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Entrepreneurs & divorce: the odds are against you

By Andrew Feldstein 

Entrepreneurs are the new “rock stars” of the business world. Twenty years ago, the word “entrepreneur” was code for “looking for my next job,” but today, there is a legitimate crop of entrepreneurs looking to bring new services and products to market.

Toady, it seems that meeting entrepreneurs with increasing frequency is the new normal. That, plus the fact that the latest crop of millionaires and billionaires come from tech companies like Facebook, Twitter, Airbnb, Uber, and Vancouver’s Hootsuite – they give us lots of inspiration.

And Toronto, Canada’s long-acknowledged business centre, is now coming into its own as an entrepreneurial hub. We have the MaRS Discovery District, 14 RIC Centres in southwestern Ontario that help entrepreneurs fast-track their businesses to market, the Maple Leaf Angels [angel investors], and all kinds of business conferences. Toronto is also the Canadian headquarters of Cisco, which provides much of the infrastructure of networks that make communication seamless.

And in Canada, we’ve had a decade of Dragon’s Den, the CBC landmark reality TV series that celebrates entrepreneurs and their big ideas. In the U.S., we have Shark Tank, which many Canadians watch on the ABC Network.

That’s a lot of entrepreneurs.

So, what’s the problem? Entrepreneurs are good for the economy, right? Create jobs and pay taxes?

Entrepreneurs are a special breed of people and being married to one or living common-law with an entrepreneur can add extra strain on a relationship.

Although neither the U.S. nor Canada tracks the divorce rates of entrepreneurs, my 20 years as a divorce lawyer tell me that the divorce rate of entrepreneurs is higher than the national average of around 40 per cent, somewhere between five and 10 points higher. And the divorce rates of second and third marriages can reach 67 per cent and 74 per cent, respectively.

As much as we idolize entrepreneurs, a 2010 Industry Canada study concluded that 30 per cent of small businesses won’t survive longer than two years, and only 50 per cent make it to five years. We hear and read about all the entrepreneurs who made it big, but the sad reality is that many entrepreneurs don’t succeed.

There are plenty of reasons for the high divorce rate of entrepreneurs and in a nutshell, it’s this: something’s gotta give.

And, with many entrepreneurial divorces I handle, imputing the correct income to the business is messy and challenging: how much is the business really making and is the business profitable? A lot swirls around this.

When you’re starting a business, you need everything and you may have very little. You may have a well-fleshed out business idea, or you may have just a kernel of an idea. You may have a business partner, or not.

If your business partner is your spouse, the daily demands of nurturing and looking after the business frequently clash with the needs of your spouse who is also nurturing and looking after the same business. And you are both trying to find time for the kids.

I remember when I finished law school, wrote the bar exam, and started my own family law firm. I didn’t create a better mousetrap or an iPad, but I took a risk and started my own law firm without any prior business experience.

But I had an advantage over most: I came from a family of accountants. We would frequently talk business over the dinner table. I am told I am more fluent in numbers than many business people.

In those early days, I was fortunate because I was able to live at home for a few years and save on rent money for an apartment or a house.

A while later, I moved out my parents' house, I married and had two children. There were times when my wife would look at me at the mall and say, “That would be nice….” And I responded with: “We can’t afford it, given all our other commitments with office rent, staff salaries, IT support and so on.”

It’s tough to say “no” to a spouse and children.

Then there is the time element: a business takes a long time to build, years in fact. If you break this down on a daily basis, it is very, very long hours spent building the business.

Ask any entrepreneur and they will tell you that the hours are just nuts. Entrepreneurs have the most erratic schedules. In the early days, there are all kinds of emergencies and opportunities that pop up everywhere and they all need attention.

With so much time spent on building the business and being away from your spouse, communication ends up being strained. You arrive home, exhausted and want dinner and put your brain into neutral by watching sports or movies, or whatever. Your spouse, having missed you all day, wants to have a conversation. You’re not in the mood to talk.

Or, you had a bad day and don’t want to take it out on your spouse so you clam up about the client that walked out the door and you’re going to be short that month.

Being a family law lawyer and entrepreneur didn’t make me immune from divorce; my wife of 14 years and I divorced in 2014 in spite of a business that’s doing well.

Many have observed that entrepreneurs are frequently not nice people. They are tough to be with. They are often demanding, creative, curious, relentless, hard-working, and irrational. They are trying to operationalize a big idea, many with insufficient funding and staff to get the job done.

A friend of mine told me about a “serial entrepreneur” in Denver, Colo., who kept trying to “hit it big.” In more than 25 years of trying to operationalize several businesses, none of his ideas worked.

Finally, his wife gave him an ultimatum: “This idea better work, or I can’t keep funding these ideas.” Sadly, that last idea flopped as did the marriage.

I’m not trying to be a wet blanket. Business is what makes the world go around; we all need products and services that someone else creates and provides. I salute Canadian entrepreneurs from coast-to-coast-to-coast.

And I believe it is always a good idea to go into a marriage or common-law relationship with your eyes wide open, clear expectations, good communication, an understanding spirit, and a bit of good luck. 

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