Virtuoso Team Consulting, Inc.

A client said something today that made me think of a customer I used to work with. He would come in to the bank and swear that all he needed was $25,000 in capital to make his business succeed. He had no collateral, terrible credit, and could typically be found with more excuses than account receivables, but wanted the bank to lend him these funds. Thankfully an investor came along and gave him the money, and it only took one month before the customer came back in complaining that, “if I just had another $25,000 I could make this business succeed.” The capital was spent, and there was nothing to show for it except an annoyed investor. It has been my experience there are only two reasons business owners apply for large capital loans, to buy assets or time.

Successful business people borrow money all of the time, but it is to purchase assets or expand. If they wanted to buy new technology that would allow them to save money, move more inventory, or ultimately drive a higher ROI (return on investment) than the interest rate being charged, more power to them.

A bad decision is using capital simply trying to survive an economic downturn. Then they are throwing good money after bad, buying time. What happens if it was not enough money, the economy stays bad longer than expected, or competition comes along? Now the business owner is in deep debt, the bank has a large (probably under secured) loan and options are limited. As in the case I mentioned above, the problem with the business had more to do with low profit margins due to a lack of cost structure understanding. A simple, low cost change to their operating budget would have paid huge dividends.

The lesson in this instance is that money does not fix things; in fact, money tends to amplify the business system, for better or worse. The next time you hear someone say they just need more money, you can ask them if they need it to buy Assets or Time?

©2008-2009 Virtuoso Team Consulting, Inc.   All Rights Reserved.

The sheer volume of things that must be done to legally start a corporation in the state of Florida is astounding:

1.Register with the Department of State of Florida, Division of Corporations

2.If necessary, make sure you have an occupational license

3.Get an EIN (Employer Identification Number) from the IRS

4.Elect and file the paperwork to be a subchapter S corporation from the IRS

5.Pay to be licensed with the county and city, as required.

6.Don’t forget your license to collect sales tax, or pay unemployment tax

7.How about a worker’s compensation waiver?

That is just the legal and tax stuff someone has to go through, let’s not forget about actual business planning, for example:

1.Writing a business plan

2.Creating a marketing plan

3.Registering your domain name (in case you should want to have a web presence, which is highly recommended in this day and age)

4.Establishing your budget, pricing, cost structures and profitability

…to name but a few.

There are also miscellaneous things like bookkeeping software, hiring employees, and exit strategies that should be established.

It really makes me wonder why anyone would want to start their own business, but then I remember what one of my clients at the bank said to me, “Jer, if you do what you love, you’ll never work a day in your life.”

©2008-2009 Virtuoso Team Consulting, Inc.   All Rights Reserved.