Facts About Finances From The Business Coach
Finance Fun With The Business Coach
28.2 – As a business coach, I recommend to only Invest in Items that Will Help You Grow Your Company
It’s super important that you understand the HUGE difference between a strategic expense (business growth focused) and a nonstrategic expense (not business growth focused). You invest in a strategic expense to help you deliver the products and services that you produce more efficiently or to help you sell more to your ideal and likely buyers. Investing in hiring sales people, technological upgrades, better marketing materials, enhanced online marketing and search engine optimization could all be considered strategic expenses. Nonstrategic expenses do not help you to become more efficient in delivering your products and services and do not help you sell more to your ideal and likely buyers. The B- and C-players on your team (assuming you haven’t coached them up or fired them by now) will almost exclusively be the ones making the case for more nonstrategic expenses. They want a bigger flat screen for the break room, they want to celebrate staff birthdays, they want to buy a cake for the person you are firing to celebrate their last day of work. These people will make you homeless if you listen to them.
As a general rule, I recommend as a business coach that you want to invest more than your competition in the area of strategic expenses, regardless of how much you are winning or losing in the marketplace. You also want to be intense about cutting out all nonstrategic expenses.
28.3 – Financing Exponential Growth
When you start growing quickly, you may find yourself running out of cash because everything begins to cost a lot of money. The quicker your company grows as a result of you implementing scalable systems, the sooner you are going to need additional means of funding. It is very important that you not be caught off guard by this need for funding, which means you should work to secure these additional sources of funding well before you need them. Although some of my recommendations may freak out new entrepreneurs, I am listing the most reasonable and practical sources of funding that are available to you as an entrepreneur who has proven your business model.
28.4 – The 14 Best Ways to Fund Your Business Growth From the Business Coach
1. Credit Cards – Am I kidding? No. I have met many top entrepreneurs who very successfully funded their business using no-interest 18-month credit cards. Companies like Barclay, American Express and others understand that many times a business owner needs funding but you may not have a line of investors begging to invest in you. Thus, they have created no-interest 18-month credit cards with large limits. This may be a great solution if you know that you will be able to pay off the balance of the cards in the next 12 months.
2. Family and Friends – Am I kidding? No. Sam Walton (Walmart), Jeff Bezos (Amazon), and countless other entrepreneurs secured funding from people that they know. Sam Walton’s father-in-law lent him the money to start his first business. The parents of Jeff Bezos pretty much emptied out their retirement fund and invested $300,000 in his business because nobody else wanted to invest yet. If you 100% believe in your business model and it is working, then you should absolutely consider borrowing money from friends and family. I recommend borrowing smaller amounts of money from more people such as $10,000 from 10 people instead of $100,000 from one person. Typically, having one major investor creates problems as they try to dominate each and every one of your business decisions because they have sunk so much of their personal money into your business (and wouldn’t you).
3. Create a Premium Package – Typically the top percentage of your customers (economically speaking) don’t care about the price you are charging at all. In fact, they value the most exclusive VIP experiences possible. I recently worked with a sports coach who introduced a premium package to his clients and was able to land five Premium Package deals that pay $1,500 per month versus his typical price point of $150 per month. The clients he sold the packages to loved the exclusivity and they didn’t really even care about the price.
4. Offer Discounts for Payment in Advance – Change your pricing model or your packages to create a situation where more of your customers will pay some or all of the balance up front before the service or products are delivered.
5. Raise Prices by 5% – Typically when you raise prices by 5%, your customers will not lose their minds and only about 5% of your customers will openly complain. Meanwhile, you can take that extra 5% and grow your business.
6. Lease Instead of Buy – You may want to consider leasing equipment instead of buying it up front and outright. When I was growing my entertainment company, I did this with the purchase of our phone system. The phone system would have cost $70,000 to buy outright (this was old school before Voice Over IP phones had been created yet).
7. Connect with Your Local Banks – Make your business bank-friendly by bringing consistency to your expenses, locking in long-term contracts with key customers, improving your margins, creating an accurate and up-to-date profit and loss statement, and creating an accurate and up-to-date balance sheet. Get your credit score up over 750 and gather at least five references from key customers. We’ll talk more about this in a minute.
8. Trade Out with Vendors and Suppliers – Rack your brain and look for vendors that would be willing to trade out services or products instead of cash so that you can save more money and have more capital available to invest in STRATEGIC EXPENSES.
9. Vendors – Talk to your key vendors who make more when you make more and strategically and discreetly share with them your expansion plans. You wouldn’t believe how many people are actually interested in funding the growth of a company that will then cause their business to grow as a result of their investment. Many of these people see you work every day and they understand the value you bring to the marketplace. These people are your fans.
10. Credit Lines – I will openly and honestly say that credit lines scare me TREMENDOUSLY because they are very, very fickle. I would compare operating your business using a credit line with having your house wired directly into a nuclear reactor because you like the energy efficiency. Sure, it’s awesome having access to unlimited cheap energy, but if that baby has a leak, you are going to wish you lived in a log cabin and had to chop wood every day to heat your house.
Essentially, a bank can have a board meeting to discuss liquidity issues they are having (not having enough cash on hand) and your business can come up in the discussion. The bankers can openly discuss the best way to get the most cash into the bank as soon as possible to meet regulatory compliance and the suggestion to call your credit line due can be suggested and approved in minutes then BOOM! You will get a letter from your banker telling you that you must pay off your credit line in full right away or the bank has the right to repossess any of your assets that were put up as collateral to get the loan in the first place. This means that your business can be motoring along making a nice profit and then BOOM, it’s over. You must come up with the entire amount of your credit line immediately or the bank will start taking your stuff. As a business coach, this is insane to me.
Many business owners say that credit lines have proven to be a great resource of the cash they need to fund their daily operations, but they are literally one decision and one call away from losing it all. If your business is too reliant upon short-term credit lines to fund operations, you need to focus on really increasing the quality of the relationship with your banker now. You need to consistently and accurately communicate with your banker and you had better have a great relationship with God. Because you are going to need divine intervention when that bank calls your credit line due all at once. As a business coach, I recommend to make sure that you never bounce a check and that you have a backup plan in place in case that bank decides to immediately reduce or close your credit line.