Hi gang,
As my personal Buddha Jimmy Buffett once said, “There’s a thin line between Saturday night and Sunday morning”
I mean, being a business owner IS insanity, right? Sure sure you are free to call yourself an entrepreneur – but maybe you’re just crazy. It can be a VERY thin line, especially when you consider the traits/needs of a business owner. Let’s look at a few of them.
You must have a very healthy aversion to risk. If we’re all being honest, there are VERY few people who can mentally handle the uncertainty of business ownership. Or you must be delusional – either approach works lol. You must be a person who can start something where you really have no idea if it will even work. You must then pour your entire soul into it with no guarantee that there’s a light at the end of the tunnel, possibly for YEARS. Not only might your business not work – you might not even make any money. Worse, you might LOSE money. Worse still, you might lose ALL of your money. Worse Apocalypse, you might lose OTHER businesses money and must file personal bankruptcy just to try to pay them back, which means you could lose personal assets like your house. How’s that business idea feeling now, partner?
In the end, you must really prove both to yourself and others that your crazy idea will pay off big time, and then you should prepare for some sleepless nights second guessing yourself or bracing yourself to defend against the second guessing the important people in your life will certainly do at some point. Risk is not holding your breath and jumping in to the ocean….it is holding your breath, jumping in to the ocean, then remembering you’re going to be under for quite a while so hopefully you’ve brought an air tank and if you didn’t you’ve got a few minutes to build one but what about the sharks… and how do I swim faster…but what about the tides?…and on and on and on. Forever. This never ends.
So, how do you minimize risk? By planning….and planning…and planning. Run so many simulations in your mind that you are prepared for whatever happens. For Daddy Warbucks sakes, have the ability to provide for yourself and your family while you’re going through this. Starting a business without a financial net is basically…crazy. Have a nest egg set aside in the event you fail so you don’t ruin your life for a while. If you’re super smart, you’ll have a source of funding before you start. Even THAT is changing dramatically now. Interest rates are much higher. Funding qualifications are much tougher as well.
I had a discussion with a branch manager of a national bank recently, and he explained the changes banks have made to make loaning funds more difficult.
“In the past,” he said, “each bank branch manager was given a ‘budget’ of discretionary funds available to us to be able to loan to a small business if we decide the risk is within acceptable levels. The most lenient banks EVER were was right before the housing market crash of 2008? . A typical bank manager could loan out millions of dollars at his discretion. No credit check – or a basic one – it was about the relationship between the bank and the borrower”
I like to call those days the ‘good old days’. In 2007, when I owned a much larger company called Inflatable Madness, the manager of a local bank walked in one day and asked for a tour. I politely showed him our 24,000 sq ft warehouse and he talked to several of the 38 employees working there. We then sat down in my office and he offered me, on the spot, a $500,000 line of credit. I’m not even sure I signed anything to secure it. It was available 3 days later. If you’re wondering, yes indeed it was enough rope to hang myself with later, thank you very much.
Those days are long gone now. Back to my talk with the bank manager:
“After the housing collapse, banks woke up and severely tightened the rules. In fact, an 840 personal credit score today is comparable to benefits you’d get with a 700 credit score back then. So the requirements for the same loan terms has jumped 140 points on average. This is IF you have never missed a payment – that’s an automatic decline – and if you don’t have high revolving debt on credit cards, etc. Also, most banks took away 100% of the loan discretion capabilities of the local branches. Everything is centralized now and my job is basically to help a business apply with my own bank for a loan.”
So, back to my main point here – make sure you’ve got funding before you jump into a new venture. There are, of course, many sources of funding . The traditional ways are much more difficult as I’ve explained, but you’ve always got your own savings, your rich Uncle, a venture capital guy, crowdsourcing, on and on, and if all else fails, the mafia. (make sure you pay them back!)
There are, of course, many other traits that you need to be a business owner, but I would say extreme risk aversion and having a source of capital are the two most important ones.
So – do you have a well-thought-out plan for your business and a guaranteed source of funding and a nest egg to fall back on in the event you fail? Is your family on board and behind you? You just might be an entrepreneur.
OR
Do you have a really great idea that you haven’t thought through much but you might dip your toes in a bit and if it kind of works you’ll quit your job and do it full time after finding someone to loan you money? Don’t worry – your wife will go along with it once you show her the millions you’ll be making. You might just be……a tad delusional.
Be an entrepreneur.
Kevin Harmon
https://www.linkedin.com/in/thekevinharmon/
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