In this video, Constructaquote Founder and serial entrepreneur , Lyndon Wood discusses whether or not money is crucial to start a business.
Scroll down for the video, or read on for the article version…
Let me tell you a little story…
When I was 19, I had £14,000 in mortgage arrears, as well as other debt, and I thought I needed £3,000 to buy a computer (yes computers were expensive back then and the size of a house!) So, I went applied for a youth grant for £3,000. I stood in front of a board of 10 to 12 people from various set ups, government and industry, and they absolutely grilled me. They asked me silly amounts of questions for a good 30 minutes, they made me wait 45 minutes before calling me back into the room and saying they don’t think my business will work and turned me down.
I left that meeting thinking, ‘I can’t start my business, I can’t do anything’. But, there is always a way, and that is the mentality I have always carried with me through my business career. I got back home and thought, ‘what’s the other way?’. I was fairly depressed and practically upset. I had a Littlewoods catalogue and decided to order a £200 electronic word processor, which were fairly new out then and it could remember sentences so I could use it to remember standard sentences when I was quoting business. So I got the work processor and off I went and built my business from there. I think I still owe Littlewoods £200, I might send them a cheque.
When you have little or no money and you want to start a business, you have to look at your own finances closely. Whats the minimum requirement you have to live from? Is it £100 a week? Is it £200 a month? What is it? Don’t be greedy. If you don’t have a starting pot of money, there’s different ways you can raise the money. There’s lots of buying and selling you could do with your own personal items such as old clothes, an old sofa or an old car – something you can sell to raise the money and start your business.
You can even buy things on Allibaba and sell them on eBay or anywhere else – just to raise that starting pot. It doesn’t matter if you’re in a full time job because you can do this to raise money on the side and kick off your business.
I hear some ‘mentors’ say “put it all on credit card”, and you hear the stories of how other business people maxed out of multiple credit cards to get their business off the ground. It’s the wrong thing to do. Credit cards are very costly so if you’re going to use one, do it in a very small affordable way. Don’t max out £10,000 at a time because the interest alone will kill you and it hits your credit record and that’s not a good thing. When it hits your credit record, it stops you raising money from banks or anywhere else. It’s just not good so don’t do it.
I helped a startup before from day one and they came to me and said they wanted to be the biggest business in the UK (in their industry) and could I help out? I said yes I can help out and I want 30% equity in return for £20,000. Not a lot of money in the scale of things but a lot of money for a startup. So I put £20,000 in and the business grew to a level where it was turning over practically £1M within 2 years.
So, in terms of giving equity away in your business, it’s always an option if you have no cash, but once again, don’t be desperate. Don’t pick the wrong person, pick the right person. Don’t just go for the money, because you’re giving part of your business away. You have to give part of your business away to someone that’s going to add value and help it grow strategically by looking after today, tomorrow, the next month and the next 3 years.
When looking for money for your business, there’s sometimes government grants available , depending on where you are in the country etc, but don’t get caught up in the paperwork and bureaucracy. Applying for government grants is not an easy task. It’s a miss mash of paper work and you either have to know what you’re doing or end up paying a consultant – which costs money. Don’t get caught up in the thought of ‘i’m going to get a grant’ because you become too reliant on it and grants have their restrictions. You can’t start something until you’ve had the money or it’s been agreed, so then you’re delayed several months to start with.
Another way of raising money can be from your family. And I don’t mean borrowing it but come Christmas and birthdays etc, get them to give you some cash instead of buying you things. Or, you could always sell the stuff they give you.
If you’re employed and in full time work and you have a regular income to pay your bills, look at the minimum you need to live off. There’s no shame in working full time whilst trying to start a business. You may work 8 hours a day but if you have that real passion to start something, you’ll put the weekends or the evenings in to that business. If you’re married or have a partner , bring them along the journey as well because that’s equally important – two minds re better than one.
If you are cut out to start a business, the most common thing is laziness. A lot of of people are just too lazy. Many people work all day for someone else and are then too lazy to work the evenings and weekends. People want quick fixes and things given to them, but if you’re going to start a business you have to put the hours in . It’s not a 9-5 job, it’s 24/7.
The myth of starting a business to have freedom needs to be forgotten. It’s a misconception and it’s not freedom. Freedom comes much later on once you’re established and have an advances business with people working for you – that’s when the freedom happens.