WHERE NOT TO LOOK FOR MONEY TO START YOUR COMPANY

One of the major obstacles Entrepreneurs face in starting a new business is where to go to raise the required money they need. It can also be the most time consuming, frustrating, and disheartening factor in start-ups. Here are some suggestions on where not to go that will save you time, energy, and angst. By not going there, you can focus your energies and precious time on more realistic prospects.

       1. Banks – At first blush, this may sound crazy as that’s where the cash is. Banks are also one of the cheapest forms of acquiring money. However, you need to understand how they work. First, they generally are not interested in loaning to start-ups. They want established companies that they can see some numerical history to help them determine the probability and risk of getting paid back. No matter what their individual criteria are-which can vary between banks they will not loan a start-up money unless the principals sign personally and have assets to back up the loan in case of default. Bankers focus on the negative side of new ventures: How can I recoup my money if the business fails? Their depositors do not expect them to risk their money; and for this safe approach, they are satisfied to receive a lesser return on their money.

On the other hand, investors focus on how fast can the company grow and how big they can get.

      2. Venture Capitalists receive a tremendous amount of media publicity about their big hits with famous high profit companies. The truth is they expect that most of their investments will fail.

Here are some of the things they want before investing in a company:

         – Proven successful owners.

         – A team of experienced people in place.

         – A quality business plan whose idea needs to win out against strong competition. Perhaps two out of 1,000 plans they look at will be chosen for  investment.

Scalability—They want to invest in companies with high growth and profit potential within 5 years.

You should also know they will insist on a high equity position in your company and most likely the ability to take it over if you can’t make your projections.

     3. Family – a good source of money for start-ups as they know you, are on your side, and will not scrutinize your plan like outsiders. However, I would caution start-ups to think twice before accepting family money if they feel the family member cannot afford to lose the money and also does not fully understand the risks.

So, save yourself a lot of time and aggravation and don’t look for money from bankers and venture capitalists if you are a start-up. Down the line, with some success behind you, they may be perfect.

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THINKING OUTSIDE OF THE BOX to solve a moral/ethical dilemma:

I have received this email story many times over the years with no idea who created it. I think it’s a good one to share to illustrate entrepreneurial thinking. You are driving along in your car on a wild, stormy night. You pass by a bus stop, and you see three people waiting for the bus.

 1. An old lady who looks as if she is about to die.

2. An old friend who once saved your life.

3. The perfect man (or) woman you have been dreaming about. Which one would you choose to offer a ride to, knowing that there could only be one passenger in your car? Think before you continue reading.

This is a moral/ethical dilemma that was once actually used as part of a job application. You could pick up the old lady because she is going to die and thus you should save her first; or you could take the old friend because he once saved your life, and this would be the perfect chance to pay him back. However, you may never be able to find your perfect dream lover again. The candidate who was hired had no trouble coming up with his answer. WHAT DID HE SAY? He simply answered: “I would give the car keys to my old friend and let him take the lady to the hospital. I would stay behind and wait for the bus with the woman of my dreams.”

Success is All in The Attitude

“Entrepreneur commissioned me to write the following article, which they ran January 4. I believe it applies to small business as well as large and services, product and home based businesses. Here it is:”

What’s important to the success of small-business owners and entrepreneurs? Knowledge, skill and talent.

However, many competitors have the same traits you do. The key to beating the competition and achieving success is mental, reflected in one’s attitude, totally controlled by the individual and requires no cash. This holds true in most human endeavors besides business–in sports, the arts and politics.

How many times have we seen the underdog team or player win over the more talented opponent? The difference is often attitude.

These 12 attitude attributes can put you in the right mindset for achieving entrepreneurial success.

