Grit with Guests: Funding the Pivot, by Frazer Rice
What do you need to make your vision real?
We live in a world which bombards us with advice to follow our passions, and with stories of people who wonder about the road not taken. In fact, more and more people in their prime earning years are taking steps to fulfill their “dreams” before they reach the brass ring of retirement — a time traditionally 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 used my personal experience and some financial planning concepts to put structure around what can be a high risk, high reward decision.
Many of us daydream about a better tomorrow…better finances, more control of our time, health and family happiness, a clearer path to professional or extracurricular achievement, and a well-established legacy. These things all come with costs, and with the risk of failure. Therefore, you need a plan.
Before you start investing precious time, money, and effort into your passion project, assess the situation at hand by asking yourself a handful of guiding questions.
Question #1: 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 preexisting, well-oiled business machine?
For those making career decisions because of unpleasant work environments, I would advise thinking twice about running headlong into entrepreneurism. It is a long and lonely road. You have to really want it and be prepared for significant personal and financial sacrifices. Ask yourself: Can I scratch the same itches while being traditionally employed? If my current situation is dissatisfying, could the correct change be a move to a firm that is more in keeping with my 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 perfect my circumstances.
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 those activities 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 their effect. 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. I wanted my life and career to be something more than an HR checklist and with greater impact. This leads to another important question.
Question #2: What does success look like for you?
It is important for anyone making the pivot to understand their own definition of success. For almost everyone, this will be an evolving definition.
Ask yourself if you have the talent and the drive to turn your new endeavor into your life’s work. Here’s how it went for me.
Am I a writer? In my case, the book was originally going to be a 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 very 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 climbing a major personal Everest and of a new, wider, more upwardly sloping career trajectory. I changed the direction of the book from “wickedly funny entertainment” to “intelligent decision-making for the one-percent,” an area in which I had significant professional experience and where I could make a meaningful difference to people (and their advisors) who needed help.
As I did, I encourage everyone looking to make the pivot to:
Speak to others in their target field and determine potential realistic results
Write down what their success will look like
This leads to the next question.
Question #3: 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 on your family and personal legacy. The first way to mitigate this risk is to follow a seven-step process, taking inventory of the tools and resources you have at your disposal.
Step #1: Determine whether you have the talent to be successful. If you aren’t seven 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 portions 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 ingrained 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 success in a different one. Success in investment banking does not guarantee success in venture capital. Success 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, education(s), healthcare — 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. The understanding and support of these groups is essential 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 established customer(s) or constituencies interested in your success will help get your endeavor off the launchpad 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 in the first month? The second month? The third month? The sixth month? 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’ worth.
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 for a new initiative.
Question #4: 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 risks 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 of credibility to a career if you are willing to invest in yourself and take a risk.
Career Risk (Reentry). This is a bit trickier, but manageable with planning. Traditional corporations abhor change…until it illuminates something on which they can capitalize. That said, the higher up the ladder you go, the fewer positions 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, through sufficient discussion, the decision-makers understand the context of your path ahead, their 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 reenter 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 all vital.
After taking all of 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 our talents and enjoyment. It isn’t easy, or else everyone would do it. However, a well-considered and well-funded pivot can be the key that unlocks our potential and helps us accomplish our goals for our families and for ourselves.
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ABOUT THE AUTHOR
Frazer Rice is the Northeast Regional Director for Pendleton Square Trust Company, a Tennessee-chartered trust company focused on administration and support for substantial families and wealth managers. He is also the author of Wealth, Actually: Intelligent Decision-Making for the 1% and the host of the “Wealth, Actually” podcast which focuses on fiduciary and wealth issues. A recovering lawyer, Frazer's wealth management career has included serving for over 15 years as a Managing Director with deep fiduciary expertise at Wilmington Trust Company. While with Wilmington, he was responsible for over $11 billion of client assets under management and administration.