Not All Money is Created Equal

Not All Money is Created Equal

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Whether we like to admit it or not, money is at the centre of staying alive when you’re an entrepreneur just starting out on a new project or company. Whether it’s raising funding, generating revenue, launching a new product, hiring staff or finding offices, it all centres around money.

What I’ve learnt over the past ten years of starting (and mostly failing) businesses is that money cannot be treated the same everywhere. Sometimes it comes with strings attached, sometimes it comes for free (almost never) and sometimes it’s the wrong kind of money for your business.

Raising funding

Many entrepreneurs think that raising funding is the end of the financial problems that you’re starting. Sometimes that’s true too,  but my experience of investment is that it’s complicated money.

Related: Do This to Improve Your Cash Flow

It’s complicated because it comes with a bunch of legal requirements like shareholders’ agreements and directors’ resolutions, which means you need to constitute a board and convene board meetings, and actually meet with your board.

You’ll also need to put together monthly (if not weekly) reports for your investor feedback sessions, which can take a couple of days out of every month.

 

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In fairness to the investors, I’d expect the same if it was my money, but for an entrepreneur trying to keep their business focused, that sort of distraction can really put a hole in productivity.

Just enough money

Just enough is never sufficient. It’s probably one of the most frequent issues that entrepreneurs will face; how much money is just enough to keep going or walk away? It’s the curse of mediocrity.

Some ideas are destined to never make it and the best indicator for success or failure is the speed at which the business gains clients, sells product or makes money.

If there isn’t sufficient revenue coming in to grow your business, you may have to consider walking away.

If you’re looking to build a business that can sustain your salary and never grow, then stick with it and you’ll be happy. However, sometimes realising that you’re earning just enough money to stay alive for a prolonged period of time is a silent killer. You’d often be better off walking away and starting something new that stands a chance of experiencing steady growth.

Unplanned but important

When I was running Motribe – a mobile social network company – we had a very specific idea of what revenue we wanted to come in to the business. We were a consumer-facing product. However, every time we’d meet with a large brand they would show interest in using our platform to grow their own community.

We decided to do one or two of these deals to help us fund our consumer-facing product. What we should have realised was that we had a real revenue stream in the business sector building out communities for brands.

We had a plan in our heads and were so focused on the plan that we didn’t see the money and revenue stream staring us in the face. Three years on, a friend of mine now has an amazing business building communities for brands.

Revenue that distracts

Some entrepreneurs are great at building businesses, testing revenue models and following the money as it appears. The problem with this sort of environment is it’s often tough to settle on a revenue stream, a business model and then an actual business and plan to grow into something sustainable and real.

At NicSocks.com I’ve been working really hard to build out a subscription sock company – delivering bright socks to people on a monthly basis. Analysing the data, I’ve come to realise that one-off sales are outperforming subscription sales.

The focus on subscriptions is, for the moment, a distraction and refocusing on our shop and individual product offerings has helped to increase our sales.

It’s important to gather data and information around the decisions you’re trying to make. Deciding in the dark is completely unnecessary in the age of the Internet and data analytics. Define the problem, outline the criteria, analyse the data and then quickly make a decision that prevents you from following distractions or deciding on a new and real revenue stream.

Related: There Are 8 Indispensable Elements of Real Wealth and 7 Aren’t Money

 

Nicholas Haralambous
Founder of the luxury sock company,, Nicharry.com , CEO and co-founder of Motribe before the company was successfully acquired by Mxit in August 2012.