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You are going to need Finance for your startup. But what you may be thinking could be completely wrong. I don’t know what sort of business idea you have, but all I can say is this, you do not need to break the bank to start a business.

I don’t think there are many businesses in this world that cannot be started by no more than a couple of grand. Starting small is the best way that I know to start a business.

It is common for aspiring entrepreneurs to get carried away by their idea and determination that they are willing to spend a fortune to get it off the ground. My advice is;

STOP!!!!!!!! Don’t go crazy, you may end up in tears.

Failure on a small scale is much more bearable. Large scale business flops normally break the people who start them. The collateral damage from huge start-up failures can be far-reaching, even affecting families.

I was watching the Dragons Den some time ago, and these two aspiring entrepreneurs came with their brilliant business idea. It wasn’t so much an idea, but rather a prototype of a mini-submarine, and they were seeking £1.5 million investment.

Now here is where it all becomes ridiculous. They hadn’t sold any units at all, and they didn`t have any confirmed orders ready to supply. This is a classic, and typical example of over the top business ideas that don’t make sense.

You cannot ask for £1.5 million from someone to experiment with.

At such levels of borrowing, a business must have a substantial trading track record and a solid proven business model.

For that kind of money, you should be bringing to investors, results of previous trading that show that this is a proven, viable, business. Needless to say, as is already apparent to you, that the misguided entrepreneurs, were quickly dispatched from the Den without any investment.

You simply cannot go crazy with someone else`s money. There may be very serious consequences if you lose other people`s cash. You cannot just expect your life to move on as usual if your heavily borrowed business fails.

Your whole life`s future could be affected. What would have started as an ambition to become successful could easily turn into an unmitigated catastrophe. I will say this one more time;

Don’t go crazy with borrowing.-Start Small!!!!!!!!

Keep borrowing under $10 000

I will discuss with you extensively about bootstrapping in future articles. But I am also aware that this model may not suit everybody. Some of you have ideas that will require a more free-spending approach in order to succeed.

Therefore that may mean borrowing a substantial amount of money. I want you to consider seriously some of the facts I outline here.

Warren Buffet once said;

Only when the tide goes out do you see who has been swimming naked”.

What he meant by that was that when the economy is doing well there won`t be a problem, and all businesses will appear safe. However, when the economy tanks – like the recession in 2008 – heavily borrowed businesses would struggle to survive.

I still, and will always argue that you do not need to borrow a lot of money to start a business. Things have changed so much in the business world that businesses can now be started for no more than a £100. Yes, that’s true £100, is all you need to start a business.

The truth about most of the people who say that they need a lot of money to start a business is that they don’t really want to start a business. Those that really want to start, simply start.

I have more sympathy and respect for people who seek to borrow after they have already started a business.

People who spend months doing a business plan waste a lot of time. If your business plan requires more than £50,000 for you to start a business, then it will take you a lot longer to start that business.

In fact, you may end up not starting at all. You may struggle to find a lender who will be willing to give you £50,000 to start a business with no business experience, no track record, and obviously, no collateral or guarantee that they will not lose their money.

Some years ago I thought it would be a good idea to start and run a care home for the elderly. I did some research and found that there would be a sharp growth in the aging population in the next 20 years.

So I thought there was a real opportunity here. The big problem was it would cost a lot of money to start a care business, and I had none. Well, how could I have had such a large amount of money? I was after all just coming out of University.

I had never managed a Care business before but I certainly made up for that with absolute personal confidence, passion, and fanatical determination to succeed.

I also had my fresh, finance and accounting University degree for good measure. Surely with such a strong personal profile and such a brilliant business idea, I thought, investors were going to fall over each other just to be first to invest.

So I approached countless organizations looking for some investment into my business idea. But here is the punchline. Do you know how much I was looking for? £250,000 or $380,000.

Well, I`m sure you have already guessed by now. I did not get the money and I did not start a care business.

Now I look back at this story of my life with such hilarity at just how naïve I was. I think to some extent I feel relieved that no one gave me that money. If they had, and if the business had failed, I imagine my life would probably have taken a very different, rather unpleasant course.

Quite frankly anyone who lends such a sum under such circumstances may be considered stupid, because they run a very high risk of losing all their money. You cannot try to learn business with someone else `s money.

You cannot make mistakes with someone else`s money. What you need to do is aim for a modest start-up, to learn the business first. Test what works and what doesn’t on a small scale.

Suppose you tried to open a small business selling custom made phone cases, and you invest £1000 of your own money.

If that business fails, surely you will be sad to lose your grand, but it is a loss you can live with. In fact if you consider the lessons that you walk away with from that experience, it may turn out to have a positive impact on your future projects.

So while on paper it may be a loss of $1000, it could easily be considered an investment if you end up using the skills, wisdom, and lessons learnt from the failed venture, in your future businesses.

The bottom line here is that your world will not stop because you lost a $1000. Now would the same apply if you had lost $50,000 of someone else`s money? You would certainly have a whole lot more sleepless nights then. It would be an absolute disaster.

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