Stop believing that money is the answer to your business’s problems
I ran a campaign recently on my Facebook page where I put out an invitation for entrepreneurs. It was aimed at those that had started out already or those who were still aspiring to be an entrepreneur. The instruction was simple – share with us 2 of your biggest challenges or 2 of your biggest fears for not starting out yet. The goal of the promotion was to find 5 entrepreneurs that we would work with to overcome those fears or challenges in their small business. ‘We’ being myself, my business partner Thabiso, and Ray O’Friel who is a close friend and colleague. We have all started our own successful businesses and have all run side hustles. All three of us have failed at some point or made a bad investment decision. The plan was to analyse the responses and then choose 5 entrepreneurs whom we will work with in a mentorship program. When I speak of entrepreneurs, I am including those who want to, but have not started yet, because they too may have the potential to be successful and need to hear this. What came out of the campaign was quite surprising; about half of all the responses included money as their biggest challenge.
So, we found about half of our entrepreneurs either used money as an excuse for not succeeding or for not starting out because they ‘don’t have funding’ or ‘lack capital’. Here are my thoughts on this –
If you have financial issues in your business, welcome to the party. Every single business has financial issues. Only the severity differs. No company or organisation (even non-profit) has ever said they don’t want to make more money.
Most of those that cited money as their main challenge and approached us seemed to see it as an opportunity for funding. It is actually sad to see how many people believe money solves business problems. There are definitely businesses that would do better with money alone, but they are the exception, and this is usually one of 2 things –
- Either they need capital to scale. Meaning they already operate at a profit and could carry on the way they are, but a capital injection could help them scale or expand the business, OR
- They need bridges now and then. This is a requirement for capital to bridge the gap between delivery and receipt of payment. For these businesses there are options like invoice factoring or friends and family
Now, I am not disputing that most businesses need some form of capital up front to get going. It is obvious that one might have raw materials to buy, fuel to get around and maybe even some ad-spend. What I am disputing is the use of money as an excuse, as a stagnation or procrastination mechanism. We all know what money can do for our business – pay rent, purchase stock, pay employees, purchase advertising space etc. but it is important to point out what money cannot do for your business, no matter how much of it you have.
Money can’t build your relationships. Take my first business as an example. We hardly had money, but we had relationships. My business partner’s dad lent us a small vehicle until we had cash to buy our own. We sat down with our suppliers and negotiated 30-day payment terms from day one, which they generally don’t do. We went to old school principals, told them our story and offered favourable rates to do work for them. We found a business like ours that had liquidated and offered 2 of their staff jobs at low wages, still better for them than sitting at home. The relationships gave us a vehicle, affordable payment terms, employees and our first customers that we used as references when looking for more work. The alternative was to sit around and use money as an excuse.
Money cannot buy your customer’s trust – this is built over time by how you treat them, how you deliver on your promises of service and quality.
Money can’t make your product solve real problems – all money can do here is make your product a better version of what it is. And even making it better doesn’t mean you are selling the right product in the right market.
Money in your business does not ensure your customers can afford your product or that they want it. Just because you think people should have the thing you sell, it doesn’t mean they can afford it or even want it. It means nothing even if you have the money to give them the best version of what it is. Your market needs to be sold on what you have to offer, or they have to have a need for it. They need to be willing to part with their money for whatever you have to offer. If you are selling ice in Alaska, that might not be so easy, no matter how good you think it is. But if you were selling ice in the desert, then you have a product that people need and want, that they are willing to hand over money for without thinking about it. So, whether it is your own money or someone else’s, more money in your business does not mean it solves those problems.
On the topic of someone else’s money (for those seeking funding) – ask yourself the following: If it was someone else with your business idea, would you hand over the money to them to start the business? Is the product or idea that good that you would part with your money for them to run the business with it? How much would you give them? What would you expect in return? What would you want to know before giving them the funds? Not so easy to see it from that perspective, right?
As Ray says – if you truly believe money would solve your problems, then someone should give you all the money you want because you will quickly learn that money just speeds things up and it will quickly show you all the other problems in your business. Unfortunately, that would also be a huge waste of money.
In my business with Thabiso, we recently approached a firm that provides funding. We quickly learned that the funding we required was too little for them to give us, i.e. the investment and return was too small. So, we didn’t try push up the number, we walked away. We knew that more money would not help us at all. Most inexperienced entrepreneurs would jump at the opportunity to get their hands on more of someone else’s money.
In conclusion – if you have relationships to leverage, if you can build trust, if you have good service and quality and you offer the right product in the correct market to people who can afford it, then you will make money even if you start out with very little money OR you will quickly find an investor because all the supporting pillars are in place for a good business. But money should not be the starting point. In some cases, if you have these pillars in place, then some customers will even hand you their money in advance. Meaning you can take deposits and forward payments. The customers will be paying for it themselves.
If the demographic for our respondents is a true reflection of the entrepreneurs out there, it is a sad situation. It means half of the entrepreneurs out there are sitting around waiting for money, which means we are 50% down on our potential as a country and an economy. If after all this you still believe money will solve your problems, spend some time researching similar businesses to yours and read a few of the stories in Entrepreneur and Thriving magazines; you will quickly see how many others accomplished what you want to with little or no money to start out with.