This article is based on the book “Why do the rich get richer (and you still do not reach a fortnight)?” by Francisco García Pimentel and Salvador Manzano, from Editorial Panorama, published in November 2021
Salvador Manzano is one of these young entrepreneurs who seem to have an intuition to start new businesses, and at 25 he already had three companies in three different lines of business. He is also a good friend, with whom I wrote a simple book on financial culture, entrepreneurship and purpose , which we have the illusion of sharing with young people in Mexico and Latin America who want to unleash their growth potential.
As part of the many talks that were later captured between the pages, one day I asked Chava : What are the questions most commonly asked by young people who are starting out?
These are the five most common.
1. Do I need money to start a business?
An innovative and profitable business model, led by a good entrepreneur, will always be able to attract money. The important thing is not whether or not you have the capital to start the business, the question is whether you have a business model capable of capturing the interest of investors.
Some businesses whose model is service can be started with little or no capital. Setting up your company on the internet and starting to look for clients can even be free.
Be that as it may, that “I have no money” is never your excuse. Encourage your creative spirit. Invest your mind and time in coming up with a business plan. It doesn’t have to be a 60 page book. “The best business plans,” says Richard Branson, billionaire and founder of Virgin and more than 160 successful companies, “fit on a single page of paper, or on a napkin.”
If inspiration doesn’t come, don’t think “What does the world need?” but “What would I like to exist, but does not exist?”; that’s a more realistic and practical approach. Create what you like or fix what you don’t like. Then see if someone else agrees with you.
In any case, remember that your main asset is your mind, not your bank account.
2. Where can I get money if I need it?
I always recommend starting with the famous term developed by Eric Ries, the MVP ( Minimum Viable Product ). We have all heard horror stories where a family member or friend bet all their assets on a business idea of their own or someone else’s and things don’t end well and why don’t they end well many of the times?
Because before investing large amounts of capital in your business, you must start with a minimum investment in your MVP, that is, the minimum necessary to start selling your product or service and then validate if the business model truly has potential.
Entrepreneurs who are capable of generating great wealth by keeping most of the shares in their company with other people’s money seem more intelligent to me. There are several ways to do it and they will depend on the type of business, the market projection and the amount required.
Most businesses start with seed capital from family or friends. It is not uncommon for the parents of Steve Jobs, the mother of Elon Musk or Bill Gates to be millionaires: they bought their shares at the lowest possible price. Other options are low-cost financial leverage; angel capitals, crowdfunding platforms or capital raising. James Dyson mortgaged his house three times to pay for the development of his vacuum cleaner, which would later make him a billionaire.
If there is a good idea and a good entrepreneur, money will NOT be the problem . Focus on having the first and being the second.
3. Is it better to go alone or look for partners?
One of the first tips I received from a good businessman friend was that when, as an entrepreneur, you face the multiple adversities that come your way, it is better to turn to discuss the solution with a partner than to turn to the wall and resolve the issue. only.
They say that the relationship between partners is similar to the relationship between spouses and it seems to me that the comparison is correct. In a partner relationship, there must be clear communication, there must be complementarity, admiration, understanding, demand, among many other ingredients.
Most large businesses require a team of partners whose missions are aligned and their styles complement each other. That does not mean that everything is a honeymoon: there will be difficult days. In general, it is better to look for good partners, who are suitable for entrepreneurship, than to start a business with someone just for the sake of being friends.
Some people, however, have such a personality that they prefer to work alone, go up front, and hire a good team. It is also valid. Whether with partners or a team, the key is to align the mission, define tasks, delegate what can be delegated and find a space where trust is real.
4. What are the risks in the first months and years?
It seems to me that in every entrepreneurial project there are high and low curves that the entrepreneur has to know how to handle. In the first years of entrepreneurship you may find yourself with risks such as:
- The partner I have is not the partner I expected
- Having made poor decisions regarding the level of leverage of your company and not having the ability to pay it
- Losing yourself in the operation and neglecting the business strategy
- Growing competition
- Neglecting the business since the partners, when they do not see profits or a way to collect a salary, begin to divide their time between a job in a company where they have a secure salary and their company that is unable to pay them a salary
- The risk of giving up in the face of adversities that arise, both internal and external
- Inability to handle the stress and emotions that are caused by the challenge of starting the business
- Receive comments from family and friends that discourage you from continuing with your project
Whatever problem you are facing, remember that it is essential to recognize the problem, make decisions and act accordingly.
All problems are solvable. In these situations as in almost any other, the worst decision is to do nothing about it.
5. If I don’t know about business, is buying a franchise a good idea?
The franchise concept has been successful over the years, and if this happens it is because both the creator of the franchise and the one who buys the franchise over time have obtained returns.
The great challenge is the following: first understand that a franchise is not investing to do nothing . Buying a franchise is buying a model that has proven to be successful, that has been standardized and that its operation is capable of being carried out successfully if the defined processes are followed. However, it is how you run any other business, you have to hire the right people, develop them, buy, manage an inventory, sell, deal with loyal customers and others who will complain about your service, etc.
Second challenge, understand that it is not a sure success , there are many factors that can cause the success and failure of the investment. My suggestion is not to make an investment without receiving advice from mentors who can help you decide if it is the best option for you, talk with friends who have already invested in franchises, those who have done well and those who have done badly.
You can also look for partners to invest in the franchise, define roles and seek the success of the investment, in this way you share both the risk and the future benefits.
5. When is a good time to start a business?
It depends on how you see it: Always or never .
You will never have the perfect time, money, plan, and market to start a business. Maybe you have a job, family, or debt. Perhaps there is devaluation, crisis or bad times. In this sense, if you sit and wait for the “right time” it may never come.
Every business involves many variables and unexpected changes. You have to dare to leave your comfort zone in order to start any business, of any size. Fear is what distinguishes a “I did it” from a “I would have done it …”.
Viewed this way, it is always a good time to start a business. There are always needs, markets, problems that require your attention, and there is always enough money to start a business, even in the midst of the worst crises.
Think that when the storm falls, many run for cover. The entrepreneur goes out to sell umbrellas.
So… when is the best time? Today. Today is the best time.