From the August 2000 issue of Entrepreneur

What separates the 44,000 entrepreneurs in bankruptcy court from those soaring to the top of earnings lists? Is it really all about profits and losses, or is it something deeper . . . something that stretches all the way back to childhood? Believe it or not, what you learned about money as a child can affect how you deal with your business's finances today.

We asked three entrepreneurs to discuss their financial "inheritance" and how it affects their day-to-day business dealings. Then we enlisted Karen McCall, founder of the Financial Recovery Counseling Institute and author of It's Your Money: Achieving Financial Well-Being, A Guide and Journal (Chronicle Books), to weigh in with her thoughts on the past and the present.

Linsey Mills

Business Data: Integrated Financial Services, a 3-year-old Winston-Salem, North Carolina, financial-planning and seminar-presentation company

Allowance: Received Allowance in exchange for chores; saved it

Things To Know: Rural, two-parent household; always saved money; equated entrepreneurship with financial freedom

Self-Description: Frugal in personal life; willing to go into debt only if it ultimately leads to profit: "My parents always talked about the bills that were due, and I actually helped pay them. I didn't give them money, but my mom would take me in the car and send me in to pay the cable bill or the light bill.

"My dad was very frugal. He was one of those who wore his clothes forever. My mom taught me how to use money to make money. She'd say, 'Let me borrow some money until I get paid, and I'll pay you back with interest.' I always thought that was great. It was my first encounter with interest. My grandfather was a clammer, and I had never seen him work for anyone. I always thought that was interesting.

"I don't like debt, but as I've gone along, I've had to accumulate more. If I can borrow $5,000 and make $8,000 to $10,000, I consider that investment debt-debt that ultimately pays for itself."

Karen McCall: "Linsey has had models with very good money behavior: his parents and grandfather. But for those who aren't as well-schooled, there's danger in believing debt is an investment. Warning signs to look for: feeling increasingly panicked, buying on margin, carrying an increased debt load and being secretive about financial dealings."

Clay Mazur

Business Data: Co-founder of Interstate Restoration Group Inc. (No. 80 on Dun & Brad-Street and Entrepreneur's 2000 Hot 100 listing), a Fort Worth, Texas, firm specializing in reconstructing commercial properties damaged by fire and water

Allowance: None. "I got money whenever I asked for it."

Things To Know: Upper-middle-class, two-parent household; got start-up capital from parents

Self-Description: In business, spends only on needs; in personal life, spends on wants and needs: "My parents never talked about money. I pretty much learned on my own. When I got money, I saved it. I always had a little laying around.

"My mom was a big spender. She loved to spend on clothes and furniture. My dad was really tight. When it came to debt, they paid as they went and stayed out of debt as much as possible. They bought me my first two cars, and paid my college tuition until I failed a class.

"I'm very comfortable with debt. I like to have supplies on hand for my company, because we can get called out at any time of the day. We can't sit around trying to round up suppliers. We just bought four pieces of equipment that cost $116,000-they're going to sit on a trailer until there's some use for them.

"With the company, I'm a lot more conscious with the money. When I spend, -I want to get value for it. But in my personal life, I'm more open. I work hard and like to play hard. I spend a lot of money doing it."

McCall: "Clay sounds balanced. He has a successful business, expenses are under control and he doesn't deviate from that. If he were less disciplined and the company weren't as successful, having a dual money personality [being frugal in business but a big spender in his personal life] might affect the business as the individual may spend liberally, feel guilty and then self-correct with a stint of frugality."

Lois Melbourne

Business Data: President and CEO of TimeVision Inc., an Irving, Texas, business-to-business software-development firm

Allowance: None

Views On Debt: Avoid it if possible

Things To Know: Poor, rural, two-parent household; parents never discussed money with her; father refused to disclose his salary even to help her get a scholarship; family members were self-employed

Self-Description: Only started spending for needs and wants in the past year: "At my first job, I made more than my parents' combined. You didn't spend money in our house-hold. All [five] kids were expected to earn their way-as soon as we were 16, we were working. I learned to be very careful what I spent money on; I also learned there's defi-nitely a difference between what you need and what you want.

"We've really boot-strapped the company and managed growth via cash flow. We probably could have grown faster if we had gone into debt or taken on equity investors. But I believe in knowing where we stand, and knowing we can support the investment we have. I take my employees' livelihood seriously. It would kill me to think I overextended the company and cost people their jobs."

McCall: "This is a fabulous case of parents who did their offspring a huge favor by instilling strong money values. Lois learned to differentiate between wants and needs. Entrepreneurs with this background, however, should be aware of one potential problem: They may feel such gratefulness and loyalty to employees that they borrow money trying to save a struggling company rather than lay off workers."

Rags And Riches

How "rich dad" and "poor dad" entrepreneurs would view identical situations, according to Robert T. Kiyosaki, author of the bestselling Rich Dad Poor Dad (Warner Books):

Scenario #1: Your business faces a looming cash-flow problem at the same time annual raises are due. Do you hold off or give the raises?

Rich Dad: Depending on the source of the financial constraints (internal mismanagement requires other actions), he explains to the troops that he has to ensure the company survives. First, he leads by example and takes a salary cut. He would then ask the staff to hold off on their pay raises.

Poor Dad: He gives the raises anyway-his concern for workers is the deciding factor.

Scenario #2: A huge conglomerate wants to place a substantial order with your company. What do you do?

Rich Dad: He makes sure the client is no more than 20 percent of the business, because he never wants to be dependent on one client.

Poor Dad: He gets so excited, he takes the order, thereby making his company vulnerable to disaster down the road.

Scenario #3: You've been invited to a business function and want to present the image of success. How would you do this?

Rich Dad: He doesn't feel you have to present this image by over-dressing; most often, he'll show up wearing casual, good quality clothes and expensive shoes. The richer he gets, the less he wants to "look" rich and the more he wants to downplay his success by dressing in a low-key but high-quality fashion.

Poor Dad: He wants to look rich and prosperous by dressing more formally, but buys cheap, lesser quality clothes and shoes.