Do you need money or business strategy to start a business?
There is no denying that cash or cash flow is the lifeblood of every business, but do you really need cash to start a business? Or just a better business strategy? Well everybody at this point is probably saying, of course, you need cash to start a business are you crazy?
Well, I’m here to tell you that you do not always need cash to start a business, sometimes all you need is a better business strategy. I am not saying that you can run your business for free, or that it will not take a lot of hard work to keep the business running, but sometimes having the right business strategy is more important than having a lot of cash. Let me tell you a little story explaining how this works.
Business Strategy Example
At one time I had an opportunity to purchase coffee dispensing machines that would be a great investment and provide a great cash flow but I didn’t have the money to invest at that time. What I needed was a strategy that would allow me to get the machines without cash, here’s what I did:
The machines were $10,000 and change and came with a great territory and pre-signed contracts, so I what I did was call a friend of mine who sells marketing and ran an idea by him that would give me the cash needed and help his business at the same time. I told him I would allow all the machines that I control to run his advertising exclusively for a full year. This would mean $30,000 in additional revenue over the course of the year, he would have to pay the 30% commission to the owner of the machines anyway which would equal $9000 in commission payments, I told him if he gave me $7000 in cash that I would waive my commission fee for the year and I was 7/10 of the way to my goal.
Cash Flow Vs. Business Strategy – Which Is More Important?
The Strategy Didn’t End There
The next phone call that I made was to a local coffee supplier that I had met at a networking event weeks before, I knew that they were aggressively looking for new business so I thought I could leverage this relationship to raise the remaining amount of capital that I needed. I made an offer that would make them exclusive coffee supplier to my machines. After I did some research I discovered that to I would be eligible for a discount on the coffee of 20% and with my project purchases of over $25,000 in the first year that would be a savings of $5000. So I told my coffee supplier that I would waive the remainder of my discount for the rest of the year if they provided me a check for $3000. After the coffee company had the opportunity to look at the sales history of this route that I was purchasing they made the deal work.
And just like that, in one week and two phone calls, I had the required capital necessary to purchase the machines and business route. So that showed me that I really didn’t need the cash, I needed a change in strategy. Sometimes business strategy can be more important than the same amount of cash and let me explain why. Now that I know that these two contacts are open to this type of negotiations I was able to leverage another win-win presentation that allowed me to raise another $10,000 and purchase more machine and sales routes.
So now in a matter of weeks, I was able to raise $20,000 of required capital to start this business and I made two great partner contacts that will be willing to grow with me as this business takes off.
So you should take a couple minutes to think about your business or potential business that you were looking to get into and how changing your strategy could greatly affect your bottom line without additional cash.