Six Options If You Are Out of Money…

Welcome to the Do It My Way podcast. Let me just say that business startups are not for the faint at heart. I met with a client this week, she gave me a call and wanted me to come by. It’s a startup and she’s spent about $250,000. She’d gotten a loan and spent on a build-out, beautiful build-out, beautiful building, did such a great job, and now is starting to market, but had very little money for marketing, because she spent all of her money getting everything ready to go.

She had to buy some equipment, she hired some staff, and wasn’t taking any money herself, just diving in, bootstrapping, trying to get this thing off the ground. It can be really, really tough. It’s one of those things that I feel like people don’t talk about, with startups, a lot. It’s fun, it’s adventurous, you’re trying these things, you’re trying to be an entrepreneur and make money for your family.

Do something that you love, call your own shots, work the hours you want to work, and all those great things that come with entrepreneurship, but there can be a really hard, tough side to it. If you don’t have the funds, that’s very stressful, right? She called me and said, “Can you stop by? I want to talk to you about a couple of things.” I went over there, and right when I walked in, she just was in tears.

That’s not typical of her personality. She just said, “I think I’m going to have to shut down.” I’m like, “You just started, what do you mean shut down? You just got open, we just did your grand opening, you’ve just finished your website, everything is looking really great, your social media is starting to pick up.” The reality is, it’s not going to happen day one, right? She’s not going to make money for a while.

It can be six to nine months until you’re putting money in your own pocket, unless you have accounted for that in your loan, and giving yourself a salary, but most people don’t. Those people bootstrap it and say, “Hey, I’m not going to pay myself. I’m going to go ahead, and–” The type of business that she has, she is not able to do it by herself. She definitely needs staff there, but she’s bare bones, she’s not hiring a ton of people or anything like that.

It’s an expensive startup. It requires equipment. She had to get a CRM. She had to do all kinds of things that are really expensive. The end of the day, she’s run out of her money. We had a really small, small budget for marketing, like bare minimum, really not even enough to make a dent, even in a market like Tulsa, but it’s better than nothing, right? We started some social media, put a little money behind some posts, but really weren’t running a comprehensive campaign that you would want to do as a startup.

As I was talking to her, it just made me think, number one, if you go into business, you have to have money for marketing. It’s not going to work. You’re not going to open your doors. It doesn’t matter if you had a reputation somewhere else. You start your own deal. Day one, you’re not going to open the doors and just have a book of business. It’s just not the way it works, right? People are in their habits. They’re already used to going somewhere else.

You have to change their pattern, interrupt the pattern, have them come to you, give

them a reason to do it, and leave the current place that they’re going. It’s a process. My heart went out to her because I’ve been in the position where you’re just like, “Oh my goodness, how am I going to pay my payroll and the next bill that’s coming out,” and let alone pay yourself. Yourself is the last person that you think of. It starts to affect your family, your personal life, and everything else.

Carrying the burden of that is a lot. It’s a lot for one person to handle. We started to get creative and I sat down and said, “Okay, number one, how many people do you just have on your list? Meaning how many people have walked in the door, they’ve gotten a service, and you have their email or their phone number?” She had over 400 people, right? That’s pretty good for just being open for a couple of months.

I said, “Okay, we are going to call, text, and email every single one of those people, and get them back on your books.” It’s a service industry where you come maybe once a month, maybe every three months, maybe every six months, depending on the service you’re getting. I said, “How many of these people have we rebooked to come back in?” Just like the dentist, you go to the dentist, they don’t ask you if you want your appointment in six months.

They say, “Well, six months is your next cleaning, and here’s the dates available. Are you available on January 2nd?” You’re like, “Well, I don’t know what I’m doing on January 2nd, but sure, I’ll go ahead and make the appointment because it’s not optional.” They’re the doctor, they’re recommending this is what you need to do, so you do it. I had to have that conversation with her and her staff.

We are the experts. We are prescribing, we are telling people, “You come in for this service, you need to come back the next month and every month thereafter to get the benefit of this service.” This is how it works, right? This is what we recommend. Just changing a little bit about how they’re presenting to the client once they come in, and rebooking them, number one, because the easiest way to make money is make money off people that already are a customer.

