For These Business Partners, Age Is Just a Number

Amy Gonzales and Kelly Caldwell didn't allow their difference in age to stand in the way of their partnership.

As told to Darren Dahl |  Sep 1, 2010 Good to See You Kelly Caldwell (left) and Amy Gonzales get together once a month or so.

" href="http://www.inc.com/uploaded_files/image/feature-128-AKEnviro-pOP_4929.jpg" alt="Good to See You Kelly Caldwell (left) and Amy Gonzales get together once a month or so."> Mike McGregor

Good to See You Kelly Caldwell (left) and Amy Gonzales get together once a month or so.

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Amy Gonzales, a geologist and wetlands scientist, played mentor to Kelly Caldwell, a biologist, at their former employer, for which they did environmental-impact studies of proposed gas pipelines and other energy projects. When Gonzales grew frustrated with her bosses, Caldwell, who was 17 years her junior, suggested they start their own company. The result is AK Environmental, which performs environmental surveys and manages construction projects nationwide. The women run their company virtually—Gonzales lives in New Jersey; Caldwell, in North Carolina.

Kelly Caldwell: I think people thought we were nuts to quit our jobs and start our own business. I think they also said, "Is Amy crazy to trust this kid?" I was just 26 at the time. She was the one with all the experience.

Amy Gonzales: I didn't even think about her age. If people can do their job, it doesn't matter how old they are.

KC: People would always tell me that it was strange that Amy and I never worked in the same place. But we never did. She mentored me, but I was in New Jersey, and she was in Pennsylvania. I call her 10 times a day and e-mail constantly. Communication has never been an issue between us.

AG: I own 60 percent of the business, and Kelly owns 40 percent. In the beginning, we both worked from our homes. In 2004, we hired my husband, Ed, who is an engineer. That's when I moved my office out of the house, because we couldn't work together very well.

KC: Around that same time, I had my first daughter and stopped doing fieldwork. We were doing other hiring as well, and as we started to grow—from six employees to 11 and then to 40—it became increasingly important for me to focus on the business side of things anyway, like payroll, invoicing, and insurance. When I had my second daughter a few years later, I did payroll in my hospital room as the nurses went in and out.

AG: I focus on the technical and marketing aspects of the business, and Kelly does an amazing job focusing on issues like banks and payroll. There isn't a lot of overlap.

KC: I admit that I miss doing the fieldwork from time to time. But this role was what I needed to do. Now, I don't think I could trust anyone else to do this.

AG: I've had employees ask me why they have to carry a business card around that says our company is a woman-owned enterprise. And I tell them, "Because it is." We work in a male-dominated industry, and we're proud of how quickly we can turn projects around and cut through the red tape. And, while we are serious about our business, we like to be lighthearted, too. Sometimes when we're in meetings with clients, it's like they have never heard anyone laugh before.

KC: The funny thing is that Amy and Ed are very well known in the industry. I have had employees or customers ask if I'm Ed's daughter. I even had an employee tell me he didn't know I was one of the owners. It makes me laugh to think about it. Ed actually reports to me, but mostly just for technical reasons. The three of us work well together.

AG: Kelly makes a real effort to visit the staff out in the field, so she sees more of them than I do. We have done work in 20 states, so we have staff all over the place. We encourage everyone to call and talk to us. We also try to do marketing things together so that our clients can see the face of AK. They always seem excited when they figure out that, Oh, AK comes from Amy and Kelly.

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Entrepreneurs Often Make These 3 Big Financial Blunders - Are YOU One of Them?

Entrepreneurs are some of the savviest people on the planet, aren't they? They know how to find economic opportunities that most don't even know exist. Over time, they can turn a small sum of money into a substantial amount of wealth through innovation, creativity and hard work. And yet so many of these entrepreneurs who have all the potential in the world are inadvertently stifling their own ability to achieve greatness. All because they are doing a few things that they think are the right and responsible things to do.

