Starting Your Own Business: Part 3
When you decide to start your own business, begin by reading several books on small business formation. Some of the best books ever written are on the bookstands today. Read about every single aspect of market planning, market research, financing, delivery and distribution systems, people, processes, promotion, advertising and especially sales.
The most critical element in an entrepreneurial business is your ability to sell the product in quantity. In fact, Inc. Magazine once wrote that, “If you have the ability to sell, you’re a fool not to start your own business.”
Dun & Bradstreet summarized 50 years of research into successful and unsuccessful businesses recently with the conclusion that, “The reason for business success is high sales; the reason for business failure is low sales. All the rest is commentary.”
Your ability to sell the product is the primary driving engine of entrepreneurship. In fact, one of the biggest mistakes that entrepreneurs make is that they build their business successfully by selling the product or service that they know and love, and then they hire salespeople and back-off to become the manager.
Now the company has a mediocre salesperson and poor manager and begins to go downhill rapidly. Finally, before the company hits bottom, the entrepreneur fires the salesperson and goes back out to selling where he should have been in the first place.
Many people think that the key to starting a new business is to arrange all the money in advance. I heard a business professor giving recommendations to a roomful of entrepreneurs recently and I almost fell off my chair. He said that, when you start your own business, don’t put any of your own money into it. Borrow all the money from the bank. And save your own money for your personal expenses.
Nothing could be further from the truth. When you start your own business, 99% of all the money you will have for your business is what is known as “love money.” This is money that you provide yourself or that people provide for you because they “love you.” No bank or venture capitalist will touch a new business start-up.
Banks and bankers are not in the business of taking risks. They are in the business of making good loans which they are absolutely sure can be repaid. When I started my new business some years ago, I was amazed to find that no banker anywhere had any interest whatsoever in lending me a single penny for my business. Most of them treated me as though I was a combination of a failure and a pickpocket when I went into see them. I learned that this is quite common. There should be a sign in every bank lobby that says “No Small Business Start-Ups Need Apply.”
Venture capitalists will only lend money to a company that has been in business for at least two years and that has a solid track record of increased sales, earnings and profits. Banks will only lend money to you if you can show them that you can cover the amount you want to borrow by about 500%. This means that they want $5 worth of tangible assets for every dollar that they are willing to lend to you. Not only that, they want personal guarantees from you and your spouse that will outlive a bankruptcy and last all of your life. They will want an assignment of every single piece of property that you own, and many banks will even ask you, if you can believe this, to deposit in a certificate of deposit with them, the amount that you want to borrow.
The very best way to start a small business is for you to accumulate all the money that you can personally, sometimes by using your savings, loans against your homes, and money from your friends and family, and then start off. You should plan to grow by bootstrapping. This means that you start small and you grow out of your sales and your profits. This takes a little bit longer but enables you to develop the skills and abilities as you go along that are commensurate with the size of your growing business.
Many of the greatest enterprises in America started on a hope and prayer and a little bootstrapping on the part of an underfunded entrepreneur.
Find out the most important concepts and tips necessary for business success with Brian Tracy’s book The 100 Absolutely Unbreakable Laws of Business Success
About Brian Tracy — Brian is recognized as the top sales training and personal success authority in the world today. He has authored more than 60 books and has produced more than 500 audio and video learning programs on sales, management, business success and personal development, including worldwide bestseller The Psychology of Achievement. Brian's goal is to help you achieve your personal and business goals faster and easier than you ever imagined. You can follow him on Google+, Twitter, Facebook, Pinterest, Linkedin and Youtube.