How can you make more money off that one customer? That’s what’s going to help you the most and get you quickly where you need to go. Now you need to keep bringing new people in, and how do you bring new people in that are outside of your circle of influence or the people that have been before? You have to advertise, you have to market, right? They’re not going to just know you’re there and walk in.

We came up with a really creative plan. We actually are talking to a couple of investors as well, that might come in and help her, because she needs some funding. There’s no reason to shut the door. It’s a beautiful space. She’s done all the right things up until the point of marketing, but she ran out of money. What are your options? You sell the business and recoup what you put into it, possibly.

If you don’t do that, then you’ve got to just get some money to start marketing, and just know that it’s going to be a slower game, but the more money you put in, the more brand awareness you’re going to get quickly, the more you can get people

through the door. These are the options that we went over, and I thought this might be helpful for other people that are out there. If you’re thinking about starting a business, number one, think about the overhead cost.

The reason I went into digital marketing, and owning a digital marketing agency, is– My overcost is basically nothing in the beginning. I had to have a laptop, right? I had to have a skill set. My skill set was business coaching and I knew how to run Facebook and Instagram ads. That is a way to make money. That was a skill people were paying for. It’s not something I had to be out a ton of money to do it, but I had to learn that skill set, and it’s so much easier to start a business like that.

I was out of my house. I had no rent, no overhead. I hired my first assistant probably six months after launching. It was just me. Any money that came in, well, it went in my pocket, right? Even if it was only a couple thousand dollars a month, it was a couple thousand dollars that went to me versus a couple thousand dollars that goes to your overhead. That’s what she’s dealing with, she is making money. She has people coming in, but she’s got expensive, high rent, in a high-rent area.

She’s got a whole build out where she spent $250,000 to make it look beautiful, buy the machines she needed, and all of that. At the end of the day, it’s like, “Oh, I’ve got to hire some people, and I got to pay myself at some point,” right? This is really like strapping. She actually has a child in college. I get that. I’ve got one in college and one on the way in the fall. It’s not cheap by any means. The pressure is really on. She just wanted to run and get out of it.

I’m like, “No, no, no, no, you’re too far in. No, you have too much blood, sweat, and tears into this. It’s a beautiful concept. It’s working. We need some marketing dollars to get this to take off. That’s it. That’s actually the easy part, right? You’ve done all the hard part.” The hard part is the concept and the whole build out. She’s done lots of things. She’s gotten some influencers that are now on board, really promoting her stuff, and just starting to do all the things that she needs to do.

Her social media is picking up, but we need some ad dollars. Here are some options to think about. Number one, you can bootstrap, right? You can take money out of your own personal account and infuse it into the business, if you have that. Most people that I work with, that are starting out, don’t have that, right? They’re trying to not take away– They’re already not getting a paycheck from their nine-to-five that they had, or their career that they had.

They’re going out and they’re starting their own thing. Now, not only do you not have your salary coming in, but you’re putting money out because you’ve got to build whatever you’re building. Bootstrapping is an option. Number two, a small business loan. I know Regent Bank here, locally, in Tulsa, and they’re all over Oklahoma, but they are great with small business loans, and they’ve helped a lot of our clients.

If you need to go get a loan, you show proof of concept, but you’ve got to market, it makes perfect sense, right? Marketing is going to be one of the most important parts moving forward, because you’ve built it, but they’re not just going to come. You’ve

got to be top of mind, brand awareness, brand awareness, brand awareness, and give them a reason. They have to be scrolling their social media and stop in their tracks because there’s something that you’re offering that is solving a problem for them, right?

Think of it that way. It takes money to do that. The other thing is friends and family. You can definitely reach out to friends and family and see if– I ask her, “Do you have friends or family that would maybe give you a $2,500 loan, a $5,000 loan, that you could get from two or three people and pay them back, and maybe be interest-free for a year?” There’s options out there, at least to ask. The other thing is an angel investor.

