Number three in the list of deadly things we see in new or young companies is a lack of capital. You know, do-re-me. You need money to start a business and keep it running. I know that you don’t want to hear this, but it takes money to make money. Yep, it is true and as much as we like to think it just takes an idea, hard work, and luck, that is not reality. This is why people subject themselves to shows like Shark Tank, because they need capital and have nowhere else to turn with their new idea.
Now that I scared you, you are going online to get one of the billion books on starting your own business. It will say that you, personally, need six months of salary, to weather the personal eating-tuna-fives-days-a-week, we-cannot-afford-this-dog scenario. But, here’s the thing, the amount of capital that you need to start your business and avoid tuna casserole every night differs depending upon what type of business you start.
For example, service businesses, like accounting or law firms require significantly less money to start than a restaurant. I started my law practice 15 years ago with about $20,000. That bought me, malpractice insurance (we will discuss in another blog), computer, printer, some office supplies, business cards, and a printer. Boom – let’s sue some people. Also, most professional service providers can operate out of their personal residences; they don’t need office space. As you can see, they are easy to start up (absent the fear and doubt that every new business owner faces).
Conversely, restaurants need real estate, equipment, people, supplies, food, 100 types of bourbon (and a liquor license, bribes not included), signage, INSURANCE, paper products (which is a real challenge during a pandemic), and a variety of other things that cost tons of money. My restaurant clients just started hyperventilating.
As I said, that is just two examples of how different businesses have different start-up and operating expenses. As such, you need help and advice about how you want to take grandma’s paella recipe and start a restaurant because all your friends said they would pay to eat it. You need help understanding how to get that warm family tradition on a plate without putting you in the poor house. If this wasn’t true, we wouldn’t all be enjoying the food truck revolution and see your local tapas place closed down and re-named three times a year.
It is imperative that you talk to people who do what you want to do BEFORE you start shopping at Costco for chicken and rice. You need to do your research with folks that have won and lost in the industry that you are entering. Especially, those that lost. Most folks are happy to brag about their successes or warn you away from disaster. So, do your research.
This is the third test that you must pass on the obstacle course to success.