Thursday, 24 December 2015

Capital Constraints - Good and Bad

I was just at the REIA of Macomb last night, Michigan’s Premier Real Estate Investment Association, and heard national business credit expert, Tom Kish, speak about unsecured lines of business credit and how they can be used to fund your business.
I found Tom’s message to be compelling, and it got me thinking about the subject of financing for entrepreneurs. Money is always a big question mark for anybody that is looking at starting or expanding their business.
There are a lot of different theories on business financing out there. The fact of the matter remains that most entrepreneurs are continually operating under capital constraints; seeming to be forever in bootstrap mode. I know that for me, personally, bootstrap mode means continually evaluating the viability of projects. Questions like: “does this initiative deserve more money than another one?” are always circling around in my brain. I know the textbooks say that this is how you are supposed to operate, that you are supposed to have to make these ‘rationing’ choices all the time. This might be o.k. for large companies to swallow, but for entrepreneurs we are often talking about survival, or growth necessary to get to a more sustainable level.
money_management
As an entrepreneur, I think one of the hardest things to reconcile my self to is the fact that I can’t implement all of my ideas. You see, I just see problems that come up in my life and in the world that I want to solve. Solving problems effectively, for large numbers of people = money made. Not being able to address these problems is hard, but if I am honest with myself I understand that I can’t always do everything.
The bottom line is that only the best ideas and initiatives will get funded. Whether you are trying to get your business off of the ground with angel funding or working with your personal savings to get started, or you are raising institutional funding, only the best ideas get the money necessary to get off the ground. The same rule applies to your own internal business funding; only the most promising marketing initiatives will get funded.
All of this might seem like a hindrance to growth, but it is a necessary aspect of business development. Our job as entrepreneurs is to make sure that we are continually coming up with new ideas for improving and starting companies and continually pushing the growth envelope. As they old saying goes: “the cream always rises to the top.”

GET RID OF THE ‘IF” FACTOR

“We will either find a way, or make one!”
-Hannibal, 218 B.C.
All too often in conversations I have with people that are either interested in starting their own business or looking to expand their existing business, what I call the “dreaded ‘if’ factor” rears its ugly head.
The ‘if factor’ usually goes something like this:
“If I get that pay raise, I’ll be able to start buying some income producing real estate.”
“If we have a big holiday season, we’ll look at putting more money into marketing.”
“I don’t know if I can take the risk of starting a business now…maybe if I was 10 years younger I would think about doing something like that.”
It is at this point during the conversation that I wish I had a time machine. Besides the fact that it would be really fun to travel through time, I would really want to see what would happen when their ‘if’ conditional is fulfilled. Would this person really go forward with buying an investment property when they got a raise? Would the holiday season really be the deciding factor in whether or not this business owner spends more to grow their company?
Many people live their lives by a conditional function: if this, then that. The problem is that life throws a lot of unexpected events at you. You put yourself into reaction mode versus proactive mode when you rest your future actions on events or situations that are often beyond your reach of control or don’t even directly tie into your goals and dreams.
The most successful people that I have encountered have a strong sense of purpose and conviction and they rarely put conditionals on their goals and dreams. I have heard successful people say things such as:
“I will buy 10 investment houses next year, no matter what.”
“We are going to plow money into marketing, based on a strong plan, so that we can double our business next year.”
“I am going to start a company now, because there is a great opportunity.”
Whatever you do, don’t put conditionals on the level of success you want to achieve. Keep moving forward and, if there isn’t a way – MAKE ONE!

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