Dear friend,

Myth #1: Small is beautiful.

Reality: Small can be extremely difficult.

Fact: Running your own business requires great effort and the casualty rate is high. A small
firm is much more vulnerable to tough economic times than a larger organisation. 

For example: To a big firm, the loss of a major contract is upsetting but not disastrous. To a small concern, it can make the difference between being solvent and going bankrupt.

Remember: The vast majority of start-up businesses close within the first year, many with horrendous debts. You need to get the right mix of ingredients together before you begin.

And: Be sensible, have another source of income for the first year or two.

Success: The people who are best placed to succeed are those who have spent some years working for someone else in their chosen field. You need to know what you are really up against. The highest failure rate is among those people who go into areas they know nothing about.

Also: Pick the right associates – this is often overlooked. People go into business with family and friends, usually not the right people at all!

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Myth #2: Banks know best.

Truth: Local branch managers know something about their community, and will have their own personal views on the scope of a potential business, based mainly on previous cases they have dealt with.

But: They rarely have any of the specialist knowledge required for success in a particular field.

And: If significant amounts of capital are involved, they will need to consult with a regional or head office – and these people have even less expertise on how businesses are run.

Reason: They are money-lenders, not business experts. Ideal: you will know much more than the banker – prove it, and you will usually get your money.

Success: To raise business finance, understand the nature of the lender, and lending.

Fact: Commercial loan decisions are based heavily on the impression made by the entrepreneur – the financially literate and articulate borrower has a huge competitive advantage.

Requirement: A well-prepared business plan – will show you have done your homework.

Expect: Questions about the key assumptions behind your figures.

Also: You need to score highly on the five ‘Cs’ – character of borrower, capacity to repay, conditions (product, industry, economy), capital provided (debt/equity ratio) and collateral.

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To your success and happiness...

Kind regards,

P.S. Have you visited www.InsiderConfidential.co.za yet?

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