  1. Have passion for your business.
    Work should be fun. Your passion will help you overcome difficult moments and persuade people to work for you and want to do business with you. Passion can’t be taught. When it wanes, as it surely will in difficult times, take some quiet time. Whether it be an hour or a week, take inventory of all the reasons you started the business and why you like being your own boss. That should renew your passion.
  2. Set an example of trustworthiness.
    People have confidence in trustworthy individuals and want to work for them in a culture of integrity. The same is true for customers.
  3. Be flexible, except with core values.
    It’s a given that your plans and strategies will change as time goes on. This flexibility for rapid change is an inherent advantage of small over large business. However, no matter the pressure for immediate profits, do not compromise on core values.
  4. Don’t let fear of failure hold you back.
    Failure is an opportunity to learn. All things being equal, venture capitalists would rather invest money in an individual who tried and failed founding a company than in someone who never tried.
  5. Make timely decisions.
    It’s okay to use your intuition. Planning and thought are good. But procrastination leads to missed opportunity.
  6. The major company asset is you.
    Take care of yourself. Your health is more valuable than the most expensive machinery or computer software for the company. You don’t have to choose between your family or your company, play or work. Maintain your health for balance and energy, which will, in turn, enhance your mental outlook.
  7. Keep your ego under control.
    Don’t take profits and spend them on expensive toys to impress others. Build a war chest for unexpected needs or opportunities. This also means hearing out new ideas and suggestions no matter how crazy they sound.
  8. Believe.
    You need to believe in yourself, in your company, and that you will be successful. This confidence is contagious with your employees, customers, stakeholders, suppliers and everyone you deal with.
  9. Encourage and accept criticism graciously. Admit your mistakes.
    You need to constantly work on convincing your employees that it’s okay–even necessary–to state their honest opinions even it if conflicts with the boss’s opinion. Just stating it once or putting it in a mission statement won’t cut it for most people.
  10. Maintain a strong work ethic.
    Your employees will follow your lead. It will also help you beat your competition by outworking them, particularly when your product or service is very similar.
  11. Rebound quickly from setbacks.
    There surely will be plenty of ups and downs as you build the business. Learn from the setbacks and move on. You can’t change the past.
  12. Periodically get out of your comfort zone to pursue something important.
    Many times you will feel uncomfortable in implementing a needed change in technology, people, mission, competing, etc. For the company and you to grow personally, you sometimes have to step out of your comfort zone.

Many organizational and leadership shortcomings can be overcome or mitigated with the good attitudes described above. All can be learned except passion, which comes from within. Take time out of your hectic schedule to periodically reflect on these attributes. You may be inspired to act.

THERE IS NO ENTREPRENEUR GENE

The use of the words Entrepreneur, Entrepreneurship, Entrepreneurism keep growing as more and more people strive to be entrepreneurs with their job creating ability. This was not always the case. Not so long ago, Entrepreneurs were described in such unflattering terms as shiftless, unfocused, shady, money-hungry, sharks, quick-buck artists, unreliable, shoot from-the-hip operators, and so on. There are many words and titles that have different meanings to different people. This can unwittingly hinder good communications and create misunderstandings.

So, let’s define Entrepreneurship so we can all be on the same page. To start with, here is the dictionary definition, which I believe most people will acknowledge falls short of the mark. The dictionary says:

  • A person who organizes, manages, and assumes responsibility for a business or other enterprise.
  • An employer of productive labor, contractor, one who undertakes some task.

This definition would lead one to assume that anyone “Starting a Business is an Entrepreneur.” I don’t believe that. It’s as far-fetched as saying that anyone who owns a car dealership is qualified to be a NASCAR driver.

So what is it?

I like to draw on Harvard Business School’s Professor Howard Stevenson’s thinking on this subject. He says it is a way of thinking, rather than a personality type. He says that Entrepreneurship is a set of behaviors. He distinguished Entrepreneurs (who are opportunity driven) from managers (who are resource driven).

So here is my definition of Entrepreneurship, which is basically Professor Stevenson’s with a few additions of mine.

“Entrepreneurship is the recognition and pursuit of opportunity without regard to the resources you currently control with confidence that you can succeed—with the flexibility to change course as necessary and with the will to rebound from setbacks.”

To me, there clearly is no Entrepreneur gene. I hope this will encourage those people who feel they weren’t born to be Entrepreneurs.

CASH SHY? TRY BOOTSTRAPPING

This guest article with the subhead of “Try These Tips for Building a Successful Business with Little Capital,” I wrote for Entrepreneur.com was picked up and run in its entirety by 10 other websites. Those include Yahoo, Fox Business, The Washington Post, MSNBC, The Street, Business Insider, AT&T Small Business, Reuters UK, Alibaba, and Buwiz. Wow! I sure didn’t expect that exposure, but it warms my heart.

The article covers subjects such as Barter, Free Consulting, Mentors, and Special Offers to Key Customers, Suppliers, Publicity, Outsourcing, Building Trust, and Selling.

The article is reproduced on my website: www.bootstrapping101.com.

I was so inspired by the coverage on this article that I wrote another one that was accepted by Entrepreneur.com and should come out within the next four weeks. I like it (surprise) as it applies to every size company, product, or service and costs the Entrepreneur no money. Yet it holds crucial ideas for a company’s success and sustainability.

We’ll let you know when it comes out.

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