Fourteen Ways To Finance The Start Of Your Business

In my career, starting and building many businesses over the years, I\’ve used every one of them except one. Here are the most popular 14 ways you can try.

Number one. Start with your own savings. The first, and usually the most common source of startup funding is your own personal savings account. Most people who start and build successful businesses tap into their own savings accounts to begin and often go back to their own personal funds. Over and over again during their career, this is usually unavoidable.

Number two. Source of funds as you can sell your assets. One of the ways that you can raise money is by selling some of your assets. It\’s quite common for business owners to sell or mortgage everything they own to get their business up and running. Very often, you\’ll have to go back to your personal assets and either sell more of them or borrow against them. In response to a financial crisis or in order to expand your business, I know you can sell your house, your car, your motorhome, your boat, or some of your furniture. You can sell anything and everything that you own. You can cash in your life insurance for its cash value. Sometimes you can sell the stocks, bonds, or securities you have accumulated or liquidate your retirement account to get the cash you need to start or operate or keep your own business surviving. Many people who start a business for the first time end up selling everything. They have to get enough money to continue to survive until they begin to make sufficient profits.

Number three. To infuse money into your business, you borrow against your credit cards; entrepreneurs tap into a common source of money to build their businesses—credit cards. Many of the most successful U.S. businesses were started by people who took out as many credit cards as possible while they were working for another company and then borrowed against and lived off those credit cards for two or three years until the business became profitable.

A friend of mine, employed by a Fortune 500 company, worked his credit rating up to $50,000 of cash value on his credit cards before he resigned from the big company. He was then able to start his business and breakthrough to financial independence on his credit card cash. This is not a great strategy, nor is it a recommendation. Credit card cash is very expensive, sometimes costing 18 percent per year on the outstanding balances and even more. But if credit card cash makes the difference between going broke and staying in business long enough to turn the corner, it\’s a common way for entrepreneurs to start and operate their businesses.

Number Four. Taking out personal loans, you can start and build a business by taking out personal loans based on your current job, your past credit rating, and your character. Sometimes you can get a personal line of credit from the bank based on your assets. Today, it\’s quite easy to get a home equity loan by tapping into the value of your home. You can then use this line of credit or home equity loan to fund your business until you achieve sufficient sales and profitability. The key to taking out personal loans is for you to build up a good credit rating and then maintain that rating. If you\’re thinking of starting a business in the future, it\’s a good strategy for you to begin borrowing and repaying loans from your bank today so that your bankers become familiar with your trustworthiness.

• Rule. Borrow big and pay back early.

Go to your bank and start building your credit rating by borrowing an amount either as a personal loan or to buy an asset such as a car, motorhome, boat, or furniture. Take out a loan for one year, payable in equal monthly payments. Then, six months later, repay the entire amount well in advance of the due date. One month later, go back to the bank and ask to borrow an amount that is twice as large. Whether you need it or not, take out the loan for six months and then repay it in full with interest two months later. Once you\’ve done this four or five times, you won\’t have a triple AAA credit rating. Your bank will actually be calling you and offering to loan you more money. Once you have this kind of credit rating, you are ready to quit your day job and start your own business.

The goal of the loan officer or bank manager is simple. It is to make good loans. These are defined as loans that are paid back promptly with interest. When you can convince bank officers that you are a dependable borrower, they will loan you all the money that they feel that you can properly repay with interest. But you must have a good credit rating to start with. Many people have been sloppy about their credit ratings in the past. They have had overdue credit card bills and fallen behind in car payments or rent payments. Unfortunately, every time you are late in a payment, it is reported to the national credit bureaus that banks use to assess your loan application. A poor credit rating can be disastrous for a business person starting out. The banks are forbidden by regulation to lend you money if your credit is not good. You, therefore, have to acquire every dollar by yourself from another source and at a much higher interest rate.

You can use one strategy to get somebody else with an excellent credit rating to cosign a loan for you at the bank. You then repay this loan well in advance of the due date. This will start to build your personal credit rating, and you can then leverage off of his credit rating to begin borrowing money in your own name.

