How To Beg People For Money

begging-banker

Continuation from yesterday…..When It’s Time To Dump Your Business Idea

Back in 2003 I was at the most nerve wrecking meeting of my career up to that point. I was sitting across the table from a Billionaire. This guy was a founder of a fast food empire that he sold for a large amount of money in the late 1990s. By my estimate he was worth somewhere in the neighborhood of $1-2 Billion.

I was nervous. I have never met or talked to a Billionaire before. After all, this guy can put my investment business on the map by writing me a $10 Million check today. For him that was nothing….. or so I thought. After having a nice lunch at Rancho Sana Fe Inn he told me, in no uncertain terms, that I must have at least a 10 year track record before he would even consider investing with me (at that time I only had 1.5 years).

My response was simple, “Listen, just let me prove myself to you. Let’s start with $10,000 so I can show you that I am for real and if you like what you see after that you can increase your investment to whatever it is that you want”. I was desperate to get any kind of money into my fund. He looked at me and said “No way, give me a call after 10 years, but not before that”. For whatever reason he didn’t like me. Maybe it was due to the fact that I looked like a 15 year old high school dropout in a cheap suit, asking him to write me a $10 Million check.

When it comes to raising money, there are two general truths. First, if you are not well connected into the right network or come from a wealthy family/neighborhood, raising money is incredibly difficult. Essentially, it is equivalent to being a beggar and standing on the street corner asking people for money. And you shouldn’t have any illusions to the contrary. It is degrading and no matter how you twist it, no one likes to do it. Mostly because of the constant rejection and humiliation one has to face.

Personally, I hate asking people for money. Even if it is an investment into a business or the stock market that could generate significant returns for such investors. Yet, if you want to be successful in business and build a large fortune, you have to start somewhere. You can’t start at ZERO and expect to make millions in a few years. While it works sometimes and under certain circumstances, it is an exception to the rule as opposed to being the norm.

Second, the proverbial truth that it takes money to make money is absolutely correct. While it is possible to start a successful business on a shoe string budget, the amount of time it will take you to grow it into a substantial business will be significant. Assuming a 20% annual business growth rate (which is exceptional) it would take you 13 years to grow your business from a $100,000 a year business to a $1 Million a year business. Yet, it would take you the same amount of time to grow a $1 Million a year business to a $10 Million a year business.

The question is, which business would you rather run? While a personal choice, my advice is always simple. Grow your business as fast as you possibly can without jeopardizing your financial stability and/or overextending/over expanding. As the number one cause of business failure is financial mismanagement. In other words, if you are going to do it full time, go BIG or go home. It is always easier and more profitable to sell a $10 Million business than it is to sell a $1 Million business.

As a result, you have to beg, earn or steal that start up or growth capital. Just accept the fact that it will be a difficult and a degrading thing to do, then move on with the task.

To Be Continued On Monday……..(Why Am I Seeing This On A Financial Website?)