Moaning about the banks winds me up. Get real! Banks are businesses, just like yours. They are there to make money from their customers and, just like you, the more customers they have, the more they will make for their shareholders. They are not a charity, and they do not have to lend money to any Tom, Dick and Harry.
They are not cheap; they’ll charge you to breathe, with arrangement fees and other costs. They should only be used to your advantage. Consider the cost of money as if it is another expense you have to bear, no different to any other costs you have. There has to be a reason why you need the money.
So ask yourself why you’re going to the bank for money. What do you need it for? I spoke to a person a while ago who ran a dry-cleaning shop. He had obviously bought all his equipment a while back. His day-to-day consumables are just the chemicals he needs to clean the clothes.
That, plus his utility bills, rent and salaries are his expenses. He has a cash business, and yet he was moaning about the bank not lending to him. When I asked why he needed the money, he said he was in debt.
‘Why are you in debt?’ I asked. ‘You are not a shop that has to buy stock. Are you opening other branches? Do you need the money to buy new plant and equipment?’ No, it was simple – he was running at an accumulative loss. It was so basic – his takings were less than his outgoings, and had been for ages.
So he wanted the cash to pay his salary and his staff’s salaries, as his business could not generate it. Sorry, mate, you are totally unjustified in complaining about the bank. They don’t back losers. You are insolvent – simple as that. What he needed to do was refocus and see how to start to make money and not just cover overheads.
It is incredible that the simple basics of business go out of the window with all of these modern-day so-called theories and principles. You don’t need spreadsheets and complex business plans; you need a pencil and a plain sheet of paper. Take my example of the dry cleaner.
On a sheet of paper he should write down his monthly costs of rent, utilities, staff and consumables. From this, he will get a figure and understand that, unless he takes in excess of that figure each month, he will lose money. This is a quick sanity check, a wake-up call that all small businesses should do.
Excerpted from The Way I See It by Alan Sugar, published by Pan Macmillan and available from all good book stores from R175.