Number five. You can borrow against collateral. You can borrow money by taking out what is called a collateral loan. You can borrow against something you own. You can borrow against your car, your furniture, your boat, or your motorhome. You can even borrow against your house, as I mentioned earlier. Many businesses have been started by the business owner, mortgage financing, or borrowing against everything he or she owns. Just remember that bankers are in the business of making good loans that are paid back in full. They don\’t take risks. They will only lend you an amount against collateral that they know that they can sell quickly in a fire sale if they have to repossess it to collect on their loan. You\’ll be lucky to get 20 percent of the value of an asset when you borrow against it.

Number six. Look around for love money. The primary source of most new business financing other than your own savings is what is called love money. Love money is money that people lend you because they love you. This is money from friends, relatives, business associates, your parents, and your brothers and sisters. New business startups are extremely risky, and banks are not in the business of taking risks; as I mentioned, they\’re in the business of avoiding risks. For this reason, very few banks will ever lend to a person starting a business unless they are convinced that he has sufficient funds and collateral to repay the loan, even if the business is a failure. Usually, the only people who will take a risk with your business are the people who love you. They will advance you the money because they believe in you and hope for the best. There are definite pitfalls from taking money from people close to you. Sometimes they will want to tell you what to do and interfere in the operation of your business. If for any reason you cannot repay them, it can cause a lot of hard feelings; it may continue for many years. You should only accept love money when you have no other choice.

Number seven. Take out a business loan. Banks thrive on making good business loans, but this usually requires that you have been in operation for a year or two and that you have complete financial statements that show that you are making a profit. Banks will want to check and double check every number that you submit to them in your loan application, so you must be absolutely correct. Even one incorrect number can cause the banker to reject your loan application. Bankers require a liquid asset coverage of at least $2 for every $1 you borrow. The banker will want to see that amount in terms of cash and receivables to be sure that you have adequate money to repay the loan. Bankers will require up-to-date financial statements, plus personal guarantees that cover everything you own and everything your wife or husband owns. Some of these personal guarantees are so ironclad that they even survive personal bankruptcy. Some people will tell you not to give personal guarantees when you take out a loan for your business. This is nonsense. Banks automatically request personal guarantees and will not even talk to you if you show any reluctance at all in signing one of them. Banks are not in the business of taking risks. It\’s only when they know that you are completely encumbered, and there\’s nothing that you can do to avoid repaying them that they will proceed with your loan application.

FIVE FACTORS BANKS LOOK FOR TO LOAN MONEY – THE FIVE C’s

There are five factors that banks look for before making a loan to you or to any businessperson. They are called the five C\’s of lending or borrowing, and you must be prepared to demonstrate all five of them when you approach a bank to make a loan.

Number one C is cash. This is the best security that a banker can have in giving you a loan. The banker will want to know how much cash you have today, how much you will have in the foreseeable future, and how much you might have put aside in other areas to more cash and cash flow that you can demonstrate. The easier it is for a banker to approve a loan application for you.

Number two is collateral. The bank will want to know what assets you have that you are going to put up to cover the loan. Are these assets free and clear, or are they already encumbered with loans or lines from other people? The banks define collateral as something that can be sold for cash fairly quickly to repay the bank in case your business is not successful.

Number three is your credit rating. Banks look at your current credit rating, and they have ways to check your credit history for your entire life. They can pull up every credit experience you have had with their computers in a matter of seconds. There are no secrets. They want to know how much money you have borrowed and repaid in the past. They want to know how good your credit rating is today and your relationships with your current suppliers. A person with a great credit rating is an ideal person to whom the bank can make safe loans. Some years ago, as a small business owner, I made a 20 percent deposit on a new home purchase and applied for a mortgage for the balance. This is usually a standard loan, and it\’s easily approved. But a years before, well, I was out of town for several weeks. A credit card bill had arrived in the mail while I was out of town, so I didn’t have the opportunity pay them until after the 30-day deadline. This single black mark, which was only for about $50, went onto my credit rating and caused my loan application to be rejected when I tried to buy a house several years later.

“As Benjamin Franklin said, cash is money and credit is money, and the man who has good credit can borrow all the money he needs from his friends and others.”

