Here is how to make sure your business will fail
The startup world is one of big dreams, world-changing zeal, and unstoppable optimism. This is one reason it is one of my favorite places to operate. The ideas and the energy are contagious – in a good way.
With all the boundless energy and optimism, though, this end of the Dreamer-Doer spectrum is no different than the established, mature end of the spectrum.
Dreamers and their businesses are reliant on cash, plain and simple.
In my years of small business counseling, lending to businesses, and managing the finances of a growing company, I came to recognize that, like it or not, cash is the foundation that our hopes and dreams get built on. Every single time, businesses starved of it will fail. Every single time.
This is often one of the least fun topics to cover when helping a dreamer become a doer, but it is one of the very most essential.
Let’s take a look at a common scenario.
Tom is a fantastic home-brewer. He has been perfecting his craft for a few years, and has started brewing his signature recipes in larger batches for sale and gifting to friends and relatives. A friend of Tom’s owns a bar & restaurant and would love to start selling Tom’s beers on draft.
Until now, Tom’s purchases of brewing equipment & supplies have been financed out of his salary as a market researcher – Tom’s day job. A couple of times he has used credit cards to pay for brewing equipment he needs, but he has kept things small to this point on purpose.
Now Tom has allowed himself to dream of quitting work for a large corporation and making a go of it as a brewer. He convinces a friend to invest with him in a cool new microbrewery idea. Together they pool the cash in retirement accounts, savings, and the limits on their personal credit cards.
$53,000 later, they have some warehouse space, 2 big shiny stainless steel kettles and a bunch of pumping and monitoring equipment. They have a little left in the
He’s not sure how things will go since he hasn’t ever done this before. He hopes to be able to pay back the money he borrowed, but he is so busy making beer, he hasn’t had time to figure out how the finances are going to work. He checks the balance in the bank account every so often and as long as there is some money in it, he’s guessing he’s okay.
Instances like this one sometimes end well. People also sometimes win lottery drawings. Both are bad ways to plan for your future.
If you want to make sure this does not happen to you, get some assistance. Whether you contact me or some other experienced professional, it is important that you not neglect the lifeblood of your business. Although cash planning may not be inspirational, it is the backbone upon which your dreams are built.