What is
the one thing that stops many potential entrepreneurs from chasing their
dreams?
Money.
Not
everyone can secure a business loan -- or wants to put his or her personal
assets on the line -- and the majority of startups never receive a dime from
VCs.
Dreams
die daily because of a lack of funds. I was recently speaking to a friend of
mine who wants to open her own hair salon. She is great at what she does -- and
with her experience I am certain she will be a very successful entrepreneur.
So, what is stopping her? About $20,000.
She
talked about bringing on an investor and I quickly shot that idea down. Within
10 minutes I laid out a plan to help her raise the $20,000 she would need to
start her business. These are the steps I outlined for her, which can easily be
applied to any business idea -- they are universal.
1. Identify what value you can bring to the table.
My
friend, Sarah, is extremely talented. She knows hair. Her portfolio is massive
and includes work on many high profile movies and modeling projects. We quickly
identified what value she can bring: knowledge and expertise in the hair
industry.
Sarah is
accomplished in the industry and her biggest value is everything that she has
learned along the way. Most entrepreneurs want to start a business in an
industry they have success in, so chances are that your expertise and personal
knowledge will always be your biggest asset.
2. Identify who you can provide this value to.
Once you
establish what value you can provide you need to identify who is the ideal
target to “sell” this value to. After a few minutes of brainstorming Sarah and
I found a small niche that she could target: people that are about to enroll in
hair and beauty school.
Within a
few minutes I learned that the average cost to attend one of these schools in
Sarah’s area was $17,000. Honestly, that’s a lot more than I expected. If
someone was willing to spend that kind of money on hair and beauty school,
surely they would be willing to spend a few hundred dollars to be fully
prepared when class begins.
3. Determine how many sales you need.
Our magic
number became $250. Even though the school cost was $17,000, the majority of
students aren’t going to have a pile of disposable income to throw around. If
someone was willing to spend money on formal education, they should be willing
to spend a couple hundred dollars on prep.
In order
to raise the $20,000 needed to start her own salon, Sarah would need to sell 80
of these packages. When you break your capital raise goal down like this it
appears to be much more attainable.
What way
sounds like an easier way to make $1 million:
- Generate $1,000,000 worth of
sales
- Sell a $500 product or
service to 2,000 customers
When you
break it down, the goal becomes easier to digest and reachable.
4. Put together an attractive service or package.
High
school students take the SAT or ACT in order to get into college and there are
several pre-test courses and training that they purchase in order to go in
fully prepared. So, why wouldn’t someone about to spend $17,000 on hair and beauty
school want to go in fully prepared as well?
So, Sarah
put together a weekend “crash course” program designed to help students prepare
for school. She designed a two-day course that teaches some of the basics so
the students don’t go into day-one blind. This prep will help her students
start their hair and beauty education with a slight upper hand. The confidence
boost it will provide alone justifies the cost.
Find a
way to deliver exceptional value -- it will make the sale much easier.
5. Hustle to get those sales (and startup capital).
When we
broke down her startup capital needs and then created a plan to raise those
funds we determined that Sarah needed to attract 80 students that would pay her
$250 for her course. Four weekend courses with 20 students in each class would
allow her to raise the $20,000 she needs to start her own salon in just a
month.
No bank
loans and no investors. No business debt and Sarah gets to keep 100% of her
business. All it took was a few minutes and some creative brainstorming.
Lack of
startup funds is the number one obstacle that prevents entrepreneurs from
chasing their dreams -- but it doesn’t have to be.