Make the Rules, Live the Rules

March 16th, 2009 by Sharon Larsen

We open Chapter 5: The Rules, with Rich’s overview of some of his rules.  Keep in mind that these are Rich’s rules – you’ll need to develop your own rules as you start a business.



One of the great joys of living the life of an entrepreneur is that you get to create the rules! You have the freedom to build and create according to your own specifications. However, once you have established the rules, you do not have the right to arbitrarily change them. Capricious rule changes result in crises not just in your business, but in all aspects of your life.


Will the rules ever need to change? Yes! Circumstances change, objectives change, and markets change. However, if you change the rules, you must do so the same way you created them: with forethought and deliberation. You must then communicate these changes to everyone they will impact.


Before you can change the rules, though, you need to write down your rules. This is your task. I cannot and will not create your rules for you. You must thoughtfully and carefully create them based on your value system, your goals, and the level of risk you are willing to take. To illustrate, let me share a few examples of the rules I have set up along the way.


Here are seven basic categories that I build rules around when I create a new company:

·         Finances

·         Culture

·         Hiring and Firing

·         Roles and Responsibilities

·         Boundaries

·         Exit Plans

·         Time and Travel Commitments


Rich’s Rule: I will not sign a personal guarantee unless I am the primary business owner, and I will always maintain control of company finances.


Earlier in my career, I was hired to be the CEO of a highly visible startup web company. I was turned on by the title and really wanted to prove myself. One of my first responsibilities was to acquire computer equipment. This required our taking out a loan, which, in turn, required a personal guarantee.


I had no vested ownership in the company and the finances were being handled by an external CPA. But, in my zeal to demonstrate my commitment and team-player attitude to the board of directors, I signed the personal guarantee. Several months later, the web bubble burst, and who do you suppose was responsible for that loan? I spent the next five years paying off those damn computers with my own money. The rule I now live by is:  never sign a personal guarantee for someone else’s business. Ever!


Along similar lines, although I have had wonderful accountants, office managers, and administrative assistants, every time I have given someone else complete control of the books, the outcome has been disastrous. No longer do I allow anyone else to have ultimate control of my finances. I always remain actively involved.


Rich’s Rule: Be true to my conscience.


How I succeed in business has become just as important to me as actually succeeding. In my last corporate job, I was a senior executive in a well-known company. In this role, I became exposed to some unscrupulous activities. As I left to start my own businesses, I recall thinking very clearly, “I would rather not succeed financially if it means doing so through unprincipled means.” I make no claim to perfection—however, there are certain businesses and activities that I refuse to engage in.


Each morning, as I shave, I have to look at myself in the mirror. And I’ve learned that’s easier to do if making money is not the most important motivator in my life. Being honest in my dealings coupled with building and lifting humanity is, to me, far more important than any amount of money.



Tomorrow we’ll finish Rich’s review of his rules.  Be thinking about what rules you might set for yourself.




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