Daymond John is one of the most successful entrepreneurs in the US. He is reported to have an estimated wealth of over $300 million.
So how did he do it?
John started off by making and selling wool hats with his friend Carl Brown. He worked at Red Lobster in the evenings and made his hats at night. He said one thing that he sacrificed a lot when he was starting FUBU was his sleep.
Once the business had gained traction, John tried and failed to seek funding to expand the business, being turned down by 27 banks.
But he did not give up and so he mortgaged his home for $100,000. He later recruited 2 more friends, J. Alexander Martin, and Keith Perrin.
With a strong four-member team, FUBU began to grow from strength to strength.
In 1993, they roped in Hip Hop star and friend, LL Cool J to help promote their products. He appeared in his videos wearing FUBU apparel and the brand`s awareness grew even further.
Through the contribution of LL Cool J and participation at trade shows, the brand went national.
FUBU signed contracts with Macy’s, J.C. Penney, and the National Basketball Association. By 1998, FUBU`s revenues had reached $350 million.
So what do we learn from this?
Daymond John said that between, 1983-1992 he was forced to close FUBU 3 times because he ran out of cash.
Well, he is not the only one. Running out of cash among small business is commonplace and can be catastrophic. You have to plan your business well. Here are a few tips that can help you when you start to run out of cash.
Firstly, know the difference between cash and profit. Failure to understand the difference can result in a business having a lot of profit and yet run out of cash.
You may get away with operating a business at a loss but if you run out of cash, that’s the end of you. Secondly, never sell on credit when you are a start-up. Selling on credit is the fastest way to get out of business.
Never keep more inventory than you are able to sell within a specific minimum amount of time. The last thing you want to do is to have all your cash tied up in inventory. Do a cash-flow analysis for the whole year prior to commencing.
That way if there are any anticipated lean periods they can be revealed and you can plan ahead. Improve your selling effort. The number one source of cash in the business is sales. Selling is the key.
FUBU` overall success occurred because they sold a lot of products. You are in business to make a profit and profit comes through sales. Sales make a Business and so without sales, you have no business.
Daymond became very successful because he expanded his apparel catalog. Great financial success is born out of business growth.
Always be looking for new ways you can expand your business and its product lines. Look for products that are closely related to what you are selling and try to add them so as to increase choice for the customer.
No matter how well your small business is doing, if you do not put an expansion plan in place, then you will never realize the business`s true potential.
Always look to forge strategic partnerships. Daymond partnered with three trusted friends in order to really grow the business.
It may also be a good idea for you to find people who will add value to your business and invite them to come on board. You just have to make sure though that you bring in the right sort of people.
You do not want someone to will ruin what you are trying to build so if you decide to go this route, make sure you invite people you know really well.
Finance came later
Don’t be quick to borrow large sums of money. Daymond mortgaged his home to free up some money to grow the business.
He did not borrow the money in the first few months of the business or even the end of the first year. He waited until he had gained real business traction before he could seek big sums of finance.
The problem with business people these days is they think borrowing more money to start businesses will guarantee business success. Money does not run businesses, people do.
Start small and then grow the business. First, prove that the model works before you make large borrowings. Finally, never give up. Raymond was rejected 27 times and yet he never gave up.
It sounds easy when you hear it being talked about but the reality is that it must have been very difficult for him at the time to accept rejection after rejection. But because he never gave up, he can now tell the story, from his mansion.