Do You Really Need Money to Start a Business?
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I’ve been watching the latest Rich Schefren video called Startup To Freedom: Prescriptions To Gain Momentum (free - no email squeeze). In a recent blog post Rich asked his readers, “What’s holding you back?“. Then he sorted through the 543 comments and broke them down into various categories.
You’ll need to watch the video to get the others but the one that really amazed me was, “not enough funds.” Actually the reason cited is common and doesn’t surprise me at all, many times while facing a problem with my blog network, or just wishing I could make things happen faster, I’ve found myself saying…”if only I had an extra $50k to put into this.”
Would You Trade 5k for 100k?
The reason most entrepreneurs don’t find the money they need is because they lack confidence in their business
The way Rich explains it on the clip is great. He asks the questioner if they could trade, guaranteed, $5k for $100k, if they could come up with the $5k?
Of course most people could; credit cards, friends whatever, most could find $5k for an automatic 20x return.
I know I could come up with my desired $50k if I was CERTAIN it would turn into $1m.
Rich points out then, that money is not the problem… as a lot of great (and even very large) businesses are started for $10,000 or less; the problem is lack of confidence.
The key part of the equation is that the entrepreneur doesn’t drop down their own money or struggle to find it because they lack confidence in their business. OUCH, too true.
Maybe Lack of Confidence is a Good Thing
When I first heard Rich’s assessment, and realized that it rang completely true for me, I was depressed. But then I thought about is some more and realized that is was just normal instincts. The fact is that I don’t really know if my blog network will produce any decent return for the money or time that I have invested into it.
It’s completely normal, to want to minimize my outlay give a weak possibility of return.
Prove your System!
Based on these revelations there are only two types of businesses: proven systems and unproven systems. Once the system is proven to produce: 1. revenue and then 2. profit, it is appropriate to increase the amount of outlay dramatically at each of those milestones.
The goal then is not to try and raise money to solve problems, the goal is to prove the system can produce money. If you don’t have enough money to prove your system, then scale back or simplify the prototype so that it can be developed and put into use with less resources.
This whole lesson is a great revelation. What I love about it is that it takes away one of my biggest excuses and puts me back into a place of empowerment with my business.
Prove the return and the money will follow…wasn’t that a movie? 
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Comments ( 3 )
Tyler added these pithy words on Mar 06 07 at 6:40 amGreat analysis Jon!
I’ll be using that with my next project.
We’ll have to talk when you get back.
Have a good one and keep up the good work.
Jscott added these pithy words on Mar 06 07 at 10:54 pmI disagree with Rich. I will not enter the comment in his space but will on yours because I trust you (clue there).
Let’s talk in AZ, o’kay?
It is not a matter of confidence or any one factor. There are many variables when it comes to making it large.
Funny thing, I have seven businesses that failed before I had four other factors behind them. Funny to me.
For what it is worth, confidence was not one of ‘em. I tend to have to much of that.
Jon added these pithy words on Mar 06 07 at 11:01 pm“Let’s talk in AZ, o’kay?”
Looking forward to it.