A Start-up with Money Problems

A START-UP WITH MONEY PROBLEMS

You have developed a great product. You know that it’s a great product. People all over the industry have told you so. You’ve invested all of your savings, which was a substantial sum, but it wasn’t enough. In spite of your long hours and constant travel orders aren’t coming in anywhere close to what you had expected. Your product is well received. You don’t understand it. You know that you’re undercapitalized. You always have been,, but you feel that you should have been generating positive cash by now. You know that you should have looked for more money before you got going, but you didn’t. You’re pressured and, you’re short of money. What do you do?
The entrepreneur is always convinced that it’s only a matter of time. But, not really. It’s a matter of action and time. It’s a matter of what actions you take in the time available to you. Available time is determined by time related costs, and all actions have a cost. Knowing that it's just a matter of time the entrepreneur is likely to either tap out their credit cards or, if those are already gone, to go to the bank. It's that time thing again, but both are very bad alternatives.
Once you get into the credit card jungle you’re lost, particularly in today’s world. Banks don’t loan money on future possibilities no matter how good those possibilities are, and start-up businesses haven’t established a good earnings history to give a bank that secure feeling. Banks always have to be secure in the money they loan. Ask any loan officer at a bank. If you have a good personal history and a good credit history they might loan you the money, but they’re going to ask you to secure it with your home. If not, you won’t get the loan regardless of your history. Credit card companies that issue credit cards to a start-up business want a personal guarantee of payment from the owners, and they're even less forgiving than a bank. Neither of them leave you any wiggle room, and if you get caught in their web it will cost you severely in the future.
That leaves family and friends as the next alternative, but don’t go there. Going to a family member or a friend leaves you open to so much personal alienation and family destruction that you'll probably wish that they had just broken your arm, and left you alone. So what do you do?
Being an entrepreneur you’re not going to like, or even accept, what we’re going to say next, but consider it. We’ve all been through it. Borrowing more money and setting your speed on fast forward is only going to cost you more money, and the money that it produces will just be a band-aid that slows the bleeding.
Reign in your exuberance for just a little while. Cut your business related expenses as far back as you can. Forget about targeting your efforts on product sales for the time being. That next customer isn’t as important as you might think. You need a continuous stream of customers. In your mind that means time and time means money. You’re going to have to focus your attention on getting it, but first you have to ask yourself whether money will solve the problem for you or whether more money is just a temporary fix.
Sales are slower than expected. Why? You’re obviously coming up against a problem or problems that you don’ see or understand. It’s really time to step back. Look at what you’re business is doing and how it’s doing it. That starts with product.
The question that you should have asked before you put all your money in the hopper, and the first question that you need to ask now is “Do you have a marketable product?” “Do you have a product that you can market with your resources or resources that are available to you? If not, is it the product or the resources that are the problem? Pride of authorship or invention is a terribly blinding emotion, but If there was ever a time when you needed to be objective about something it’s in your current circumstances. If it’s product you might want to bail. ‘’Take your losses in stride, and move on. If it’s time and resources, that’s most likely fixable.
When you’re looking at product you have to recognize that it’s just not about the physical product, its construction, or its price. Its about competition for your potential customers dollars and how they’re currently spent, it’s about product use, design, distribution, buying procedures, product approvals, budgets and anything more that you can think of that would affect the purchase of your product.. Don’t leave a stone unturned.
If you’re using independent representatives talk to them, but talk to them individually. Identify a broad range of organizations that you feel are potential customers. Identify someone within each organization that has decision making authority, and will talk to you about a product. You want to talk to them as a researcher looking into a new type of product, not as a salesman making a product presentation. They’re going to be busy so you may have scheduling problems, but you’ll be surprised at how willing they are to talk to you, particularly if they think it’s going to put them on the inside of something.
You might hear things like “Were currently using…the product is not in the system…the product has to be approved before we can use it…there’s no money in the budget to experiment…if the price is higher than we're paying there's going to have to be a clear-cut economic advantage to switching…it’s a great idea, but not for us…because of what we’re currently doing you would have to make modifications before…it's a great product idea. It’s just going to take time…all of our products come from an approved list of distributors”.
Amazingly, they will really see you as a different person. You would expect comments like that to be coming from those potential customers that you've been calling on in a sales capacity. But no one likes conflict, and no one wants to be a bad guy, so they tell you whatever makes you smile. That is, until it comes time to actually generating the order.
Collect as much information as you can. It will paint a picture of what has to be done to get your product to the point of marketplace acceptance and use. It will give you some idea of what you have to do to get there and how long it will take. You should be able to convert that combination into dollars. At this point your ready to make some decisions. Is it worth it for you to continue? How much financing will you need before you start generating positive cash? Can you sell the product to another company? Can you find angel financing, or should you just walk away? If you're really an entrepreneur there's always a next time.
by Fred www.consummate-entrepreneur.com




A Start-up with Money Problems - To learn more about this author, visit Fred 's Website.

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