Bootstraping. You take no debt and fund it all yourself. Some way. Some how.
Family and friends. You take on debt from the people closest to you. The people who believe in you and are willing to help you.
Angels. They’ve got money to invest and are willing to bet on you, or your idea because they hope to get a good return.
VC’s. Venture capitalists are in the business of making bets on founders, or the idea of a founder. They’re willing to invest much more than typical angels, and they’re likely looking for an exit strategy within 5 years or so.
Loans. Whether SBA, banks or some other source, many business owners get financing for a variety of things.
Money has been plentiful in the last few years. Lots of companies have succeeded in raising multiple rounds of funding, especially tech companies.
I’m not about to take a deep dive into all the options out there. For starters, I’m not qualified. And this is a daily, under 10-minutes podcast. Besides, I have no way of knowing your specific situation. I’m not a fan of brainiacs who preach absolutes. “You must” or “You should” aren’t optimal ways to start any sentence in a conversation with business owners. We tend to bristle at such things. But the world is filled with experts who enjoy telling us all exactly what we should do. The only thing I know that we all should do is figure it out for ourselves. Yes, I’m a big fan of surrounding ourselves with others who will help us do it, but we each have our own path. It’s one aspect of business building that’s exciting.
We have to find money to fuel our growth. That much is certain. And depending on the stage and size of your company, that can look very different for each of us. There are some basic principles that never grow old or obsolete though.
Traction, which is something we all want because without it we don’t get growth, can be hard to achieve. Business is fundamentally about working hard to get momentum, then working even harder to stay in the momentum for as long as possible.
I’ll confess my bias right up front. I’m not a fan of debt. I’m not a fan of taking outside investors. But I’m not working toward an IPO or some exit strategy either. And you may be. Power to you. This is why we all have to follow our path and figure it out. But in spite of my bias, some things about business building are basic, but too frequently overlooked as business owners try to make things more difficult than necessary. I’m surprised at how complicated some of us try to make things versus how few of us seem to just aim toward keeping things as simple as possible. Or maybe I’m just not that bright! (don’t comment on that)
Runway. We all need it. It doesn’t matter how long you’ve been in business. You still need runway. You’ll always need it. Money is a resource. One of our strongest resources because it provides runway while we grow toward profitability…or greater profitability.
Maybe you’re just starting. This is really important. Where you put your money will mean everything to the runway. Spend the money on fancy stuff and you’ll shorten the runway. Be super practical and put every dollar on trial for its life, and you’ll extend the runway. It’s not that hard. The hard part is the decision you need to make to avoid trying to impress people who don’t matter. Care more about the company and what you’re trying to achieve. If impressing people who don’t matter is important, just delay it as long as possible. By then you’ll hopefully be so successful that those people who don’t matter will really be impressed by whatever fancy you throw in their face.
Don’t justify spending money by conning yourself that you “need” something. At the beginning, middle or even after your company may be getting long in the tooth, be real and practical. Always. One thing every experienced business owner has experienced is going over the financial to “find some money.” When we’re under the gun to find some money, it’s amazing how much money we can find. “We’re spending how much on paper?”
As a young man I learned the art of putting dollars (even nickels) on trial for their life. I’m frugal, but not tight. Tight is stingy and I’m not stingy. Not by a long shot. But I am frugal. And willing to shop. Even more willing to negotiate. It never hurts to ask. And as long as it’s done with mutual respect, it can build even stronger business relationships. Don’t be hateful, rude or obnoxious, but don’t be bashful. You can be perfectly polite and firm in what you’d like. Doesn’t mean you’ll get it, but you’ll improve your situation. Maybe a little. Maybe a lot. But you will improve it. Guaranteed.
Growth sometimes needs fuel because we get lazy. Complacent. Satisfied.
Things roll along just fine. Until they don’t. Maybe it’s not a big dip, but over time a trend becomes visible. It’s not favorable. Then our attention gets diverted back where it should have likely been all along. On growth. Remember, where you are and what you’re listening to – GROW GREAT.
