How to Move From Corporate Exec to Entrepreneur

Sallie Krawcheck
Bloomberg/Getty Images Sallie Krawcheck, owner of Ellevate Network, speaks at the Bloomberg Year Ahead: 2014 conference in Chicago, Illinois, U.S., on Wednesday, Nov. 20, 2013.

Sallie Krawcheck is the Chair of Ellevate Network (formerly 85 Broads), the global professional women’s network.

As a founder, it's not about how much cash you can make, but how little and for how long

This post originally appeared on LinkedIn. Follow Sallie Krawcheck on LinkedIn. This post is part of a series titled “Behind the Scenes” in which Influencers explain in detail one aspect of their work. LinkedIn Editor Isabelle Roughol also provides an overview of the 60+ Influencers that participated in the package.

I get it. You want to be an entrepreneur. Enough of the drab cubicle or undersized office. Enough of the super-long meetings with the formal agenda. Enough of the – ugh – corporate cafeteria. On to the exposed brick walls, casual wear and foosball tables. Oh, and eventually becoming a zillionaire.

I’ve made the switch from corporate executive to entrepreneur. Before you do it, it’s worth recognizing that it can be a very tough move, and being an entrepreneur can be a very tough undertaking. In fact, I tell anyone who asks that being an entrepreneur is tougher than running Merrill Lynch. That’s not to say it’s not an unbelievable experience… but it’s not for everyone. Here’s how to make the switch.

First, the practical. Do you have enough money to support yourself? As the founder of a start-up, it’s not about how much cash you can make, but how littleyou can make and for how long. Firstly, that cash can help the business to be successful; and, secondly, if you are going to be successful, the value of that dollar working in the start-up is worth massively more than in your bank account. So before you make the switch, do the math and shore up the bank account.

Then there’s the soul searching you need to do. Are you after the idealized portrait of a start-up? Or do you really want to build something and create something from nothing? Are you so passionate about the idea that you’re ready to go all-in? This takes being deeply honest with yourself about what motivates you and how you best operate. Do you live for the feedback in the formal year-end review? Forget it; the market is your review. Boss choosing work and setting deadlines for you? Nope. Procrastinator? Not good. Like to spend half the day at the water cooler complaining about your colleagues or comparing notes on last night’s game? You’re doomed.

That’s because you can make a number of wrong decisions or have a batch of “I’m in a coasting mood” days at large companies. If you’re not pulling as hard that day, someone else likely is. And if they’re not, that 15% profit margin on those billions of dollars of revenues absorbs some good number of mistakes. A cash burn-rate counted in months means you can’t make many mistakes that take months to correct.

And, at smaller, hyper-growth companies, everything matters. Again, at a large company, you never want Joe-the-talented-up-and-comer to quit. Ever. But if he does, it’s going to be some time for the loss of that one guy (out of 1,000 or 10,000 or more) to hurt the p&l. At a smaller, growth company, everything matters… and everything matters pretty quickly. I remember when I ran Bernstein: of our 18 research analysts, if one left, there was an immediate, direct and negative impact on the p&l.

Thus, it takes a certain mindset to be an entrepreneur. Someone who is a self-starter, passionate about a business, optimistic (some even to the point of marginal delusion), who can handle the heat and the stress. Someone who can let go of corporate trappings and pageantry.

And, to be successful, it helps to be someone who is ready to go “all in.” That can mean drawing on what you’ve built, such as your network. I’ve met any number of people who’ve told me that they view calling on their networks for funding and introductions to potential customers as “cheating.” (Yes, I’ve really heard this… quite a bit, actually.) Well, strong networks have been shown to be one of the key differentiators of success for entrepreneurs. And getting to success can mean going all in emotionally and risking failure and rejection. Because you will fail; it’s just a matter of what you fail at and how quickly you recover. And you will be rejected; it’s just a matter of getting past the rejections.

Not quite there? Then, if possible, put a toe in the water before taking the plunge. I spent time with entrepreneurs, advising them both formally (as part of their advisory boards) and informally. They got access to the expertise I had built and I got to “test drive” the idea of working outside of corporate America.

