In this interview with HBR’s Women at Work team, entrepreneurs Stacey Abrams and Lara Hodgson share hard-won lessons from starting and running three companies together: first a consultancy, then a manufacturer, and finally a FinTech. They were blindsided by the cash-flow and other systemic issues they ran into when trying to scale a new but popular product. They reflect on what made their long-term partnership work well and how they’ve come to understand and manage self-doubt, guilt, and the repercussions of underrepresentation. They also share tips for networking, hiring and retaining employees, learning the ins and outs of finance, and when to walk away from the company you built.
Stacey Abrams met her business partner, Lara Hodgson, in the lunch line at a conference. They struck up a conversation, became friends, and went on to start three companies together, in professional services, manufacturing, and FinTech. They learned a lot along the way. In their new book, Level Up: Rise Above the Hidden Forces Holding Your Business Back, they share tons of hard-won lessons. By describing their successes and failures, they hope to smooth the path for other entrepreneurs, especially women and women of color.
The Women at Work podcast team spoke with Lara and Stacey about their experiences and the advice they have for other entrepreneurs around scaling, managing cash flow, partnering with customers, planning, and work-life balance (which Stacey refers to as “a lie from the pits of hell”!). Below is an abridged and edited version of the conversation. You can hear the full interview here.
What were the most important personal qualities that you brought to your entrepreneurship that made the difference in not only getting your businesses off the ground but then continuing to grow them?
Lara Hodgson: Without a doubt, I would say curiosity for learning and resilience/grit.
Stacey Abrams: I’m not a risk seeker, but I am very risk tolerant. One thing that always drew Lara and I together is curiosity: loving to learn new things, wanting to understand how things work and make them better, what a solution might look like, what new information might add to the equation.
Stacey, what would you tell our listeners about how you make business partnerships work?
Abrams: A lot of partnerships begin with long-term friendships and morph into a business partnership. Lara and I were friends: We knew each other. We liked each other. We could reach out to one another. But our friendship was built more on a mutual respect than it was on longevity.
So when we started working together, we had rules about how we would operate, what we would expect of each other. One of the most important aspects was a commitment not only to honesty, but also to transparency. Honesty is telling the truth. Transparency is telling the truth before you have to. We don’t wait for the hard question. We don’t wait for the mistake to be uncovered. We get ahead of it. And that helps not only our business relationship, but our personal relationship and our relationships with clients.
Lara’s one of the smartest people I’ve ever known. I trust her intellectual integrity so even when we disagree, which happens, we don’t distrust the fundamental premise of the argument. We may disagree over the solution, but we don’t doubt the other one’s grasp of the challenge.
Hodgson: Stacey and I didn’t go to the same church or have children in the same school. So our normal week allowed us time together, but it also allowed us time apart, which is important because it preserves the diversity of our thinking. Where a lot of partners go astray is they spend so much time together that they actually lose their diversity of thought and start to think alike. That’s dangerous. So Stacey and I always had the ability to approach a problem, appreciate the different perspectives, and then continue to develop those different perspectives by allowing our lives to have some distance.
In the book, you write, “Sometimes what’s holding you back is not a glass ceiling, but rather a sticky floor. Don’t let your self-doubt overcome you.” Can you talk about whether you dealt with this in starting your businesses and how you dealt with it?
Hodgson: I deal with it every day. Women and underrepresented founders can question themselves: “Am I good enough? Am I smart enough? Am I approaching it the right way?” What’s so valuable about our partnership is that it keeps us both grounded when we have those worries.
Abrams: We are exhorted, especially women in business, to be fearless. That is the dumbest advice. Because fears are real and salient.
Lara and I confront the fear. We don’t ignore it. We don’t pretend it doesn’t exist. But we try to investigate its roots and figure out how we can befriend it. How do you navigate it? How do you leverage it? That’s easier to do that when you have a business partner and a friend, but it’s possible to do even on your own. Make sure you’re not ignoring the warning signs but that you’re investigating and preparing for the danger.
Do you feel like being women helped or hindered you as you launched your businesses?
Abrams: Yes, both. As a woman of color, I don’t have the ability to leave behind the dimension of race when gender is also part of the conversation.
In the book, Lara and I talk about how there are expectations that come along with gender, or with race, and or with both — and the challenge is trying to understand which -ism you’re facing. But the opportunity is understanding how you can leverage the diversity and the distinction of who you are to differentiate yourself.
