Most entrepreneurs are not finance people. Most are inventors or salespeople. They believe a need exists for something and want to be the one to fill that void.
Very few entrepreneurs really understand the way business finance works until it is too late — and that often means the end of the business. I’ve seen this countless times in my 12 years as an entrepreneur and consultant. Hell, I’ve even experienced it first-hand.
Here are some things I’ve learned the hard way:
Lesson #1:
No matter how brilliant, creative, and blessed with talent you think you are, all meaningful transactions that occur in the life of your business will be most affected by the decisions you have made regarding how you have financed the business.
Lesson #2:
No matter how much you think you know about business finance, you are woefully uneducated. Do yourself a favor, hire an ethical, smart accountant early. But, don’t put all your trust in any one individual. Learn as much as you can about finance.
Lesson #3:
You will regret at least one major financing decision no matter who you are or what business you are in. Just know it’ll happen.
Lesson #4:
Most of the financial mistakes you will make will happen within the first three years. That’s why it’s critical to be more like a speed boat than a cruise ship. Act.Analyze.Adjust…as fast as possible.
Lesson #5:
You need to know that once someone gives you money, no matter how much they love you, it just became a business transaction. Your grandmother will sue your ass as fast as she’ll whip up a bundt cake once it becomes business.
Lesson #6:
If you are going to take professional money, take professional money. Amateurs may seem “cheaper,” but they aren’t. Don’t be penny-wise and dollar foolish.
Lesson #7:
Take money from as few, and as deep pocketed investors as you can. The fewer investors you have to deal with, the better. You’ll thank me when you aren’t sweating over closing a deal because your wife’s brother-in-law John has just a few more questions he wants answered first since he invested $1,000 three years ago.
There you have it. Seven simple lessons I learned the hard way. Let that not be you.
How about you? What lessons have you learned?
About the Author: Greg Hartle is co-founder of New Methods. And also founder, co-founder, investor, and/or strategic advisor with over a dozen businesses. Greg also speaks and consults professionally with businesses, non-profits, and other groups on 21st century capitalism, leadership, and integral life strategies. Connect with him on Twitter and Google+
