We’ve all gotten some bad business advice. We are on our 3rd installment going thru this list that I found in an article on fundera.com. Let’s dive into these next two pieces of bad advice.
- “You Need VC Funding—No Matter What”
“The worst business advice that I have ever received was from another startup founder who told me that our business would never get off the ground without outside angel or VC funding. He told me that we didn’t stand a chance going up against other industry giants without having at least $1.5 million in initial seed money because nobody would take us seriously and we needed that money to staff up fast and to flood the industry with a marketing campaign.
Boy was he wrong. After talking with potential investors, we were unhappy with their ‘plans’ for our business and decided to bootstrap instead. It has made all the difference. We now serve 1,200+ customers and 20,000+ users and are growing every month, and we have been cash-flow positive since our 4th month.”
– Jeff Kear, Founder of Planning Pod.
Look, I’ll freely admit that I had NO idea what “VC funding” was.
I assumed it was some sort of financial term, but not sure about anything else. So – what do we do when we don’t know? We learn! So I googled that and found that it is a financial world term – Venture Capital. It’s basically a large amount of seed money that you get from investors who see your potential and want a piece of the pie. So they invest and when you make a return, they gain back a percentage of that. Think Shark Tank.
But…he’s right – not all businesses need big investors…especially if the plan your investors want you to follow doesn’t fit with your vision. Now, don’t be a diva – if you’re lucky enough to find a good investor at a good rate and he just wants to tweak a few minor things in your plan, you should take that investment and run with it. But if it’s a complete business plan overhaul…you might want to rethink that.
Let’s brainstorm – what are some ways you can “bootstrap” as this guy mentions that he did? When we started, we had some start-up money – we got ours in a sad way as my mom had just died in a car accident and the car manufacturer was forced to pay out for their construction negligence, but that’s a unique situation. If we did NOT have that seed money, I imagine we would’ve had to do some brainstorming too.
Here are some of my thoughts on this:
- You could live lean and save what you can while working a 2nd job…it’s a lot of work, but totally doable. George has done that before during our first year in business because even though that seed money bought equipment, it did not feed us during the first year of business while we were building our client base for our new business here in Colorado and not yet making enough to survive.
- You could take out a small business loan. Search out the best rates and put that money to work right away – the sooner you can pay it off, the better! Honestly, I don’t normally suggest going into debt, so this would be a last resort.
- Ask friends and family to invest – the keyword here is “investment” not gift or loan. A family gift or loan can create tension in your family dynamics if the gift becomes a guilt trip they dangle over your head for eternity and a loan usually comes with expectations of you paying monthly payments or paying it back in an expected period of time – if you don’t, here comes the anger and guilt trips again. HOWEVER, if this is an investment, they will only get their money after you’ve started making a profit – which works well for you - and the benefit to them is that, if you are successful, their percentage return rate could be huge. For this, make sure that you wow them with a solid business plan, approximate time table, and a lot of passion and confidence!
If you play it smart, you don’t need a pushy outside investor. You got this!
- “You’ll Never Succeed On Your Own”
“The worst advice that I’ve ever received was that I’ll never succeed on my own or without help.
If you’re an extrovert who thrives while working on an energetic team, it’s sound advice. But it didn’t work for me. When I finally started my business alone, I quickly made good money and more progress than I had in the previous 12 months.”
– Tim Carr, Founder of WP Zinc.
Ahh, the extrovert vs introvert conundrum. This is semi-true…this choice of team or no team largely depends on your personality type and giftings. If you’re not sure which you are, yet, ask yourself if you worked better on projects in high school/college alone or in a group. Also ask yourself when you feel more recharged – when you have time alone, or when you hang out with others. Some of us are blessed to be a little of both – I tend to think I’m that way. If not, no need to fret and no need to immerse yourself in people constantly or isolate yourself completely.
I’m of the mindset that no man is an island, so if you work best alone, do that, BUT make sure you take some time to bounce ideas off friends, on occasion, too. I’ll bet even this guy did that from time-to-time. This will not only give you helpful feedback, but will help you grow out of your comfort zone – we all need to stretch ourselves in order to grow. On the flip side, if you’re more of an extrovert, the same holds true, but opposite – create and rely on a good team working with you, BUT make sure to deliberately plan some alone time, too. You need to listen to others, but you also need to listen to yourself. Alone time – away from devices, just you and a notebook and pen is just the boredom we all need sometimes in order to let the creative juices flow. If you’re never bored and never alone, it can be AWFULLY hard to come up with the creativity you need to push your business to the next level. Plus – again – you’ll be stretching yourself to accomplish personal growth.
That’s it for now, I’ll give you two keyword hints for next week’s blog – pressure and plurality.