So as women in business, we often see problems in a different way. We are used to having to navigate and circumnavigate challenges. The same thing is true for people of color. We bring different perspectives because we don’t always have access to the traditional resources or standard opportunities that others may take for granted. What people see isn’t going to change even if we close our eyes really tight and hope they don’t notice. So instead you have to decide how you’re going to leverage it and prepare for when it is used against you.
Hodgson: I am very often, as you can imagine, on FinTech panels where I’m the only female. When that happens I choose to let being a woman be my superpower. What I mean by that is I’m not going to try to blend in. In fact, quite the opposite. I’m going to say something bold that makes the audience uncomfortable, and they are going to remember me.
Abrams: Part of the opportunity when you face those challenges is to insert yourself into the organizations that perpetuate them, and you don’t go in saying, “I’m going to destroy you from the inside.” You don’t come in as the conqueror. You come in as the inquisitor and you start to create change from inside. We sometimes let the size and scale of the challenge overwhelm us, and we become myopically focused on the situational to the exclusion of the systemic. But if we don’t address the systemic issues, the system just gets more hardened.
You write in your book about the net 30 payment system and how it hinders many small businesses. Do you think that is a systemic issue?
Hodgson: Yes, I think it’s absolutely institutional, and it’s an example of what Stacey mentioned. Most business owners think it’s situational, and quite frankly, we did the first time we came up against it. A net 30 invoice is when you deliver your good or service to your customer and you give them an invoice that says you can pay in 30 days. When we were growing our second business, our clients were asking for net 30, and Stacey and I thought, “Sure, we can give you that.” And we went to our suppliers and said, “Well, if we have to wait 30 days to get paid, would you give us 60 days?” It seemed like a great solution. We proudly walked away thinking we’ve got this in the bag.
And then that net 30 invoice didn’t get paid for 60, 90, 120 days. Our initial thought was that we messed up. That’s often your first reaction as an entrepreneur: “I messed up. I didn’t negotiate correctly.” But as we started to talk to other people, they said, “You just have a working capital issue. Everyone has that.” Stacey and I were thought, “Wait a minute. If everyone has this problem, then the existing solutions must not work very well.”
What were some of the sort of widely accepted practices that blindsided you two as you were getting your first business off the ground, and how did you handle them?
Abrams: As someone who didn’t go to business school, it was all blindsiding. My first company was a small consulting firm. I had one client, and they paid me when I sent them an invoice. So the first time I sent an invoice and got silence for 30 days, I was astonished. This was a major company and I expected them to remit payment in a timely fashion. And in our business together, I was responsible for accounts receivable so it was my job to go and find our money. These big companies that absolutely had the resources to remit payment would not do so for want of a few pennies. It was confounding. I was calling them and they were taking the call, which meant they had a staff person whose job was, rather than cut my check, to tell me to wait.
Hodgson: One piece of advice I would give is to find someone to help you manage the finances of your company and, more importantly, explain things to you in common terms. Because finance can be scary, many people hire a person, typically a banker, and then they abdicate the finances to that person and assume it’s covered. That’s a big mistake. You need to know the finances. You don’t have to become an expert but bring in some who can explain it to you in terms that you understand. If they can’t do that, they’re the wrong person.
Abrams: And there’s no shame in asking even elementary questions. When Lara and I started working together, I would make a running list of glossary terms, and then call her up and ask her, “What does this mean?” We often don’t ask [potential investors] questions because we’re afraid that revealing our ignorance will diminish our shot at the money. If your idea is solid, asking thoughtful questions will not decrease the likelihood of their investment.
We have a question from a listener. Lauren Sanford is one of the owners of Two Little Birds Eatery in Rockport, Massachusetts. She wants your help navigating customer relationships. Here’s her question:
“During the pandemic, we’ve had to raise our prices at our small restaurant because of increases in product costs. Some of our customers who we value and who have been loyal to us since the beginning have expressed disappointment with the higher prices. How can we maintain good customer relationships through the ups and downs of this economy?”
Do you have any thoughts for Lauren?
Abrams: I go back to transparency. When you’re a small business owner, you’re aware of the universe of challenges. When you’re a customer, you’re only aware of your moment of interaction. So you might say on your menu, “I know our prices are higher because we’re facing these supply-chain issues. As soon as this gets better, we are going to reward you.” Something liked that acknowledges the legitimacy of the pain, gives an explanation so it doesn’t seem like greed, and promises a remedy even if you don’t know exactly what that looks like yet. That brings your customer in and makes them a partner in your business. It’s no longer an oppositional relationship.
What advice can you give our listeners about hiring and retaining employees in a moment like this, when we’ve got this war for talent, and when your company is still in its early days, and you can’t compete with the same kind of benefits that the bigger players can offer?
