I work with a lot of businesses – 63 industries, more than 500 businesses a YEAR – at all different stages of development, from start ups to mature organisations.
In start-up phase, the problem I see with a lot of businesses is that they look for funding EVERYWHERE, except for the one place they should.
So, hot shot, pop quiz … how do you plan to fund your start up?:
a) Bank Loan
b) Family and / or friends
c) Venture Capital
d) Government Funding
My answer – e) – bootstrap the hell out of it.
Bootstrapping: a self-sustaining process that proceeds without external help.
See, here’s the thing. Most new business owners get themselves in trouble by falling in love with their product. Now look – I don’t disagree that you should love what you’re selling … selling something that you know sucks rarely goes down too well.
But here’s the problem – your business isn’t about your product. No business is, at its heart, about “what” it does. All businesses come down to two, inextricably linked principles: sales and marketing.
Marketing: the act of creating sales leads.
Sales: the act of generating money from those leads.
As an entrepreneur, as a business owner that’s your job. Marketing and sales.
“If you don’t have more sales than your company can handle, your ONLY job is to create more sales than your company can handle – outsource everything else and focus purely on that.” Brian Tracey
For some reason, a whole bunch of Gen Y’s seem to think that the way that you get a business up and running is to get someone else to give you money.
In most cases, especially if this is your first business, that’s not going to be the case. For the simple reason outlined above – your business idea, no matter how different and revolutionary, means nothing if you can’t market and sell the hell out of it.
Here’s a little “secret” about VC, government or any other kinds of funding: the people who invest do so to get a return. That means, for every dollar they put IN, they want to be able to pull that Number PLUS a percentage back out. Just like putting your money in a high interest savings account … you don’t do it to help the bank because you’re good hearted … you do it to get a return.
I see a lot of people complaining about how VC seems so “mysterious” and they don’t understand why some people get funding and others don’t. The answer is simple: Venture Capitalists know what it takes to make a business successful. They don’t necessarily choose the most innovative idea – they choose the team who has the right combination of skill, passion and sales and marketing ability.
A great example I found on Flippa recently:
This dude invested $650,000 (of INVESTORS money) and 5 years of his life into developing a website that no one wants to buy.
He couldn’t even get an offer for $1,000.
Because without sales and marketing, your product is just a really expensive widget that doesn’t make any money. A lot of investors learned their lesson after the dot.com crash back in the 90’s when they lost millions pushing money into ventures that never showed any kind of a return.
I know you’ve got a big dream about how the whole thing is going to work – but the on-the-ground reality is very different. The costs involved in leasing a premises, hiring staff and storing stock – when most people could begin their businesses working from home, outsourcing and drop-shipping – are exceedingly high.
Being too attached to your “vision” of how your outcome should look has caused more than one company to go broke. Sustainability in business is created through cashflow – and cashflow is created by 1) your ability to sell and 2) your ability to manage the money once you’ve got it.
But that’s what business is really about … its not awards ceremonies, networking events, creative meetings, junkets. It’s a hard slog. 120 hour weeks. Working until your fingers bleed. On the phone until you begin to get worried that you’re giving yourself brain cancer. While the whole time, dealing with family and friends who think you are crazy for leaving the “security” of a day job.
Being an entrepreneur is about learning how to create money from thin air. It’s an incredibly awesome (and fun) skill once you learn it … it’s about self-sufficiency. Expecting someone else to come and give you money is the opposite of everything being an entrepreneur stands for. And of course, you’ll find that old paradoxical rule applies – when you no longer need to think about VC because you’ve created your own self-sustaining business, suddenly investors will become interested because they’ll be able to see how you can return their money.
Six years ago, Leela Cosgrove was just another office drone working temporary admin jobs to make ends meet. After being plucked from obscurity and apprenticed to a self-made millionaire, she founded Unique Value Propositions Pty Ltd and The Strategic Anarchy Agency and established herself as Australia’s #1 Information Product Specialist. She’s known as “the chick who can monetise anything”. Over the last 6 years, Leela has worked with some of the biggest names on the Australian and US speaking circuits, producing more than 100 products that have created in excess of $10 Million in value for her clients and working with people in 63 different industries. In 2009, she increased her own business by 400% in the middle of the Global Financial Crisis.