Frankly, I’m surprised, that when asked more entrepreneurs don’t mention capital as their biggest key to success. When asked about keys to succeeding as a risk-taking business builder they, entrepreneurs, often answer with words like perseverance, will, fight, creativity, but not capital. Let’s be clear, without capital, lots of it, your big idea is going nowhere fast.
Traveling on a Treadmill
For the better part of seven years I’ve started, managed, and closed businesses, lots of them. I’ve worked in the physical space on startups (coworking, coffee, tea, Vietnamese subs, seriously), and online (marketing, search engines, PR, publishing, ghostwriting) without much luck. Donald Trump never knocked on my door to hand over a big check, just as INC Magazine never ranked any of my companies on their coveted fastest growing list. Rather, I just kept breaking even at best, all in the name of growth.
For nearly a third of my life I thought, just keep working, just keep plowing away at these ideas, and at some point, someone, presumably fate reincarnated, will hand you a big check for your efforts. One day making a living will be child’s play, because this business is what I love to do. Then reality set in.
Did you know that 86% of wage earners in Africa live on less than $2 a day according to the UN? Are these people bad? Unworthy of a good living? No, you say, just not educated? Could you afford tuition on $2 a day? Life isn’t fair, and one of the most humbling ways of discovering the truth in this cliché is to look at global poverty in relation to human existence. They’ve never had the capital to change their lives for the better, and getting that capital is extremely hard, so until Bono gets there to raise some money, they make close to nothing, and live like it.
Back to entrepreneurship, it’s not that you can’t start a business with nothing, and build up something sustaining. In fact, many small businesses exist entirely to sustain the owner. As in, Bill Smith owns a hot dog stand, he works alone, and his profits are enough to pay his bills. This is very possible with nothing, or next to nothing, as Mr. Smith can use a credit card, or sell some stuff around the house, buy a cart for the cost of a new sofa, get some hot dogs, and work his butt off until his sweat equity turns into cash. What’s nearly impossible is Mr. Smith growing his one stand into a regional or national chain without capital. Not just a little capital, but a lot of capital.
Most entrepreneurs don’t want to just be self sustaining, though that is step one, rather they want to build something larger than themselves, and that is where the lack of capital kills so many businesses.
The Desire For More
Many make the false assumption that entrepreneurs want to build large businesses out of sheer greed. This often is not the case, as me, and most of my fellow entrepreneurs care more about creating jobs, opening up new markets, helping to create something out of nothing, for us, it’s magic. The desire for more is so great, ironically, it often fuels the lack of profits in many businesses, as they, like I have for so long, strive for growth.
Without hard money in the millions more than likely, it’s tough to weather the storms that so inevitably occur during business building times. It’s not like money is easy to make, so whatever the industry, this is what I’ve seen across sectors and economies, having sufficient capital on hand is the only true way to avoid failure.
When the mortgage crisis emerged, and banks started dropping like tears at a funeral, there was only one reason for the phenomena, lack of capital. Sure the banks, or the owners of the banks, made risky bets, sure they bought financial products Warren Buffett couldn’t properly explain, but at the end of the day, what plagued them was lack of capital. They simply didn’t have enough money to keep the troubled boat afloat.
While my goals are much more modest than the average green-eyed banker, I too felt the jellyfish like sting of being undercapitalized. Yet my desire for growth trumped my improvised situation, my desire for something larger than myself almost consumed myself, as humans we error.
Pigs in Africa
A few years ago, when my company dripped money instead of bled it, a client visited Africa on a charity mission, and bought some pigs. Thanks to the internet he emailed me pictures of the pigs and farm from his tent, literally, and told me about the sustainability of pig farming. People, with the help of us foreigners, could breed, and eventually sell these pigs for a handsome profit, and then breed more, and sell more, which would help them greatly increase their chances of surviving. This, for all the greenwashing out there, is a damn good definition of sustainability.
I invested some money in the pig farming endeavor, as it sounded like a safe bet. I believe it was $300.
Just today I received an email from a woman in Tanzania expressing internet in pig farming, it was the third I’ve received this week. Amazingly, the little experiment two years ago worked for those pig farmers, and somehow, someone found out I invested in the venture, and now they all email me for, unbelievably, capital.
Life goes full circle; people you meet that are meaningless to you now, might hold the key to your livelihood in the future. I write this blog post about the utter failures I’ve had at business for lack of capital, while receiving emails from well-meaning aspiring pig farmers asking for capital. The irony is not lost on me, and here’s hoping it won’t be lost on you either.
Check out more about the pig farm investment, and what happened over there by clicking HERE.
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