Your credit rating is a very precious statement about you that follows you wherever you go. I have known many people whose entire lives have been ruined because they have been sloppy or indifferent with their credit. They had failed to make credit card payments, car payments, utility payments, or rent payments when they were due. In one or more of these cases, they have been reported to a national credit bureau. This negative credit rating has dogged them for as long as 10 years, wherever they went anywhere in the country. They couldn\’t buy a car or rent an apartment. Don\’t let this happen to you.

The fourth C. that banks look for is capital. Banks want to know the amount of capital you have. How much of your own money have you invested in the business? How much are you willing to invest? They take this as a measure of how committed you are to the success of the enterprise. At various stages of the business, both at start-up and later on. Most entrepreneurs invest everything they have and everything they can borrow in their businesses to get them through the lean times. You must be prepared to do likewise.

The fifth C that banks look for is character. They want to check you out in the community to find out what people say about you. What is your previous track record with regard to loans? What kind of character do you have in terms of honesty and dependability? What kind of a reputation does your company have with regard to quality and service? Who do you know? Who knows you personally? Who will vouch for you? And today with Google, they can go onto the internet and find out everything about you from the time you were a child. Everything that\’s ever been printed or anything that anyone has ever said or written down anywhere is available within a couple of seconds on Google. You have to be really careful with regard to your character.

These five C\’s all combine to determine the level of confidence the banker has in you and in making you alone. In the final analysis, the individual banker must have sufficient confidence that you are the kind of person that is going to succeed in the business that he or she is lending you money to start or operate. Borrowing money from banks involves a progressive series of financial transactions like waves from the ocean that grow in size over time. When you first attempt to borrow money, most banks will want $5 worth of collateral. Personal investments and other assets for every $1 they will lend you; they will also want personal guarantees that extend beyond bankruptcy. Should you declare it? But after a bank has several years of experience with you and comes to know and trust you, its requirements relax, step by step; after five years of successful borrowing and repaying the money back to the bank, its requirements for cash, collateral assets, and even personal guarantees will drop off one by one. The bank officers will be content for you to pledge the cash flow and the assets of your business to support the loans that they are giving you at a certain point. They will even come to you and offer you more money to expand your business or to make other investments. This kind of high-quality credit rating should be one of your key goals in business to build it and to maintain it.

Number eight. Lease or Rent rather than buy. You can finance your business through leasing instead of paying cash for cars, furniture, buildings, or office equipment. You can lease them and make monthly payments, thereby dramatically decreasing your cash outlays, especially at the beginning. This is a proven way to get started, especially since your sales and cash flow can often be unpredictable in the early or growth stages of your business. Never forget that cash is king. Cash to the business is like blood to the brain. It\’s the critical determinant of success or failure. As long as you have enough cash on hand, you can survive any crisis. But if you run out of cash, your business can collapse and go broke overnight. You must do everything possible to hold on to cash leasing or renting. The things you need is one strategy that you can use at every step on your way to wealth.

Number nine, Bootstrap your way to success. Bootstrapping is one of the most popular and effective strategies to start and build a successful business. It\’s an excellent way to finance and grow your business. Bootstrapping requires that you start small, generate sales and profits, reinvest your profits back into your business to grow, and then make more sales and repeat the process. Thousands of men and women who are today millionaires and even multi-millionaires began with little or no money and built their fortunes one dollar at a time. Through bootstrapping, even though you start more slowly with bootstrapping, there are certain distinct advantages to this process that make it superior, in many cases, to starting off with a lot of money. When you\’re forced to bootstrap and build your business slowly, you have no choice but to replace money and investment with hard work and creativity. You have to get sales results with what you have right where you are because you have so little money you cannot afford to make mistakes. This pressure makes you sharper and more alert than people who start off with the luxury of too much money in the bank. Many businesses that start with too much money get into trouble quickly because they have not learned how to handle the money. When you bootstrap, you remain conscious and aware of every dollar that comes into and out of your business. You get smarter at a faster rate than other people. As you build your business out of your own savings and cash flow. You learn the lessons and gain the experience you need to create a business that lasts for years.