If you are an entrepreneur, you may find that you are falling into some of these traps. In addition to uncovering these pitfalls, I'll provide some practical solutions that can help you in your entrepreneurial journey. However, as with any financial matter, always consult with a team of professional advisors who understand the unique needs of entrepreneurs before making any financial decisions.

Mistake #1: Paying down your mortgage in an effort to increase your home's equity.

Many entrepreneurs are willing to borrow against their home from time to time in order to infuse some capital into their business. As a result, the equity in the home is relied upon as a "safe haven" or temporary holding tank for cash. Increasing equity in a home or a commercial building might seem like a wise thing to do, but the consequences of such a decision could be disastrous for an entrepreneur.

In an attempt to protect their home, many entrepreneurs wait until their financial situation requires them to tap into their equity. In other words, using equity is viewed as a last resort for obtaining cash. Here is the trouble with this logic. For those who do find themselves in a situation where they are in desperate need of cash, there is a good chance that they will be unable to receive an approval for a mortgage or home equity line.

When we entrepreneurs experience a financial crisis in our business, we are immediately less attractive to lenders. This is an important but often overlooked detail. Banks generally do not lend money to self-employed people who are in frantic need of cash. They only lend to people who can demonstrate a clear ability to make payments. Thus, if you walk into a bank and all you have to show for the most recent quarter is a weak Profit & Loss statement; you will be out of luck. And that is just the start of your troubles.

All one needs to do is play this scenario out a little further to see the danger in relying on equity for future cash flow. Since the struggling entrepreneur is unable to get a mortgage, he or she will likely begin to make use of credit cards and vendor debt, because most entrepreneurs are optimistic and will do anything to keep the business running.

The more this occurs and the longer it drags on, the worse the debt-to-income ratio becomes. Additionally, if debts are mismanaged during this time, credit scores will weaken. Now your chances of getting that loan are even slimmer.

Pretty soon, if the business does not recover, creditors get antsy...and what do you think they will go after to satisfy these debts? That's right, your home and all of its juicy equity. Not only will you lose the equity, but you'll be looking for a new place to live!

Solution to Mistake #1: Don't wait until you need the cash! Take out a mortgage when things are going well for you. If you are in a good financial situation and are maintaining good credit, you will receive better interest rates on the mortgage or home equity line. Since funds that are removed from the home may not be needed immediately for the business, simply reposition the cash into an accessible place where it can earn a decent rate of return.

Depending on your investment choices, you may or may not recover all of the interest cost of the mortgage, but remember, mortgage interest is often tax deductible, and so the amount you have to earn on the repositioned equity may not be as high as you think.

This is a key concept to proper money management for entrepreneurs. Leveraging an asset to maintain a liquid financial position is not as expensive as it seems! And if you are not sure where to put the cash from your home after it is removed, I recommend a unique financial vehicle which you can read about in the solution to Mistake #2.

Mistake #2: Putting too much money in retirement accounts.

Successful entrepreneurs know that their greatest ability to accumulate high levels of wealth lies in their ability to grow their own business. These same entrepreneurs also have plenty to say about the importance of having easy access to cash. After all, cash is king, right? And yet, despite these two factors, the very same entrepreneurs will take every last available penny each year and throw as much as they can into a retirement account.

You might be thinking, "Well, good for them! They will be rewarded for their discipline when they retire." But the problem here is twofold. First, these types of accounts are not liquid. Accounts such as Traditional Individual Retirement Accounts, 401(k)s, SEP IRAs and S.I.M.P.L.E. IRAs simply do not afford entrepreneurs any accessibility.

I see scenarios all the time where a small business owner who has not yet attained age 59 ½ (which is the age that you can start withdrawing from these types of retirement accounts without penalty) needs cash to take advantage of an opportunity or to avoid a cash flow dilemma and is unable to do so because the vast majority of his or her savings has been placed into these retirement accounts. The money is there, it's just not available to be used as capital in the very business that could probably create a substantially higher level of wealth! He or she ultimately is forced to rely on expensive lines of credit or vendor credit to keep the business going.

