Good, Fast, or Cheap. Pick two. Maybe you have seen a sign like this at your neighborhood mechanic. It is both clever and true and it captures the essence of trade-offs.

A point I make to my children from time to time is that they can have anything they want, they just can’t have everything they want. This is an obvious oversimplification, but it highlights the truth that achieving anything of value requires trade-offs. Sacrifices must be made. Trade-offs are everywhere – economics, investing, relationships, fitness, career choices, school. Literally, everywhere.

Sometimes we forget about the trade-off we have accepted, or we simply pretend that we can have it all; these situations typically end in disaster. I once worked with an entrepreneur who raised venture capital funding but continued to run the company as if it were a lifestyle business. This resulted in some tense Board meetings. When you accept investor money in exchange for a portion of your business, you give up some measure of control over your growth strategy.

In many family businesses, especially when there are multiple generations of owners, there are often competing priorities among the shareholders that must be navigated. In times of leadership and ownership transition, these priorities and the related trade-offs can easily become a point of conflict. Often the older generation is less concerned about growth and more concerned about liquidity since they want to maximize cash flow available for distributions or stock buybacks. The younger generation may be more interested in reinvesting profits to grow the business and maximize long-term value. There may be a third priority around maintaining control of the entity. Selling equity to an outsider or even issuing bank debt gives some measure of control to a third party and can limit your flexibility to decide what you do with your excess cash flow. Thomas Sowell said “There are no solutions. There are only trade-offs”.

The point is to never ignore the trade-offs you face in your business. Communicate clearly about what you are optimizing for and where you are willing to sacrifice.