Abrams: I believe in growing talent and giving opportunities that they might not get somewhere else. Titles matter, and sometimes in lieu of monetary capital, social capital and influential capital work.
Growing the talent you need means having a tolerance for mistakes. If you’re afraid to hire new or young or inexperienced people because you’re afraid of mistakes then you’re going to stagnate your business. What I’ve found is that when you grow your talent, it’s loyal, it’s resilient, and it’s forgiving.
Hodgson: The other advice I would give is hire slowly and fire quickly. If you hire quickly, you might find someone with a great skill set, but you haven’t had the chance to assess their mindset. And the mindset matters more. There are very few things you can’t teach someone how to do, but you can’t teach someone how to think. So hire slowly so that you can assess mindsets and then fire quickly if you find that mindset is not a match.
In the book, you write about how it can feel daunting to pick up the phone or send a cold email, but you can’t let that hold you back when you’re trying to grow a business. So from your experience, what sort of opening lines or framing typically leads to creating the connection that you want?
Hodgson: As Stacey knows, I’ve never met a person that I won’t talk to. The mistake most people make is that when they get someone on the phone, they launch into what they’re selling, or what they offer, or the solution they have. But that’s about you. What I’ve found to be most successful is to start by framing the problem — the shared pain that you know that they have. If you can build that connection on a shared problem or pain point, then you can collaborate on a solution.
Abrams: We have a tendency to knock ourselves out of the game before we even start. I have this other job and life in politics where apparently you’re supposed to say things out loud. I’ve learned not to worry necessarily about the response. I have no control over what someone says back to me. I can only control what I put out there. So to Lara’s point, don’t start with you. Start with them.
Also, do your research. Don’t become a stalker though. It’s not about reciting their lives like Wikipedia, but know enough to know whether they’re going to care about what you’re offering.
And under-promise and over-deliver. Don’t say, “I’m going to follow up with you tomorrow,” if you know that tomorrow you’ve got two soccer games, a quidditch match, and something else. Instead, say, “I would love to follow up with you soon.” Give yourself the space to be able to meet your obligations because that interaction is going to determine the longevity of the relationship you build. That first interaction is to get their attention, but to keep their attention and to build trust, you’ve got to meet your obligations.
Some women start their own businesses in the hopes of gaining some flexibility or control over their own schedules. In your experience, how realistic is that?
Abrams: I do not believe in work-life balance. Work-life balance is a lie from the pits of hell. I believe in work-life Jenga, where you acknowledge that you’re trying to make all of these pieces fit together. Yes, entrepreneurship gives you more flexibility, but flexibility is limited. I have parents who are raising my niece, so part of my obligation is giving them financial stability.
When Lara and I started our businesses, I was very honest with her about the flexibility I needed to sometimes take on additional jobs, because I didn’t have the luxury of not having a steady income at times when we weren’t able to draw a salary. Be honest with yourself about what the other pressures on your time will be. Don’t pretend that things are going to suddenly be fixed because you get to wake up at 8:00 AM instead of 7:00 AM, and the world is going to be different because you’re in charge of yourself. No, you’re just shifting responsibilities. You’re not eliminating them.
Hodgson: Becoming a mother and wanting flexibility was the catalyst for me starting a company. I can honestly say I work more for myself than I’ve ever worked for anyone else. But there is flexibility in how and when I work. My mentality has been: Forget balance and strive for optimization. For example, if I have a board meeting, I’m focused on that. I’m not checking my emails. I’m not checking in with work. I’m not texting. I am all in. But the minute I leave and I’m with my son, I’m all in with him and I’m not checking emails and I’m not texting.
As women, we often layer guilt on ourselves because we’re at work when we think we should be with our children. Or I’m helping my parents, but I should be doing work. That guilt comes in when we draw this line and then we cross it, or we allow another person to cross it. Being intentional about where your line is and holding that line will remove the guilt, but it will also allow you to optimize your time.
When do you think is the right time to start thinking of an exit strategy from a business?
Abrams: Part of the exit strategy is being ready to leave when you know you’ve done your part and you’ve created your own irrelevance. When you no longer can put in what the business deserves or when there is someone who can do a better job than you can, it’s time to move on.
I no longer work day-to-day with NowAccount. I’m still a shareholder. I serve on our advisory board. I do consulting work for the company, but I’m no longer in the day-to-day operations, and that happened because I had this other life that took precedence. I wasn’t essential at NowAccount. I was essential at my other job.