Number 10. Use customer financing. A popular way to raise money is to finance your business by using what is called customer financing. When you use this method, you get your customers to give you the money you need to produce the goods and services you sell to them for the money they have already paid you in advance. Today, Ross Perot, a multibillionaire, started EDP Industries with $1,000 borrowed from love money from his mother after making dozens of sales calls. He finally found one customer who would buy into his idea of handling all the data management services of that customer\’s corporation. Perot then talked his first customer into paying 50 percent of the fees in advance so that Perot could afford to purchase the computer equipment and deliver the services in the first place. The rest is history. He\’s now one of the richest men in the world.

A, request to deposit many businesses will request a 50 percent deposit on an order when they make the sale. With this money, they will buy the raw materials or order the products and pay for the labor to produce and deliver the product they have sold. Their profit is contained, and the other 50 percent that they collect upon successful delivery of the product or service. You can do this as well by requesting a 50 percent deposit when you make the sale in the first place and then using the money to actually fulfill the order.

Another way that you can do this, B, is to get paid first. Many companies use customer financing to get started and grow. They make the sale and then ask the customer to pay for all or part of the sale when the order is placed. If this is not possible, they ask the customer to agree to pay on the delivery of the order rather than waiting 30, 60, or 90 days. They then take this money one paid and turn around and pay their suppliers. This is sometimes called kiting, and it\’s very common in small businesses. You arrange 30 or 60 days credit terms from your suppliers. You sell the product, get paid for it, and then turn around and pay your supplier before the bill becomes due. In this way, you have little or no capital of your own tied up. You can actually be in business with little or no cash investment or exposure by selling a product, receiving payment, and then paying your supplier.

C, the third way to use customer financing is to sell a subscription. For example, you could sell newspapers, seminars, and subscriptions of any kind. The customers pay for the product or service in advance prior to delivery with a subscription; customers pay for the entire year of the product before receiving the first issue. Another way of customer financing is direct mail selling.

D, Direct mail marketing, either through the mail or on the internet, is another form of customer financing. Your upfront investment is in advertising and mailing, but you take the orders before you fill them and deliver the product. You receive the money by cash or credit card before you have to purchase and deliver the product or service at all. Your customers are actually paying for the business as you go along. Another way of customer financing is to license the rights.

E, You can use customer financing by licensing the rights to manufacture and market a product that you own or control in exchange for a royalty or fee. When you license the rights to your product or service, you should request an advance payment of some kind and then insert a minimum performance requirement for each month and each year into the agreement is get a retainer. You can use customer financing in consulting or the sale of an intangible service. Many small businesses start with a person who has expert knowledge in a particular area. He goes out and offers his services as a consultant on what is called a retainer basis on a retainer basis. Clients pay you a monthly retainer to work for them for a certain number of days or hours each month. In exchange, they give you progress payments, usually on the first of the month, almost like a rent payment for your services. If you\’re working on a consulting basis for several days or weeks.You can build the customer as you go along on a weekly or monthly basis. In this way, the customer finances your operations and your lifestyle.

F, is Multi-Level Marketing or Network Marketing. Multi-Level Marketing is another way of customer financing. In multilevel marketing, all you require is a sample kit to get started. After demonstrating the samples, you can take orders for the products and collect payment. You can then buy the manufacturer\’s products, deliver the order, and keep the profits.

G, Factor your receivables. Many companies use banks or specialist companies to factor their purchase orders from customers, especially if you receive an order from a large company with a good reputation. The purchase order is a guarantee to pay if and when you deliver the product or service that you have sold because of the creditworthiness of your customer. Banks will lend you 70 percent or 80 percent of the face value of the purchase order. They will then charge you interest on the loan for carrying the balance. Factors will take ownership of the receivable from the customer and order the payment on the purchase order to be made directly to them. This is an excellent, if not the high-interest, way of collecting the money you have coming in advance of payment from the purchaser.

H, Franchise. Your business franchising is also a form of customer financing. The franchisor expands the business by selling the right to use his business system and name in another market area. The franchisee pays a franchise fee that provides the money necessary to support the newly franchised business. McDonald\’s now has 40,000 franchisees worldwide based on this concept of customer financing.

There are two important points with regard to franchising.

