, this sounds like this is what is adding up the best.” They can agree or disagree. We can go through the options, and then I’m on to the next thing.

So if it’s a business strategy type of situation, that’s what they get. If it’s a deal, it’s totally different. If we’re doing an M&A deal, then it’s a front to back situation. If it’s just pure business strategy, we’re going in there and we’re going in always with the lens that the time we spend together is meant to produce a return on investment. We’re not spending for fun. We’re not spending to be an expense. We’re spending so that they can take their business to the next level.

Mike:
With nine out of ten new businesses failing each year, I’d love to hear your perspective on what’s the top reason for these failures?

Carol:
Number one is always like five reasons for me. I can never follow the instructions. Here are the five number one reasons. I think that a lot of people go into business, one, just not knowing what to expect. Their expectations are so far off. They don’t realize they need a certain amount of money. They don’t realize it’s going to take a certain amount of time. They’re just really not up for the task. I think breaking it down a little bit more, under-capitalization. We’ve got all these people running around going, “Oh, guess what? You can start a business for a hundred bucks.” Well, that’s great, but it takes a couple years for most businesses to get a foundation underneath it so you can pull money out of the business. So now, you need money not just to start but also to fund the operations of the business and also to live on. If you are not in that situation and you haven’t set aside enough money or you can’t raise enough money to do that, then you’re in a really bad situation. Guess what? If you have to choose between paying your mortgage and investing in your company, that’s going to be a lose-lose proposition.

I think that’s a huge issue, and I think just not being prepared. People are lazy. It’s your life savings and your time. Why are being lazy now? This doesn’t make any sense. Write the business plan. The business will wait two or three months for you, and if it won’t, then it’s not a business. It’s a fad. So, really invest the time, get the experience, make sure you’ve got the financing, do the business plan, make sure that it’s really the right time for you personally. Those are the kinds of things that will give you the better chances to succeed.

Mike:
You have a pretty amazing social media presence with almost 7,000 Twitter followers. How important and effective have you found social media to be in business?

Carol:
Social media is interesting. I think that social media is a really nice complement. It’s not the be all, end all for me. I’m not a social media person or guru. I engage in social media as a tactic, as part of a larger branding strategy and a way to get my information out there. It’s been really good from that respect, from just an awareness standpoint. From people helping to spread my message, it has been very, very effective, and I’ve met some really interesting collaborators through social media. I have also found there are limitations to it, so I think again you have to make sure that it’s not the be all, end all and you have to be in the right place. I choose Twitter as my main outlet for disseminating information because I think that’s most compatible with the folks that I am reaching. There are other people where Twitter makes absolutely no sense, and they should be on Facebook. It’s just aligning and making sure that you’re in the right venue as a way to do whatever it is that you’re trying to do. For me, Twitter has been a really great tool in terms of spreading the message.

Mike:
I’ve heard you in the past mention the word “jobby.” Can you explain what that is, and is that inherently a good thing or a bad thing?

Carol:

Jobby is my very affectionate made up term for a hobby that is disguised as a job or a business or basically a hobby that you make some money from. No judgment here. Jobbies can be great, and they can also be really, really bad. It all depends on your mindset and if you’re aware that you have a jobby. A jobby is great in the sense that if you want to test out a business, what a brilliant way to do that. You say, “Okay, in my free time, I’m going to make sure that this is really something I want to do and so I’m going to invest a limited amount of time and money to test out the viability of the business before I quit my job and before I make the leap.” I think for people who use it in that regard it makes a ton of sense. And there are some people who really just want a hobby that they make some money from. If they have an awareness of that, phenomenal. Great to have a hobby that makes money than one sucks that up all your money, like scrapbooking or golf does. So it’s really, really cool from that standpoint.

Where the challenge happens is there are a lot of these people who are these dabblers, these side business people who think that this is going to make them a million dollars. They run out and they invest very heavily. They get the website and the business cards, the glossy brochure, tons of inventory. They spend all this time and effort on something where there’s really no viable business model behind it or they’re just personally not committed to it. That’s the challenge.

This was really inspired by my mom. My mom had a gift basket company in the 1980s that was like the pioneer. I won’t recount the whole story for you, but the punch line is that she worked her butt off 50 hours a week, 52 weeks a year on something that really looked more like a hobby, and she ended up making like four bucks an hour. I was making more than that babysitting for my sister so that she could be off working on this hobby. So I think it’s just about awareness. It all goes back to what we talked about goal setting. At the end of the day, your goals are what sets what make sense for you.

Mike:
Finally, is there anything you’d like to leave us with?

Carol:
I guess, briefly, I would just go back to risks and rewards. In terms of modern entrepreneurs and the landscape that we’re in today, it’s all about risks and rewards and making really good tradeoffs. You really want to spend the time to think does the business model that I have today give me that tradeoff that makes sense? I like to use analogies, and I like to use game show analogies. One of my favorite ones is “Let’s Make a Deal.” If you imagine you’re sitting there with a certain amount of money, like $49,000, that represents your salary, and Monte Hall or Wayne Brady, depending on which era you’re in are standing there with the two curtains and one of them is zero dollars and one of them is $50,000, do you trade $49,000 for the chance at $50,000? Nobody would ever make that trade on a game show, but people do that all the time with their businesses. So you have to say if this is the trade, either I need to find another business that gives me a better curtain choice, or I need to run in the other direction.

I think that people who are in business, even if you’re right in the middle of it and you’re struggling, think about the trade that you’re making. Have you made a good trade? If not, what can you do to tweak your business model so that what you’ve traded off actually makes sense, that you have that payoff? Again, not necessarily just financially, but quality of life. I spend a lot of time talking to sole entrepreneurs who claim that they’re very happy and then you ask them are they working more hours? “Yes.” “Are you more stressed?” “Yes.” “Do you have more fights with your spouse?” “Yes.” “Okay, are you happier?” “Well, not really.”

So again, let’s be real with ourselves. This is your life and we want you to be successful and happy. Figure that out. What’s going to make your successful and happy, and if some things need to change, be willing to change them.

Mike:
Carol, thanks so much for your time and your insight. I greatly appreciate it. Take care.

Carol:
My pleasure.