It’s amazing what we find when we’re really looking. Today, that’s the main point. I want to encourage you to form a search party for the missing money that could be used to fuel the growth you need. If you’re growing, great. Grow more. When momentum is achieved, it’s all the more important to shove more chips into the middle of the table because we’re already winning. That’s why it’s important to avoid the trap of thinking “we did that go find the money exercise back when we needed to, and now we don’t need to.” We often hear sports teams who are winning encourage each other to play as though they’re behind. Why do they do that? Because they know the competition is working feverishly to come back and try to avoid the loss. Teams that are leading don’t often achieve greatness by sitting on the lead. The great teams keep playing as though they’re losing. That’s what I’m urging you to do.
Step 1 – get your search party engaged today to find money. Pour over the financial line by line. And don’t be shocked if you find some really stupid stuff. Most of us always do. Don’t be shocked if you find some questionable stuff. The times I’ve engaged in forming a serious search party I’ve almost always discovered some questionable expenditures. Success tends to foster laziness and bad habits. But it can also foster unethical and corrupt behaviors, too. Be on guard.
Step 2 – put every expense on trial for its life. Surround yourself with people who can provide alternative perspectives. The people who claim they “need” it aren’t the best folks to rely on for the final decision (which is always going to rest with you anyway). Maybe they’re right. Maybe they aren’t. It’s highly likely they’re too close to it to see any alternatives. Besides, innovation often stems from forcing people to be more creative with less. I’m not encouraging cruelty, but I am encouraging you to consider if the current expenses are necessary, and if they are…to question the returns.
Step 3 – determine your sacred cows, if you have any. Most companies do have sacred cows. That’s up to you. I lean toward not having any. But if you want to have some, then do it. For example, I know business owners who drive certain cars on a company lease. It’s important to them. Fine. Just be willing to admit it’s a sacred cow and you want it. You own the joint, so it’s fine. Only you can figure out if you have them, and if you want to keep them. Just know they have a price tag.
Step 4 – calculate the value of the dollars and the time. Retail car sales and car leasing companies make tons of money because people don’t care about time. They care about the payment. Make the payment cheap enough, and they’ll sign the paperwork. No matter how unfavorable it may be to their financial health. Be wise. Think about the time element.
Sometimes we make a gamble. The other day I had to either re-sign with an energy provider (my previous contract was expiring) or find a new one. So I went shopping. Rates are all over the place. Energy costs have gone up since my last contract. Some contracts were for 36 months. Hardly any were for 12. Do I sign one for 36 months thinking rates will just keep going up? Do I sign one for a lower term thinking we’re likely to experience an economic downturn in the next 24 months? I choose the later course because I think we’re poised to experience a dip in the next 18 months or so. Do I know for sure? Of course not. No idea if I’ll be right or wrong. But if I’m wrong, then I’ll have put myself in a position to pay a higher rate for 12 months that I could have had a lower rate — if only I had signed a 36 month contract instead of a 24 month one. That’s a chance I’m willing to take. Just a really simple example of how we have to think about time, not just the dollars.
How long before you recoup the investment? How long before (fill in the blank)? — those are worthwhile questions to debate while you put money on trial for its life.
Step 5 – make this an ongoing practice. To ensure that you’re always able to fund growth, keep this up. You don’t have to be a CPA or financial wizard to get really good at it. Surround yourself with professionals who can help you understand what you don’t. Do not be bashful to ask any question. Do not be bashful to admit you don’t understand something. Build this habit into your weekly schedule. A little bit consistently over time trumps devoting hours and hours to it occasionally. Treat it like gym work. Put in the work frequently to grow stronger.
Step 6 – be and remain curious. Few things will help you more in finding the money you need for growth. Ask why. And ask it often. Not only will it help you find more money, but it’ll help your company find more innovative solutions, too. Never lose your curiosity. It’s the magic behind growing great.
Be well. Do good. Grow great!
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