Money solves all problems, yeah right

Yesterday I was talking to a client about when to get financing. I started with when you should not get financing, like when you don’t even have clients. I’ve lost count of the number of people who have gone into huge credit card debt to start a small company and then done zero or one deal. There are many ways to do business without having to come out with a lot of money.

Richard Branson back in the early 70’s would sell records, get the order and then buy them from a wholesaler and ship to the client.  He got paid before he spent the money.

Build up your clients and then start investing your profits into more and more marketing. And good marketing, not branding. Don’t follow what the big brands do. That is often a complete waste of money. Instead spend it on things where you can track the numbers. No numbers, then don’t do it. Start off slow and learn what works.

Only get financing when you know for sure you can get more clients than you can handle but don’t have the cash to do it. You’ve proven to yourself and your bank that you can add many more clients. Don’t finance it with credit cards. That rarely works. Get a business loan. If you can’t convince your bank, then you should seriously look at their concerns. You may be too attached and need to rethink.

I get concerned when people have a lot of money to spend on their new business because they tend to spend poorly. I’ve seen many people go through $100,000 or more on training and seminars without making one cent. They constantly learn and never do. The people with little money often proceed more smartly and have a higher success rate.

Money can and does solve problems, but you need to know when and how to use it. If you’re just starting out with your first business, then be cheap and proceed slowly. Constantly learn, but always implement on a daily basis.

Learn, do, rinse repeat.