So you have an idea for a business. Great! Now what? Do you know the next step?
A business idea is like a seed you plant into the ground. That seed still needs water and sunlight before it can grow. Many people (myself included when I first started) are under the assumption that to start a small business you need a lot. The truth is you only need a little. Now this isn't true of every small business idea, but nearly eight out of 10 small businesses don’t take that much to start.
My first business, when I was 17, cost me all a little over three-hundred dollars to start. My second business ran me about the same. My third business was even less than that because I had a better idea of what I was doing. I was able to cut out everything I didn't need.
I recently watched an interesting video on YouTube. It’s a video from billionaire Mark Cuban. In this interview he states that, “… only morons start a business on a bank loan.” Now, I’m nowhere nearly as successful as Mark Cuban but I know what he is saying is a fact. I've done it before.
I’ll give you the video at the end of this post.
Back to the point… Why is a bank loan so bad? I’ll tell you why. When you enter the Game of business the most important assets are (1) Your determination, (2) Business cash flow and (3) Your time.
Now out of these three assets, which one can you control? Only number one, your determination. Business cash flow is out of your control to a large extent. And time, you can manage it but you cannot control it. All three are important but let’s look at business cash flow today.
When you “put your foot down” into the Game of business you must realize that you are starting a race. In order to keep up and do well you need to train yourself like an athlete and prepare. This training involves the basic skill-sets you need before you even start. Everything from how to communicate, negotiate, sell, business ethics, record keeping, understanding marketing, advertising, etc.
Once all of this is under your belt then you can actually compete and hit the starting line.
When you take out a bank loan, you are not starting at the line with everyone else; you are starting waaayyy behind the starting line. You are losing before you even start. Why? Simple, because repaying a loan eats into your business profits. Any business that cannot maintain a positive business cash flow will eventually go out of business. A business needs some sort of cash flow in order to operate, don’t you agree?
It’s almost like taking out a student loan. Even if you land that good paying job, your take home pay sucks because you owe someone else money.
In business this is even worse because most businesses do not turn a profit their first year. Read that again. So if I already owe money and I am not making any money (or very little), I am increasing my chances of failure! Great way to compete in a race, isn't it?
The truth is you really can start the majority of small businesses from nothing. Using part of your current paycheck, in fact. If you put up just 10% - 20% of your take home pay and invest it, you can use that to piece together your business. Baby-step by baby-step.
Is it slow? It can be. Is this the most effective way? Not particularly. This does however, do one thing extremely well. It’s let’s you be at the starting line with everyone else in the race. You don’t owe anyone anything and all the profit you make is yours, not someone else’s! Faster profits mean faster business growth. Do you see my point? Let’s wrap this up.
If you really want to understand the Game of business in the simplest way possible, check out my book, Unlocking the Small Business Game. Grab a FREE preview - Click Here.
Until next time. Keep it moving and keep it simple in the process.