• First of all, there are strict legal requirements for almost every state with which you must comply before you can offer a franchise for sale. You may franchise in a single state or in multiple states. The legal costs are high, and the process takes many months, even one or two years, to get the approval to sell a franchise to another person in the first place.
• Second, remember that a franchise is a proven success system. It is, by definition, a system from which you have removed all the bugs. Through extensive experience, the franchisee, the purchaser of your franchise, should be able to follow your detailed instructions. Open a branch of your franchised business and begin generating sales and profits immediately. Some business owners actually attempt to franchise a product or service business even before they have made it profitable themselves before you purchase a franchise. You should do exhaustive research into the franchise or the background of the company, the industry, and the legalities involved.

Number 11 way of raising money is to seek venture capital. Some companies are financed by venture capital. This is sophisticated money managed by experienced people that is pooled as high-risk capital to invest in potentially fast-growth companies. This type of money is well known but very hard to get. This is the one type of money that I have never raised personally. Many young entrepreneurs try to raise venture capital to start their businesses.

They are absolutely amazed at how difficult this is. Fewer than one percent of business proposals received by venture capitalists are ever funded because new businesses are so risky. Fully 99 percent of all business plans and proposals submitted to venture capitalists are thrown in the wastebasket. Venture capitalists are not in the business of losing money for their clients. Venture capitalists will invest in the business today only when it has three things going for it.

• First, it has to have a proven success record. The business has to have been in operation successfully for at least two years. At this stage, the business owner approaches the venture capitalists for money to expand the business to take advantage of larger market opportunities.
• Second, the entrepreneur or business owner must submit a complete business plan. A complete business plan like Business Plan Pro may take anywhere from two to six months to produce and may require from 100 to 300 hours. You can do it yourself, or it may cost anywhere from 25000 to $50000 to have it done by an outside consultant. But venture capitalists will not even talk to a person without a complete, detailed business plan that entrepreneurs thoroughly understand and which explains page by page the potential profitability of the business.
• The third ingredient, and often the most important factor that venture capitalists look for before they will invest in your company, is a competent management team in place. Venture capitalists today look more closely at the experience of the managers of the company than at any other factor when making a decision to lend money. If, for any reason, you do not have a proven success record of building and operating a profitable business, plus a complete business plan explaining exactly why you want the money and what you intend to do with it, as well as a competent proven management team in place. It\’s better to look for other sources of capital than from venture capitalists.

Number 12. The way to raise money is to consult the Small Business Administration. You can often tap into the Small Business Administration, called the SBA. The SBA will look at business plans as what is called a lender of last resort. This means that the SBA will only consider your business plan and your loan application. When you have been turned down or rejected by at least two other banks or financial institutions, the good news is that because the SBA is a government organization, even if they will not approve your loan, the staff will help you operate your business more efficiently. They will provide you with consulting services at a low cost and sometimes for free. The SBA also has publications, books, pamphlets, audios, and videos that can help you in your marketing, financing, selling, and other aspects of your business. Many small and medium sized companies have been saved or turned around by the Small Business Administration.

Number 13 Way to raise money As small business investment companies. You can sometimes raise money through small business investment companies SBA, because these are risk groups that pool money to invest in small, up-and-coming companies. They are similar to venture capital groups, and they require some kind of a track record before they will invest with you. Both venture capital suppliers and small investment companies will require equity or ownership in your company. Very often, they will require controlling equity of 51 percent or more of the stock in your business before they will invest. If you do not perform and generate the profits that you promised in your proposal, they want to be in a position to take over your company. Replace you with more competent management and recover their investment.

Number 14 way to raise money is to issue a public stock offering. You can raise money for your business with a public stock offering during the dot com boom. Many companies were going to market selling stock and raising large amounts of money even before they had built or sold a single product or service. They were called jokingly pre-revenue companies. This type of investing, going public in advance of having a functioning business had never happened before and probably will never happen again. Normally, a public stock offering requires a record of proven profitability, usually for several years. Before you can go public, you require two to three years of audited financial statements. A public offering is usually done through a stock brokerage firm that will handle most of the details and then offer the stock to the public and their clients for a fee, usually about seven percent of the total amount of money raised. Now here are some critical factors with regard to a public stock offering. And even if you don\’t intend to go public, you need to know these factors for operating your business successfully.

