It’s true that a certain amount of cash is necessary for any startup. But when we press them and ask if they have taken full advantage of their hidden resources, they look back with vacant stares. Most have never thought about using their hidden resources. Or worse, many don’t even know what their hidden resources might be or where to look for them.

Sure, we refer to them as “hidden” resources because they are not necessarily taught in school nor are they heralded by the entrepreneurial press. On the contrary, young people today are inundated with the idea that they can’t start a business unless they raise tons of cash. They are being told that they must borrow huge sums, take in large investors, or trade their equity for VC money. In fact, there’s an entire industry based on this premise.

To read the complete article, please visit The Business Journals 

Who We Are

Michael Houlihan and Bonnie Harvey co-authored the New York Times bestselling business book, The Barefoot Spirit: How Hardship, Hustle, and Heart Built America’s #1 Wine Brand. The book has been selected as recommended reading in the CEO Library for CEO Forum, the C-Suite Book Club, and numerous university classes on business and entrepreneurship. It chronicles their humble beginnings from the laundry room of a rented Sonoma County farmhouse to the board room of E&J Gallo, who ultimately acquired their brand and engaged them as brand consultants. Barefoot is now the world’s largest wine brand.

Beginning with virtually no money and no wine industry experience, they employed innovative ideas to overcome obstacles, create new markets and forge strategic alliances. They pioneered Worthy Cause Marketing and performance-based compensation. They built an internationally bestselling brand and received their industry’s “Hot Brand” award for several consecutive years.

They offer their Guiding Principles for Success (GPS) to help entrepreneurs become successful. Their book, The Entrepreneurial Culture: 23 Ways To Engage and Empower Your People, helps corporations maximize the value of their human resources.

Currently they travel the world leading workshops, trainings, & keynoting at business schools, corporations, conferences. They are regular media guests and contributors to international publications and professional journals. They are C-Suite Network Advisors & Contributing Editors. Visit their popular brand building site at www.consumerbrandbuilders.com.

To make inquiries for keynote speaking, trainings or consulting, please contact sales@thebarefootspirit.com.

The post 3 Ways to Get Your Vendors to Reduce Your Need for Cash appeared first on The Barefoot Spirit.

Sure, we refer to them as “hidden” resources because they are not necessarily taught in school. Nor are they heralded by the entrepreneurial press. On the contrary, young people today are inundated with the idea that they can’t start a business unless they raise tons of cash. They are being told that they must borrow huge sums, take in large investors, or trade their equity for VC money. In fact, there’s an entire industry based on this premise.

We’ve seen startups who raise tons of cash tend to spend tons of cash in a “burn rate” that is often unsustainable. The cash itself seems to discourage resourcefulness. “Why scratch around for resources when you’ve got all this cash?” Never mind that you can achieve a positive cash flow before you burn it all up. Never mind that there were critical lessons you should have learned by starting out smaller and slower that would help you grow faster and bigger with a more solid understanding of the cost of sales. “Just give me the cash!”

Scaling Fast

The VCs want you to “scale fast and fail fast.” They are betting on 10 or 20 businesses just like yours. They’re playing a cold, detached, numbers game. They just need one unicorn in 20 to hit the jackpot. They expect to lose on the other 19. Why be in the other 19?

You don’t need to scale fast to be successful. You need to understand the cost of your own success. What happens if you scale fast and then find out that your products or services demand customer service that you are unaware of until you got out there? But now you’ve burned up all that cash the VC gave you and you can’t afford to service what you’ve sold.

How to Use Vendors as Bankers

Undercapitalized businesses are forced to grow slowly. In that process, they learn the true costs of sales. They also learn how to finance their expansion through cash flow management. But the most important thing they learned is how to use their vendors as bankers. These are your hidden resources.

Instead of borrowing the cash to pay your vendor, you get the vendor to buy into your integrity, your loyalty, and your growth plan, a plan that includes increased sales using their products and services. If they do, they will see you as a “partner.” This doesn’t happen overnight, but it’s a relationship that can be built by your behavior toward them.

1. Warn them before you miss a payment.

When you see that you can’t pay your bill on time, call them with advanced warning. Show them empathy for their position and the risk they’ve taken with you. This builds trust.

They have bills to pay and must use your funds to do it. Nobody likes a missed or late payment, but it’s way better to get a warning call in advance with a payment plan to become current, than to chase down a deadbeat. Put yourself in their shoes and treat your vendors the way you would like to be treated.

This behavior sends a message that you are the type of client they can trust. You have their interests at heart. They will extend credit and terms to a company like yours because you have mitigated their risk.

Extended credit and terms are the same as cash, cost less, and don’t require you to give up equity.

2. Consider a long-term contract.

Your vendors don’t want to work with you on extended terms and increased credit limits to build your business up just to have you take it away from them. They need some surety that they will see a return on their investment. A long-term contract will give them the confidence that you will stick around long enough to validate the risk they took “financing” your growth.

3. Have regular progress meetings.

Whether they ask for them or not, hold regular meetings where you update them on your immediate and long-term plans. Get them to buy into to your roadmap. Share the challenges that you face and the growth in business you both could have if you work together.

There will be times in your growth when you need more of their goods and services to take on a new big client that can result in increased income for both parties. If they see it coming, they can plan for it. They can make special allowances to help you land that big fish. They’re pulling for you!

Who We Are

Michael Houlihan and Bonnie Harvey co-authored the New York Times bestselling business book, The Barefoot Spirit: How Hardship, Hustle, and Heart Built America’s #1 Wine Brand. The book has been selected as recommended reading in the CEO Library for CEO Forum, the C-Suite Book Club, and numerous university classes on business and entrepreneurship. It chronicles their humble beginnings from the laundry room of a rented Sonoma County farmhouse to the board room of E&J Gallo, who ultimately acquired their brand and engaged them as brand consultants. Barefoot is now the world’s largest wine brand.

