The Tortoise vs. the Hare: What Kind of Entrepreneur Are You?

“Are you a tortoise or a hare entrepreneur?”

This is the question Ami Kassar urges every entrepreneur to consider.

Kassar is the CEO of Axial member Multifunding, a national business loan advisor and brokerage that prides itself on helping business owners find debt options that work for their unique businesses.

He recently talked to us about the differences between these two types of founders — and shared a few best practices to help tortoises plod ahead.

Hare Entrepreneurs

Hare entrepreneurs tend to prefer equity financing, whether it’s from VCs, private equity, or other sources. Their overarching goal is to grow as big as they can, as fast as they can.

They spend their time building management teams and writing business plans. They’re selling their dreams to investors, Kassar says, often before they have a product to sell to customers.

The payoff can be colossal if all goes according to plan. But the process can be stressful. “They’ve chosen to ride a treadmill,” says Kassar. Once they’ve attracted investors, “they spend their time managing them. It’s like having a dozen husbands or wives.”

Tortoise Entrepreneurs

Tortoise entrepreneurs prefer debt financing. They’re often building lifestyle businesses, targeting more gradual growth over a longer period of time.

Risk-averse “lenders don’t care about your business in 10 years,” says Kassar. “They want your current income statements.” So instead of drafting business plans, tortoise entrepreneurs spend their time keeping their books in order. For lenders, working with a business with bad books is “like watching an NBA player with his shoelaces untied,” says Kassar: It just makes them nervous.

How to Succeed as a Tortoise

“Our society glorifies hare entrepreneurs,” says Kassar — think the Silicon Valley startups vying for VC money and targeting billion dollar valuations — but there are benefits to the tortoise model too. Debt financing is less risky than equity, and allows you as the owner to retain more control over your business.

If you’re targeting debt financing for your company, here are a few tips.

• Get a home equity line. “This is the cheapest and easiest money you’ll ever get,” says Kassar, and it was the first thing he did when he started Multifunding.
• Pay attention to your personal credit. This will be a lot more important than your business credit for at least the first few years of your business’s lifecycle, says Kassar.
• Keep your business books in order. Again, no lender will want to give you money if they aren’t squeaky clean.
• Know what problem you’re solving for. “Ask yourself: ‘Is money the problem?’” says Kassar. Entrepreneurs often think money alone will solve every problem they’re having in their business. “We ask business owners why they need money, and what problem they’re trying to solve with it.”
• Create a path to bankability. Thanks to their low interest rates, bank or SBA loans are the best option for nearly all businesses — but they’re also the hardest to qualify for, says Kassar. Banks evaluate your bankability on business profitability, cash flow, credit history, and collateral, among other factors. If your business isn’t bankable and you need to take on alternative financing, be sure to have a plan for a) how exactly you will pay the loan back on time and b) how you will work to make your business bankable.
• Review your debt regularly. “What makes sense yesterday might not make sense today,” says Kassar. “Loans should be structured for ultimate flexibility” — meaning that you should regularly review your current structure to see if it still makes sense for your business.