That’s somebody who’s going to give you money in exchange for equity, right? They’re going to give you money and they’re going to own part of your business. You’ve seen this on Shark Tank, right? They will come in, they will give you X amount of dollars for 10% of the company, and you have to decide if it’s worth it at that time. To me, for her, it’s worth it, right? She doesn’t have the money. She can’t continue forward, and like I said, the hard part’s over, we just need marketing dollars.

We will show an ROI pretty quickly, but we’ve got to have the dollars to get it out there. Angel investor, they typically let you run the business as well, which is great. You can call the shots. You’re the expert, you know that business, not them. You maybe just don’t know the business side or the marketing side, but you know how to do the service. You’re really good at the service, I would hope, or you wouldn’t have started that business.

Getting an angel investor can help kickstart you, right? Somebody that has money, they’re looking to invest, they will give you some money in exchange for equity that, in the long run, they’ll make out better. If you didn’t have them, you wouldn’t keep going, right? You’re at that fork in the road. Stop or don’t stop. If you’re continuing on, then you need to infuse money into the business. Then, finally, venture capitalists.

They will also give you money in exchange for equity, but they typically have say-so in the business. A VC will come in and start calling the shots. Might be a good thing. You might need a mentor. You might need someone to help you out, or it might be one of those things that’s like, “Oh, shoot, I have this banker, this attorney, or a doctor coming in that doesn’t know my business, but they have money they want to invest, and now they’re suddenly telling me how to run my business.”

Might be good, there’s pros and cons to that. I can see that working out very well if it’s someone in the industry, that has already done what you want to do, okay, that’s a great venture capitalist for you because they also have that experience in your industry. If it’s somebody out of the industry and they just have money, it might be– I don’t know. Could be great advice from the business side, but they may not understand your niche or your business as well. Those are just some things to think about.

There are options. You don’t ever need to shut your doors and just quit by any

means, but you’ve got to act quickly. I told her she’s got to make a move fairly quickly or she is going to have to shut her doors, and then you’re just losing that $250,000. Another option, even, is just get a buyer. Get a buyer. If you want to just run the business and be the operations manager, be the director of operations, have someone own the business, come in, and infuse money and capital into it, then that might be a better option as well.

A lot of times, I don’t think people think about actually running the business and what that entails. They just love the niche. “Oh, I love this area. I’ve been doing it for 15, 20 years. I’m really good at it,” but you haven’t ever run a business, right? You just have been really good at that service, which is a great thing, but there’s so many other things that go into it. Just wanted to share that today.

It was on my heart because I had just met with her, and it breaks my heart to see somebody that is so down, wants to give up, and run the other way. I get it, because you also are very much on an island, by yourself, when you’re an entrepreneur. No one is looking over you. You don’t have a boss. You don’t have anybody to help you. She hired a front desk person, this girl making $12 an hour, she’s not the one that’s going to be your support system, probably, nor should she be.

She really shouldn’t even know this is going on behind the scenes. To have a mentor to lean on and go through some options is a really great thing. I will update you guys, but right now, she does have somebody looking to invest, and they would be more like an angel investor giving money for equity. They don’t have experience in this industry, but they are intrigued because of all the work that she’s done and put in. It might work out really well.

Then we also have a small business loan option that we’re looking at as well. Just some things to think about before you start. A lot of times, people dive in without really looking at, “Okay, here’s my startup cost, but how am I going to market? What is my marketing budget every month, that I can get away with?” For her, I’m recommending $2,000 to $3,000 a month. It’s not a ton of money. It’s not something that’s astronomical, you’re not going to be able to do, but if you’re out of money, you’re out of money.

I get it, right? That is a lot of money if you’re sitting there, not paying yourself, but in business world, and an investor coming in– The investor actually made a comment, like, “Is that it? You just need $3,000 a month to get this thing going? Easy.” That’s also somebody that has money, that is willing to invest. Just a quick tip for today. If this was helpful to you, I would appreciate you sharing it. I would love to hear your feedback, as always. Until next time, see you soon.