Beginning with virtually no money and no wine industry experience, they employed innovative ideas to overcome obstacles, create new markets and forge strategic alliances. They pioneered Worthy Cause Marketing and performance-based compensation. They built an internationally bestselling brand and received their industry’s “Hot Brand” award for several consecutive years.

They offer their Guiding Principles for Success (GPS) to help entrepreneurs become successful. Their book, The Entrepreneurial Culture: 23 Ways To Engage and Empower Your People, helps corporations maximize the value of their human resources.

Currently they travel the world leading workshops, trainings, & keynoting at business schools, corporations, conferences. They are regular media guests and contributors to international publications and professional journals. They are C-Suite Network Advisors & Contributing Editors. Visit their popular brand building site at www.consumerbrandbuilders.com.

To make inquiries for keynote speaking, trainings or consulting, please contact sales@thebarefootspirit.com.

The post 3 Ways to Get Your Vendors to Reduce Your Need for Cash appeared first on The Barefoot Spirit.

Of course, your VC has a right to quarterly reports. They want to keep track of their investment. If you’re not performing as agreed, they want to know right away. They want to cut their losses, which means you could lose your financing if you don’t make the numbers. Are you getting a little more nervous?

You know if you push your salespeople too hard it will take away from next quarter’s numbers. You know that if you load up your buyers you may lose them due to lack of service. And you know your reputation will be hurt if you don’t service what you sell. In fact, you may not have even fully realize the true cost of sales until you got several months away from that extravagant launch party. The reality of your business is just beginning to settle in. Now you know at least part of what you don’t know. But it’s too late and the report is due!

Just since you started, you have learned a ton. It’s stuff they didn’t teach you in college. It’s stuff that you wish you had known about. It’s stuff that requires actually experience.

You thought your VC knew more about your business than you. You thought they’d warn you. You thought they would be an enabling “partner”. You thought your business plan was validated because your VC funded it.

But no! You are on your own! And now it’s clear that your VC doesn’t really care. He’s spread out his risk like a gambler playing the odds. He’s bet on 10 to 20 start ups like yours, hoping for that one unicorn. Your business is just one roll of the dice. Will you make your numbers and stay in the game or will you crap out?

You are quickly approaching a no-win situation where if you make the numbers, you could lose your business. If you don’t make the numbers, you will lose your investor, and then your business.

The Department of Commerce says that 9 out of 10 businesses fail. That’s why most VC’s play the odds. But the same Department of Commerce also reports that businesses that make it to 2 years are more likely to make it to 5, and those that make it 5, to are more likely to make it to 10.

Having been through it from ideation to monetization, we understand why. In the first 2 years, we found out our cash flow plan was more important than our business plan. As time went on, we began to respect the cost of sales, which generally increased directly with growth. That’s why we created The Barefoot Startup, a more sensitive approach to starting and growing a business. It’s more grounded than bootstrap. It’s being in touch with the environment.   

Just like being barefoot, the Barefoot Startup directs you to learn to walk before you run. It directs you to be more sensitive to the terrain so you don’t fall down. It shows you how to be more flexible so you can make quick adjustments, thoughtful pivots, and remain light on your feet.

Don’t let quarterly reports hurt your chances. Starting a business is challenging enough. Discover and use your hidden resources. Outsource everything but accounting, sales, and quality control. Create revenue earlier with the relatively small, low-hanging fruit. In other words, reduce you need for capital right from the start, and you may not have to play the VC game at all. Ironically most VC’s are shying away from pre-revenue startups anyway. Demonstrating revenue proves your concept, but more importantly, provides a priceless business education. VC’s will line up to expand a proven concept and you will be in a much better bargaining position!

The credo of The Barefoot Startup is simple: Start small. Make your mistakes in a small place. Get your act together before you take your show on the road. And don’t scale to fail …or make your quarterly numbers! By keeping your (bare) feet on the ground and building a solid foundation, your chances of success will increase, and your need for outside capital will decrease!

Who We Are

Michael Houlihan and Bonnie Harvey co-authored the New York Times bestselling business book, The Barefoot Spirit: How Hardship, Hustle, and Heart Built America’s #1 Wine Brand. The book has been selected as recommended reading in the CEO Library for CEO Forum, the C-Suite Book Club, and numerous university classes on business and entrepreneurship. It chronicles their humble beginnings from the laundry room of a rented Sonoma County farmhouse to the board room of E&J Gallo, who ultimately acquired their brand and engaged them as brand consultants. Barefoot is now the world’s largest wine brand.

Beginning with virtually no money and no wine industry experience, they employed innovative ideas to overcome obstacles, create new markets and forge strategic alliances. They pioneered Worthy Cause Marketing and performance-based compensation. They built an internationally bestselling brand and received their industry’s “Hot Brand” award for several consecutive years.

They offer their Guiding Principles for Success (GPS) to help entrepreneurs become successful. Their book, The Entrepreneurial Culture: 23 Ways To Engage and Empower Your People, helps corporations maximize the value of their human resources.

Currently they travel the world leading workshops, trainings, & keynoting at business schools, corporations, conferences. They are regular media guests and contributors to international publications and professional journals. They are C-Suite Network Advisors & Contributing Editors. Visit their popular brand building site at www.consumerbrandbuilders.com.

To make inquiries for keynote speaking, trainings or consulting, please contact sales@thebarefootspirit.com.

The post Is your Startup Doomed by Your VC’s Quarterly Reports? appeared first on The Barefoot Spirit.