Mark Cuban’s Advice To Entrepreneurs – Risk, Energy, and Funding

According to online dictionaries, an entrepreneur is “a person who starts a business and is willing to risk loss in order to make money” or “one who organizes, manages, and assumes the risks of a business or enterprise.”

Well, I get a check for both of those. My past venture into the fashion industry was fraught with risk and cost me plenty. Now, I have little to show for it, save for a closet full of the most amazing handbags EVER CREATED.

I’m normally a risk-averse person, but somehow, when I’m on a quest to find the formula for success in some endeavor, I throw tons at it – money, energy, time – hoping to find the magical components. The problem is, when you invest in something you really don’t understand, you come up empty more often than not. Knowledge is power, sometimes more so than money, and that’s what struck me with this video from Mark Cuban.

The big takeaways?

Seeking funding for a new business venture is failure. It’s an admission that you can’t hack it on your own, can’t find success with the resources you already have, and need to sell-out in order to plunge forth. The question is, how successful will you really be when you are on the hook for millions of dollars to others who believed enough in your idea that you probably could have rocketed on your own first, albeit a little slower??

I never thought of it that way…

My latest venture is challenging, to say the least. And while I’ve researched the concept itself, I’ve thought many times about how I’ll pitch the idea to investors, how I can get into an accelerator, how I can get the attention of venture capitalists…all so I can command funding and leverage expertise from those who have already found success.

But after watching this video, I realize my mindset needs some fine-tuning. Funding is not necessarily the answer. Preparation is the missing element in my formula. It’s where I fell short with my first business. Not taking enough time to learn about the industry before jumping in, spreading myself and my resources too thin to be even slightly effective, not doing enough research in the form of focus groups prior to designing my products. It was a totally ad hoc, fly-by-the-seat-of-my-pants, throw-lots-of-crap-at-the-wall-and-see-what-sticks process, with no tried-and-tested repeatable elements. I had no blueprint, no measurable metrics, and no plans for future execution. So, what did I do? Hired a new, more expensive PR firm (which did squat, btw), designed even more products without customer input, spent more money than I could afford…only to land flat on my face with no answers and lots of anguish.

I never acquired the knowledge, though I did amass mountains (now they’re more like hills) of debt as a result. I could have mitigated the risk with a deep understanding of the business landscape, including potential pitfalls and competition elements. But not me! I’m an instant gratification whore, way too impulsive and impatient to waste time on LEARNING, of all things.

To my own peril. I’ve raised many a glass to that toast, regrettably…

So, Mark. Thanks for the advice. Knowledge is the most powerful tool in your arsenal. The more ammo you have, the more prepared you are for battle. And yes, it IS a battle. But winnable if your head is in the right place.

Got Funding??

Part of the issue with running a startup is figuring out how to keep up your monthly expenses while waiting for your sales to explode. After all, if you can’t pay the bills, you won’t be able to sustain and grow. It’s difficult to pinpoint exactly what you will need at various points and a lot is dependent on how quickly your offering explodes in the marketplace. That’s both good AND bad…good because you have a lot more incoming funds to line your bank account and bad because you need to maintain momentum while meeting increased customer demand. Sales may fluctuate from month to month as well and you need to have enough cash on hand to keep the lights on, even during the lulls.

falling dollar bills from money tree

falling dollar bills from money tree

This is where working capital comes into play. In layperson’s terms, it’s basically the money you need to pay your operating expenses – the things you have to pay aside from your development or manufacturing costs. These expenses include administrative, legal, insurance, office overhead, salaries, payroll, taxes, transportation…the monthly bills that recur without fail, independent of how many widgets you produce or sell.

Some newbie CEOs fund their businesses using credit cards. I might have been one of those at one point…let me give you a bit of advice. DON’T. DO. IT. 0% offers look like loans with attractive terms but they expire. It’s tempting to use those blank checks, I know. But there are better ways to manage your finances.

Small business loans? Um, okay, if you want to pay back insanely high interest rates. They are also extremely difficult to secure AND you practically have to hand over your firstborn as collateral. Just a little more added stress to deal with. No thank you!

You may also have the discretionary funding available for personal investment purposes. If that’s the case, good for you! Not everyone has that luxury. But don’t get too discouraged. There are other options available.

A revolving line of credit is actually a really good way to mitigate some of the risk related to keeping your business solvent. You use what you need when you need the cushion and pay back only what you’ve spent with flexible terms, without having to worry about high fees or high interest rates. You can pay the money back as a lump sum or broken out into monthly payments at a set rate. You may want to create your own unique repayment schedule. You may only need funds at crunch time while you’re waiting on receivables from slower-paying customers. A revolving line of credit gives you steady access to cash when you need it most.

