According to Mark Cuban, one of American’s entrepreneurs, owner of Dallas Mavericks, and TV Personality, the biggest mistake most people make is to think that they have to raise money to start a business.
As a financial advisor, I totally agree with Mark. There is no such thing as a successful business that became successful because of funding. Yet every week I receive tons of emails asking for advice on how to raise money or if I would invest in their businesses.
The answer always is “No” and you will discover the reason at the end of this article.
A business is ready for funding when it has certain key attributes.
While I understand that certain businesses genuinely do need funding, and while funding is necessary at certain stages in a business, I do not think that every business needs funding to get started. And in fact, the majority of funding needs are not real funding needs, but the lack of ability to create money from thin air.
Most Funding requests are disguised gap in creativity and sales skills. Because with the right sales and creative skills, you can create the amount of money that you want. And you can also break down your business into the version that you can fund with your own money.
Thus funding problem is majorly disguised creativity and sales problems. And quite frankly the lack of funding is a great excuse for people who are not really ready to start a business.
I know this because great entrepreneurs are not stopped by funding challenges. And the greatest entrepreneurs in the world all started in spite of funding challenges.
Amazon started out from the garage of Bezos’ in Bellevue, Washington. He started out with funding of almost $250,000 from his parents.
Facemash now Facebook started in 2004 by Mark Zuckerberg and a group of friends. They started out with sweat equity, technical skills, and the ability to sell their idea and build a solid community.
Apple started out in Jobs’ garage on April 1, 1976, by college dropouts Steve Jobs and Steve Wozniak. They started their business with sweat equity, technical skills, and the ability to sell a not so perfect Apple 1 product without a monitor, keyboard, or casing.
Bill Gates and his business partner Paul Allen built the world’s largest software business, Microsoft, from technological innovation, keen business strategy, and aggressive business tactics.
You will find a similar story for Elon Musk, Mark Cuban, Richard Branson, Dangote, and so on.
These men built their businesses from the ground up with sweat equity, the right attitude, personal savings, or support from families. Funding did not stop them and funding will not stop you if you are serious about entrepreneurship. Quite frankly funding at the early stage of a business increases business stress, dilutes control, and expands leadership complexity.
So while you may fantasize about some strange investor sent by God coming along. To lift your business off the ground. In reality, this rarely happens. You must find ways to fund your way to a proven business model. Investors rarely fund ordinary ideas or struggling businesses. They fund businesses that are already succeeding but need funding to expand that success. This is why banks rarely lend to SMEs but do so easily to successful businesses. And why the majority of successful business owners started off on their own
So why do people still waste time looking for funding?
People gravitate towards funding for three reasons. The first is the Fantasy of overnight success. The second is the desire to use another person’s money to fix fundamental problems. That can only be solved through discipline and hard work. And the third is to make an already successful business even more successful.
Among these three reasons, only one is of interest to the investor. Investors are not on a mission to rescue your business or make you rich. They are on a mission to increase their wealth and achieve more financial success. They will only invest in businesses that can help them achieve their goals. And until your business develops this capacity you are not yet funding worthy.
Thus the only purpose for funding is to transfer investor’s idle funds or funds that are less optimized to a profitable business vehicle. That has the capacity to generate higher profits. This means that your business must have the capacity to turnaround investors’ money very quickly. If your business is not yet at this stage. You should focus on bringing it up to this stage and then attracting investor’s funding can become easy for you.
The key to successful funding is to answer the three funding questions. First, is my business fundable? Second, do I need funding for wealth-creating purposes? And third is my business at the stage where it can turn around investors’ money without losing it? Answering these questions is key to funding your business.
A business is ready for funding when it has certain key attributes. There are seven key attributes that attract investors and make a business funding worthy.