The second problem I see with too much retirement account money is lack of potential. You can add up all the deductions, the potential 401(k) contribution match (if the entrepreneur is also working a traditional job where 401(k) contributions are matched) along with the potential to earn an average rate of return of 10% to 12% each year and it will still pale in comparison to the kind of returns that a successful entrepreneurs or small business owner could achieve in his or her business.

Take a look at the Forbes list of the richest Americans and you won't see anyone who made the list as a result of contributing to retirement accounts. The vast majority are entrepreneurs who invested in themselves and their own businesses rather than relying on retirement accounts to create their wealth. It's okay to have some money in a retirement plan, but as a successful entrepreneur, don't fall into the trap of using it as a primary means of creating wealth. Focus on growing your business by keeping a sizeable portion of your money in a place that is safe and accessible.

Solution to Mistake #2: Forgo some tax deductions and reroute some of your retirement contributions into a more liquid financial vehicle. I would recommend that you learn how to properly structure a maximum funded cash value life insurance policy. Unlike traditional policies that are purchased primarily for the financial protection in case of the premature death of the insured, these policies are structured to maximize the growth of the cash value in addition to providing financial security in the event of death. Typically, these policies are fully funded over a period of just 5 to 7 years.

By placing larger amounts of premium dollars into a policy that has a smaller death benefit, the majority of the premium payments will go into the cash value account; rather than being whittled away by policy costs. Cash value is contractually available through policy loans and never requires a credit check.

When properly structured, it is possible to access this money through policy loans both before and during retirement with no income tax consequences or IRS penalties. This assumes that the policy remains in force and is never cancelled; so be sure not to over borrow from your policy and always make sure that the minimum insurance premiums are being met.

Sometimes the death benefit on these policies is small enough that it won't adequately cover your life insurance needs. In this case, I recommend supplementing the policy with a low cost term policy. Don't leave your family or business under protected.

While there are lots of things to think about regarding these financial vehicles, a skilled financial advisor will understand the intricacies and can help you utilize these policies to increase your liquidity. Imagine owning a financial vehicle that can provide for you in retirement but also makes cash available to you as you experience your entrepreneurial journey. You will quickly be in control of your finances and will only have yourself to ask for a loan!

Mistake #3: Keeping too much money in the stock market.

Having too much money in the stock market may eliminate your chance to take advantage of opportunities that arise during economic downturns. It is during these difficult financial times that a properly positioned entrepreneur can thrive. Entrepreneurs with safe and liquid finances will have the ability to bargain shop for their business when times get tough.

For the entrepreneur, there is wisdom in keeping a decent amount of cash in an easily accessible place. To be certain, there will be times when you will not be earning as much interest as your friends, but remember, you are a skilled entrepreneur! You will more than make up the shortfall when you are buying inventory and equipment for pennies on the dollar from your competitors who are going out of business.

Solution to Mistake #3: Keep your money in a place that is accessible and will not fluctuate with the stock market. Money market funds, short term treasury funds and even short term CD's at a bank could benefit you. Certain varieties of properly structured cash value life insurance policies can work well for longer-term planning. You may feel out of place at first, because everyone around you will be using the stock market to create their wealth. Unfortunately for them, unless they have skills that rival Warren Buffet, they will probably only reach a mediocre level of wealth.

You, on the other hand, will be able to employ your money in your business from time to time and will have greater control over where and how it is invested and what risks should be taken. If you are confident in your ability to succeed as an entrepreneur, I am convinced that your decision to maintain higher levels of cash liquidity will allow you to achieve financial rewards in your business that will far exceed the returns that can be found in the stock market.

Brad Fisher is helping entrepreneurs achieve their dreams by showing them how to structure their financial plan to maximize their financial liquidity. If access to cash is important to you, visit http://www.EDFPlan.com learn about some important financial concepts that are beneficial to entrepreneurs.

Contact Info:
e-mail: brad@edfplan.com
phone: (614) 866-2850
web: http://www.EDFPlan.com