Kabbage is a company that helps put small business owners in touch with the funding they need. Low interest rates and flexible repayment options? Yes please!! The application is quick and simple – you can get approval in minutes and the funds are generally available to you upon approval. Besides all that, they have a really cool logo. And you should know by now I’m a sucker for a good logo. =)

SONY DSC

SONY DSC

Everything Changes, For Better or Worse

I actually posted this awhile back but I caught an episode of Shark Tank and I had to find it to reblog.

They say change is good.  Perhaps it is, in the long run.  But in the short-term, it is just plain scary, primarily because it forces us into the unknown. Always daunting.  Change can be exciting but nerve-wracking at the same time.  It can force us into positions where we need to take risks we were never before ready to face.  Comfort zones are eliminated, and new challenges may arise.

A few months ago, a friend and I went to see Barbara Corcoran speak at a local college.  She arrived an hour and a half LATE but I forgave her because her presentation was pretty entertaining and she left me with a quote I continue to use because it is SO TRUE – PERCEPTION BECOMES REALITY.

Courtesy of www.abc.com

Courtesy of http://www.abc.com

Early on in her career, before she became a real estate mogul, Barbara had a business partner/boyfriend who loaned her money to start a real estate business.  Long story short, he hooked up with the office secretary (also her best friend) and broke Barbara’s heart.  After some time went by, the couple unceremoniously announced that they were getting married.  Poor Barbara became the third wheel and finally decided that she needed to go out on her own.  Her ex told her she’d never be able to make it without him.  HA! Who’s laughing now, Ramone Simone???

Anyway, back to my point…

She did go out on her own…and for anyone who watches Shark Tank, you know that she is a monumental success in her field and a millionaire over and over.  Change, though unwelcome at first, forced her into this place. It backed her up against a wall and made her choose her next move, a highly lucrative one as it turned out.

Wrestling with change does not always yield such profitable results, but entrepreneurial spirit welcomes the prospect of an alternate reality – not like in Star Trek; I’m talking about a clean slate and a brand-new plan of action.  Who says you can’t end up like Barbara???

Are You Risk-Averse Or Risk-Embracing??

I’m so charged up right now!  I have the best freaking idea and I’m so excited to work on it!!!

I LOVE channeling my inner creative spirit!  Sometimes it goes into overdrive.  It’s like I can’t stop it.  LOL, do you get the reference?  The Girl Next Door??  Elisha Cuthbert, former porn star, Emile Hirsch, her younger, sex-starved neighbor??

Anyway, big ideas usually come with equally large risks, and not all of them are financial.

For example, if you’re going to dive head-first into a new venture, is your Hubby going to freak out about piling on the debt to get your idea off the ground?  Since he only has his past experiences to draw upon, things might not look too promising for you. Crikey, am I ever going to redeem myself???

Is the risk of an ugly divorce worth all the effort?

Of course, if you’re a gambling person in need of startup funding you could always put your investment on black and roll the dice in hopes of making the rest.  It COULD work…

One defense mechanism you definitely need in your arsenal to overcome said risks is P-A-S-S-I-O-N.  Do you know why?  Passion won’t pay the bills but it’ll drive you towards getting your idea out there and perfecting it so that everyone immediately gets the value proposition.  That creates D-E-M-A-N-D.  And then follows the $$$$$.

See a need, fill a need!  Wow, I’m full of movie references today!

Ever see the movie Robots?  If you’re an inventor/innovator/entrepreneur, you should watch it.  It totally inspires you to get out there and find ways to make the world a better place!  Seriously!  How apropos for a kiddie flick.

Courtesy of Wikipedia

Courtesy of Wikipedia

My idea is fabulous because it is a game-changer!  It’s disruptive!  I had my “ah-ha” moment.  And it was AWESOME!

There has to be an observed need for an idea to gain traction.  And it can’t just exist solely for your own personal purposes.  You have to solve for pain points of the masses.  Making your own life less complicated is nice in theory but it won’t earn you any awards.  Think BIGGER!!!!

Ask the question – can my idea make lives easier?  If so, HOW?  That’s all part of the value prop, too.  And if there’s perceived value, there’s perceived benefit, both worthy of serious financial gains!

It’s such an exciting prospect…to smash out of the box (I’m imagining the Hulk now, kiddies are watching The Avengers).  But make yourself a promise…absolutely love the idea because if you don’t, nobody else will.