borrowing money Is Not A Cure All

Simply borrowing more money to support your business operations may seem like a solution to your money problems.

However, borrowing more money could make the problem worse.

Borrowing money seems like the right thing to do for two reasons:

• it relieves the immediate pressure.


• it allows things to continue as normal.

We all wish things could remain the same, but maybe it is time for a change. Before borrowing money or bringing in investors, stop and ask yourself this question:

What is the real business problem or issue that needs to be resolved? Do I really need to borrow money? Is there some other problem that needs to be resolved?

Answering this question will lead you to finding the root cause of your need for cash. Borrowing money to support your operation based upon a flawed business model is only delaying the inevitable. There can only be one of three results:

• Your bank will foreclose when they feel your ability to repay the loan is at risk.


• You feel increased pressure to repay the debt or keep investors happy.


• When investors become impatient with your lack of performance and feel you are unable to turn things around, you will no longer be able to raise additional funds to support your operations. It is only a matter time before you have to close the doors.

If your business model lacks an adequate level of customer adoption -- that is the problem you have to resolve. If you cannot correct this fundamental problem, no amount of money will be enough. You are better off closing doors sooner than later.

Understand Your Banker's and Investors' Mindset

At times it might seem like your only job is to keep investors and the bank happy. While it is your responsibility to communicate with them and answer their questions, do not let them run your business. Remember:

• They have to to make a profit. They invested money in your company believing that it would be profitable.


• They do not like risk. All banks and financial institutions are risk averse. They will not risk their capital. The moment they feel their money is at risk they will begin to evaluate their options.


• Banks/investors are keeping an eye on your financial position. Specifically, an improvement in your financial position.

You must understand and be able to interpret what your financial statements are showing. If you do not know how to read them, get a CPA or accountant to interpret them for you. Pay particular attention to your financial ratios. Bankers and investors know what they mean -- so should you.

Keep Your Eye On the Ball!

Be careful that you do not allow your focus to stray from the core business principles of:

• innovation: looking for ways to deliver better, faster and cheaper;


• management: trying to strike a balance between adequate controls and employee independence;


• customer service: keeping customers happy is the best insurance there is;


• sales and marketing: making sure your business has the ability to manufacture customers.

Beware: A Survival Mentality

I have witnessed this more times than I care to remember. The debt becomes the focus rather than serving customers. The business owner becomes obsessed with keeping the business afloat and repaying the debt. She starts to make inappropriate decisions and misguided attempts to reduce costs that result in lost customers and market share.

The most basic business concepts dictate you must first understand your customers needs, wants, emotions and perceptions before you can build a business model to meet those needs.

Five Problem Solving Questions

Keep asking yourself these questions over and over:

• What is the real problem or issue?


• Do I really need to borrow investment capital or is there some other problem that needs to be resolved?


• What am I not seeing?


• Is there a better solution?


• Who can help me?

Be Daring Enough To Invest Your Time In Writing A Business Plan!

Start with the end first. What is the end result a prospective customer wants as a result of doing business with your company? What do they want to experience? What is the customer really buying? How can you meet those needs? Be willing to look at your business from a fresh perspective. Be prepared to reverse engineer every aspect of your business from beginning to end.

Probably the most valuable thing you can do at this point is to take the time to write a business plan. I know what you are thinking:

"I do not have the time to write a business plan. I am too busy trying to save my business!"

I would argue that you have no choice. If you are having trouble getting banks or investors to give you money, maybe it is time to regroup and take the time to write a business plan? The process itself will force you to examine every assumption and principle behind your business. Take advantage of our Business Plan Outline.