Received wisdom will tell you that you should never make assumptions (as put in Police Academy 'when you assume, you make an ass of u and me'); in the real world of course assumption form an integral part of every day life whether it is for basic self preservation, to save time or simply to test our understanding - it is simply too complicated to only act when you know for sure.
The most frequent wrong assumption that people make about my businesses is that the start up business feeds the finance business - they will say 'I see, so you set them up, then go get the funding they need'. In actual fact the funding business feeds the start up business; I am privileged to have a detailed insight to what a lot of businesses do - where they go wrong and where they go right - this insight is hopefully passed on to start ups to help them avoid those mistakes. Funding? If I can help you start with zero funds then I have had a success.
Whilst we are dealing in cliches, my dear Grandmother always used to tell me 'you won't get there any faster by speeding'; one of my more destructive traits is a compulsion to speed on motorways. Whilst in many cases I can directly prove Grandma wrong, the truth of the matter is that she could more accurately have re-worded her caution as 'you won't achieve an more by speeding'. Put into context, because I like to drive fast on motorways, I assume that on a journey of any real distance I can average 60MPH. Ignoring the rising improbability of this happening, I am of course increasing the cost per mile covered and incurring secondary risks such as being caught for speeding (time consuming and expensive), accidents (potentially fatal) and, because I insist on using motorways I often actually travel further than I need to. Do I make extra time? Not really - I might get there sooner but then I spend 10 minutes waiting for the other person to turn up.
Where was I going with this? Oh yes..
By far the most common business start-up mistake is the belief that more cash equals more chance of success; in very many cases this can be the very opposite of what actually happens. Like the risk incurred by speeding, having too much cash in hand carries inherent psychological risk - witness the lottery winner who feels they should now start a business, lurching from franchise to dodgy 'opportunity' like a drunk in a casino, with neither plan nor realistic chance of success.
Alternatively, like my spare 10 minutes the cash will just sit there waiting for something to happen.
A successful business will be planned then capitalised, not the other way around, so here is my very simplistic Business Funding Plan:
STEP 1: Compile your plan and cashflows on the assumption that there is no capital available.
STEP 2: Look at where you go into deficit and ask yourself is there a realistic way that you can avoid or postpone expenditure without fundamentally damaging your business.
STEP 3: Look at ways of improving cashflow rather than introducing capital.
STEP 4: If you are certain that capital is required, build it into your plan as a loan, with repayment terms. (Even if it is your own money that you are happy to inject).
Remember, having cash in your business might get you to your goal quicker, but will it actually be any better?
