I get a number of calls every week that go something like this:
"I want to start a business. I have a wonderful idea. I have no money but so and so told me there were government grants available for new businesses. Can you help me get $50,000 so I can start right away?"
Not wanting to burst the bubble immediately, I might say something like, "What do you want $50,000 for?"
"That's how much I need to rent a building, make some improvements, and set myself up in business. I figure I'll make it all back in the first year."
Right away, I have a pretty good idea this small business graveyard candidate has a rude awakening coming. I'm not sure it will come from me.
Yes, I'll explain that Matthew Lesko is not the only source of sound business information. I'll let this entrepreneur know that the government just doesn't hand out 50 $1,000 dollar bills to anyone that asks.
In fact, in all my years in this line of work, I have never seen one dollar of "free government money" for creating new businesses. If you hear of any, please let me know, won't you?
I'm not really making fun of entrepreneurs that are not savvy about new business financing. In fact, my work is to help create jobs in my region and the way we do that is by helping small businesses expand. So I really do want to help and assist entrepreneurs in any way I can.
But I can tell you with dead certainty, and without even knowing what type of business idea my friend has, if he were to receive a check for the $50,000 he wants and he spent it as explained, his business would have a very, very slim chance of surviving.
Too much money in the beginning will doom most businesses.
I know that sounds counter-intuitive, but it's true. Here's why:
When you have substantial funds to spend on your business, you think of lots of cool ways to spend it. You need a building, with new furnishings . . . and yes, a new computer would be really nice.
You figure it's about time to replace that junky desk you've been using for so long and you've got to buy a fax machine that can also scan and make copies, color copies.
Oh yes, you'll make a needed "investment" in a couple of software programs that will save your business tons of money and a lot of wasted time.
You know where I'm going with this . . .
When money abounds, most people develop spending patterns that stifle resourcefulness, determination, creativity, and imagination.
Instead, they tend to develop the bad money management habits that kill small businesses like over indulgence, buying the "deluxe" when the regular will do just fine, and confusing wants with basic and essential needs.
Many a successful business has been created during very difficult financial times. Real entrepreneurs figure out ways to get things done without taxing the business any more than is absolutely necessary.
If you have a hefty bankroll dedicated to business creation, be extra careful that you don't allow that excess to handicap your thinking, deaden your ingenuity, and warp your sense of what is really absolutely necessary.
Remember these two principles about startup business cash and finance:
"Cash is King - protect it, hoard it, and conserve just as much of it as you can!" and
"The success of a new business is directly inproportional to the size of the owner's new desk!"
