Lou Adler – Avoid Raising Capital from Friends If You Want to Keep Both

Feb 17, 2021

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Lou Adler is the CEO and founder of Performance-based Hiring Learning Systems – a consulting and training firm helping recruiters and hiring managers around the world source, interview, and hire the strongest and most diverse talent.

Lou is the author of the Amazon top-10 best-seller, Hire With Your Head (John Wiley & Sons, 3rd Edition, 2007), The Essential Guide for Hiring & Getting Hired (Workbench Media, 2013), and the Lynda.com Performance-based Hiring video training program (2016).

His current “Diversity Hiring without Compromise” initiative is focused on developing a color-blind hiring process that ensures the best people get hired regardless of race, religion, age, sexual preference, and physical challenges.

Lou is one of the top bloggers on LinkedIn’s Influencer program writing about the latest trends in hiring, employment, and recruiting. His articles, quotes, and research can now be found in Inc. Magazine, Business Insider, Bloomberg, SHRM, and The Wall Street Journal.

The company’s new mobile-ready learning platform—TheHiring Machine—provides instant access to all of the tools needed to find and hire outstanding talent.

“Do not take money from your friends unless you want to lose them.”

Lou Adler

Worst investment ever

Lou was running a company with 300 people in it when he was 32 years old. He hated his boss, and they would argue every other week. Lou would quit every other month. One day he just left for good.

Becoming a recruiter

In his old job, Lou would work with recruiters who were making so much money. This enticed him to become a recruiter after he quit his job.

When Lou became a recruiter, he realized that hiring was just like any other business process. You just had to do it right. There were so many things being done wrong, and if he did them right, he could make a lot of money. And that is precisely what he did.

Winning the recruitment game

After year two, Lou tripled and then quadrupled his income. He could not believe his luck. After riding on this wave of success for about 25 years, Lou decided to try something different. He decided to automate his recruitment process. This was during the dot-com boom.

Losing his business and his friends

Lou invested a million dollars and borrowed another million dollars from his friends and used the money for his new business venture.

While Lou’s idea was a smart one, the market was just not ready for it. For this reason, everything fell apart. He lost his company and the friends he had borrowed money from.

Lessons learned

Raising capital by borrowing from your friends is a bad idea

Be very careful when asking friends for money to run your business. When you take someone’s money, you got to deliver. If you do not, you will undoubtedly ruin the friendship.

Learn how to manage your cash flow

Cash flow is vital in running a successful business. Do not ignore it. Learn how to manage your cash flow, and everything else will fall into place.

Andrew’s takeaways

Being skilled in something does not necessarily make you a good businessman

You may be very good at doing something, for instance, a great technician, then you decide to start a business as a technician. Soon enough, you will realize that the job of running a business is very different from the position of being a technician.

Sometimes the problem is just your timing

Just because a business fails to succeed does not mean it was a bad business. Sometimes, it is just the timing that is wrong. Great idea, but at the wrong time.

Cash flow is king

It is not cash that is king; it is cash flow that is king. Raising money is easy. The real challenge comes in creating the cash flow to build a profitable business.

Do not mix friendship with business

If you have to borrow money from your friends to run your business, make sure that you do it professionally. Do not let friendship get in the way, because if the company fails, so will the friendship.

Actionable advice

Life is not all about money. Think about what is important to you and let that drive you.

No. 1 goal for the next 12 months

Lou’s number one goal for the next 12 months is to finish writing his fourth edition of his book Hiring With Your Head: Using Performance-Based Hiring to Build Outstanding Diverse Teams.