Sallie Krawcheck is the Chair of Ellevate Network (formerly 85 Broads), the global professional women’s network.

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TIME wall street

Diversify Corporate America

Sallie Krawcheck
Javier Sirvent for TIME

I wouldn’t have thought my gender affected the decisions I made on Wall Street—until I got fired

Capitalism is the most successful economic system in history. But sometimes it breaks. So too do the big banks, the most highly distilled form and symbol of capitalism. And never more so than in the crash of 2008.

The culprit in that crash has broadly been identified as greed, and the solutions have focused on additional regulation of Wall Street. But there have been few proposed solutions to one of the most important, and mostly unexamined, causes of the downturn: groupthink.

I saw groupthink in action during my time on Wall Street. One sees hints of it in research showing that subprime bankers had worse personal real estate performance than the average American. And I lived it when I was fired from my position running Smith Barney at Citi after advocating partly reimbursing clients for losses on (unintentionally) high-risk products we sold them. I was told to “get back in line” and was later relieved of my duties.

When people ask me if I was fired because I am a woman, my prior answer of “Absolutely not” has now become “Well … not exactly” as I’ve reviewed the research on gender differences in the workplace.

While I did not necessarily take the positions I did because I’m a woman, research shows that compared with men, women are more risk-averse, take a longer-term perspective and are more concerned about maintaining relationships. And thus in a climate like Wall Street’s, women are arguably more client-focused.

These differing perspectives are neither good nor bad in and of themselves, and they can be complementary and therefore can strengthen an institution. Studies have shown time and again that companies with diverse management teams outperform those with less diverse teams–and that diverse teams outperform even more “capable” (on paper) teams.

That makes sense to me. Earlier in my career, I worked at Sanford Bernstein, by far the most diverse company I’ve been at. We actively hired people with non–Ivy League, non–Wall Street backgrounds, including even a taxi driver. (And that’s not to mention a just-returning-to-the-workforce-after-maternity-leave mom like me.)

When I was director of research there in the late 1990s, we began pursuing a strategy very different from that of the rest of Wall Street, pulling ourselves out of the extraordinarily lucrative–but conflicted–business of stock underwriting. We energetically debated the trade-offs of this decision. Our business suffered greatly for a few years (even our clients questioned us), but when Eliot Spitzer revealed that research analysts had been misleading investors by publicly praising–but privately disparaging–stocks, our lonely choice was validated. There is no question in my mind that it was because we were a diverse group of individuals that we questioned the conventional wisdom.

But it’s not all about individual firms’ fates and fortunes. The entire economy can suffer when groupthink is allowed to run rampant, as it did in financial services–among bankers, regulators, rating agencies, boards, analysts and others.

When diversity is embraced, however, there can be a major economic upside. The economic engagement of women, in particular, is a driver of economic growth, which positively affects everyone. A 2012 Booz & Co. Goldman Sachs report estimated that fully engaging women in the economy would increase U.S. GDP by a whopping 8%. More women in the workforce begets more demand, more demand begets more jobs, more jobs begets more demand.

What’s more, diversity can drive second-order positive economic impacts. Recent research from the Center for Talent Innovation indicates that greater diversity can power greater innovation.

At the end of the day, though, diversifying the leadership of Wall Street and corporate America is a fairness issue. Companies with more-diverse leadership teams have lower gender-pay disparities throughout their workforce. And for the banks, the fairness imperative is even clearer: gains in good times accrue to shareholders and employees, who represent an increasingly nondiverse group, while the risk of extreme losses has been shouldered by taxpayers. Unfortunately, progress on diversity has stalled in corporate America and actually gone backward on Wall Street.

One can see the promise of a business world dominated by those who “think different.” Harnessing the messy clash of ideas inherent in diverse perspectives is the smart path forward to a more modern and sustainable form of capitalism.

Krawcheck is the head of 85 Broads, a global professional-women’s network

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