A. Price earnings ratios going public is one of the fastest ways to become wealthy in the United States by building your business with a track record of growing earnings. You can sell stock to the public based on a multiple of those earnings. For example, the average price earnings ratios of companies in the S&P 500 have been about 15 to one for the past 50 years with fluctuations. This means that if your company is earning $1 million in profit each year, the stock market value of the company at $15 million 15 to one, and you could set your share price based on that valuation. If investors in the stock market believe that your company is going to grow and increase its profitability in the years ahead, they will often pay 20 and 30 times the expected earnings of the stock for that year. During the dot.com boom, companies with no earnings were selling for as much as 300 times projected earnings. Intelligent investors are unintelligent. Investors were willing to pay outrageous sums based on extraordinarily optimistic projections. This can still happen and is still happening today.

B. Full disclosure is required. You can often make a private stock offering to individual investors who invest in your company without you having to go public. In either case, public or private investors will require a due diligence report on your company. This means that they will require that experts carefully evaluate every word and number in your financial statements and projections, including every detail of your history, to assure that everything you say is absolutely true and verifiable. The wonderful thing about a public stock offering is that it provides a market for the shares of your company. When your company begins to grow, and you go public, you can sell 30 or 40 percent of its stock into the public market. The public marketplace will then set a value on the shares of your remaining stock with this value set by the public market. You can borrow against your own stock. Use it for equity financing and even use your stock to buy other companies.

Number 14th way to finance your business is to obtain supplier financing. You can raise cash for your business by what is called supplier financing. Many companies that supply you with goods and services to sell to your customers will offer you delayed billing if you ask for it. If you have a good track record and credit ratings with your suppliers, they will often be willing to wait 60 or 90 days for payment. This gives you an opportunity to purchase products and services, even raw materials, from your suppliers to produce the goods and services that you have sold to your customers and then get paid for them all before paying the original suppliers. With good credit, a person can start a business, make sales, fulfill the sales and make profits long before having to pay for the products and services that have already been sold. The ability to do this depends very much on your character, your reputation, your credit rating and the confidence that your supplier has in you, and your ability to pay.

Here is an important point. Smaller or newer companies are more likely to offer you credit terms than larger companies. Smaller or newer companies are often easy to deal with because they\’re hungry and eager for the business. The key to getting generous credit terms from your suppliers is for you to go and visit them personally. You must sell the decision-maker or the credit manager on you and your reason for requiring credit. Take along your financial statement and even your accountant. Show your business plan and explain what you are doing, and very often, your suppliers will extend you credit and help you build your business.

In a well-known business story, entrepreneur Victor Khayyam purchased Remington Products, a $150 million company with almost 100 percent financing by the owners. The people who wanted to sell the company structured the deal in such a way that they financed almost the entire purchase. They had such confidence in Victor Khayyam that they were willing to receive their money later out of the cash flow and profits of the company.

You heard it said that it takes money to make money. This is true, but it does not have to be your money. If you have a good credit rating and you use some of the creative financing methods described above, you can actually build your business with other people\’s money. Many of the most successful millionaires and multimillionaires in America and throughout the world today have used these methods to propel them forward on the road to wealth. Most entrepreneurs have an instinctive or intuitive sense of their businesses. They have a feeling or a sense for customers, markets, sales, and profitability. They listen to their gut and react accordingly. Many successful entrepreneurs are primarily promoters and salespeople. They get into business because they really like their products, and they\’re excited about other people buying, using, and liking their products as well. As a result of this sales and marketing focus, they often take their eyes off the ball. The ball in the business refers to the numbers in your company. It is not uncommon for an entrepreneur to spend all of his time working with customers and generating sales, only to find his business going broke day by day because he has neglected the key financial activities back at the office.

• Rule, you should personally authorize every expenditure over $100 in your business.

You should sign every check and demand complete backup for those checks. You should know and agree with every amount that goes in or out of your business. Your bookkeeper or accountant should provide you with a daily report that shows you the amount of money you have in the bank, the amount of money that your customers owe you in the short term, the amount that you owe to others, the stock you have an inventory and its value and your daily financial situation positive or negative. You should question every number on your daily report and your balance sheet. You should require your bookkeeper to submit a financial statement every month. Clearly delineating your sales. Cost of sales, costs of operations, and profits or losses. These are numbers that you must have at your fingertips at all times.

