Raising venture capital for a founder is an exercise in seeing how high the founder’s tolerance for rejection is.  But if success is achieved, survival is assured and the horizons are unlimited.  Maybe grow the company and sell it for a big number.  Maybe even go public.  Maybe even build to a large successful company that is a leader in the industry.  But in the meantime, there is a business to manage, and managing a growing company is a lot more complicated than raising a round of venture capital.  Managing goes on “forever” as long as you own the company.

In the earliest stages the founder has to manage him/her and maybe one or two employees.  Not that hard.  But then success and growth start to happen.  More people, with all the attendant problems they bring are being added to the payroll.  There are hiring and firing decisions to be made, maybe some government regulations (like having to pay taxes, hence having correct records, hence paying attention to the company financials).  You may need new space, with all the time required to find the right space to grow into.  And finally the small matter of always having to make sure that there is enough cash on hand, not to mention constantly focusing on increasing sales and revenue.

When you become a manager you may look back on raising venture capital as a walk in the park.  Now you have to learn to manage, whatever that takes and whatever that is.  Success won’t come without it.

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In Hamlet Act 1, scene 3, 75-77 Polonius provides this counseling to his son Laertes.  So we know that Polonius didn’t own a small business in today’s banking environment.  It’s fairly certain that the Fed is going to lower interest rates soon by at least a quarter of a point, on top of the already historically low interest rates that we have today.  One factor affecting the Fed’s decision is that China’s second quarter economic growth decelerated to the slowest growth in 27.  And since China is a major buyer of US goods a weak economy in China can slow growth in some sectors of the US economy.   

In March I wrote a post about no more interest rate hikes.  I never thought that instead rates would be coming back down.  So I will say again that if the Fed does go ahead and make the cut there will be plenty of time to look at your company and its future to see whether a loan of some kind would help your company grow and increase its profitability.  One way lower interest rates would help if nothing else would be that if you have credit card debt that has been used for your business you might be able to pay it off and increase your cash flow because of the substantially lower payments on a bank loan.  Taking on debt is obviously risky and not always wise.  But if it would help you grow and profit it might be worth serious consideration.

I wonder what Polonius would say today.

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Approximately 10,000 Baby Boomers are retiring each day.  A lot of these Boomers own businesses and a lot of them would like to see these businesses, which are their legacies, continue.  Starting a business from scratch may be a dream so that you can look back and say that you built your own successful business.  But as exciting as that idea may sound it is hard – really hard, and a very high percentage (some say up to 50%) fail in the first year.  That’s lousy odds when you consider that you are usually risking everything and therefore you could lose everything if you don’t make it.

Or, you could buy an existing business – one that is long past the high-risk startup stage.  Perhaps most important, it has a salary in place for the owner.  Otherwise, why would you buy it?  It already has customers although this could be a little dicey if you aren’t careful.  Often, and this of course does not apply to all businesses, business drops off for a period of time for a new owner because the customers were comfortable with dealing with the old owner and aren’t sure whether you can live up to the service, quality, whatever provided by the previous owner.  It should be incumbent as a new owner to try to make sure existing customers are aware of the transition and that you will continue to provide the same level (or better) of service that they had become accustomed to.  And one more thing.  Commercial financing to acquire an existing business, and especially SBA financing, is much more likely to be available than to a startup.

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