There are really only two numbers in your business revenue or expense. Every dollar that comes in and out of your business falls into one of those two categories. Your ongoing objective is to increase your revenues relative to your expenses or reduce your expenses relative to your revenues. You should only invest money to make money. Question every possible expense and ask, will this increase our profitability or not? If the answer is no, then delay the expenditure. Run your business like a turnaround.

Often when companies get into financial trouble, they bring in a turnaround specialist. This is someone who is an expert at turning around businesses whose survival is in danger. Each of these specialists uses a similar strategy, no matter what the business or industry. The first act of a turnaround specialist is to stop the bleeding. He immediately stops, cuts off, eliminates all unnecessary expenditures for the turnaround specialist. Cash is everything. Once the cash flow is under control, the specialist goes through every product and service in the company to identify what is selling well and what is selling poorly. He applies zero-based thinking to every expense. He asked if we were not now spending this money or offering this product or service, knowing what we now know would we get into it again today. If the answer is no? Then the next question is, how do we get out of this and how fast?

You often read about a troubled company that brings in a turnaround expert or decides to do it themselves; a few days later, they announced the shutting down of several factories and the laying off of thousands of people. In 2006, this happened with both Ford and General Motors. It happens with every company that fails to adapt and adjust to changing customer preferences or to the current economic situation, and the successful companies act quickly once they\’ve made a decision. You must be a turnaround specialist in your own business.

The billionaire Marvin Davis, who started with nothing, was asked by Forbes magazine for his secrets to business success. He replied. He said I have no secrets—just two business rules. The first rule is don\’t lose money. The second rule is that whenever you are tempted, refer back to rule number one. Don\’t lose money.

What I have seen over the years is when a business person says I can afford to lose a little money. That businessperson is not only going to lose a little money, he is going to lose a lot. There seems to be something in the casual attitude toward losing money that leads to bigger problems.

“As Jim Roan said, casualness in money matters brings casualties.”

Story: Warren Buffett, the second richest man in America, worth $40 billion in 2006, was out golfing with three of his friends sometime ago. Just before teeing off on a particular hole, one of his golf partners said, Warren, I bet you a thousand dollars; you can\’t make a hole in one from right here. Buffett looked down the fairway toward the distant flag on the green and then back toward the place where they were preparing to tee off and said, Nope, it\’s not a good bet. His friend said, Come on, Warren. It\’s only a thousand dollars with all your money; you won\’t even notice it. Warren Buffett looked up the fairway again and back to where they were standing and then said Foolish and small things, foolish in large things. It\’s not a good bet.

This is an important rule to remember. Foolish and small things. Foolish and large things. You shouldn\’t be, either. Don\’t forget that your goal is to become financially independent. To achieve this goal, you must watch every dollar that comes in and out of your company. You must focus single-mindedly on generating sales, revenues, and profits. You must curtail and minimize every expense you possibly can. You must think about the financial health of your business all the time, every single day. Casualness brings casualties.

Story: In the Bible, Jesus tells the parable of the talents. A wealthy landowner, it was going away. He gave 10 talents, five talents, and one talent to each of his three servants. When he returned, he asked them what they had done with the money during the months that he had been gone. The first servant who had received ten talents reported that he had gone into the marketplace, bought and sold products, and doubled the amount. The master said, oh good and faithful servant, you have been faithful over small things. I will make you master over many. And he promoted him and put him in charge of much of his business. The second servant reported that he had invested the money, and it also doubled its value while the master was away. The master said you have been faithful over small things. I will make you master of even greater things. The third servant admitted sheepishly that he had been afraid to risk the talent. He had buried it in the ground and had dug it up to give it back to his master when he returned. The master said to him, Oh foolish servant, you have done nothing with what I gave you. And so, even what you have will be taken away in life.

This parable means that when you demonstrate your ability to achieve success with small amounts of money, you will attract more and more money to you. When you show that you can be faithful over small things, you will be given an opportunity to invest and grow and create large things. Money is always attracted to people who know what to do with it, who handle it with care, and who make it grow. Money always goes to where it is most welcome and stays where it is loved and appreciated. When you develop a reputation for handling your money skillfully and well, generating growth and profitability, individuals and banks will soon be lining up to give you all the money you need to grow even more.