People ask Dan all the time how to get money to start a business. They ask for handouts or they ask him to invest in their business. You don’t approach a successful people asking for something. You approach a successful person, add value, and give them something first before you ask anything in return. Listen to this episode to discover four ways to get money to start a business.
Listen to the podcast here:
How To Get Money To Start A Business
Almost every day, I get a private message on Facebook, email or Instagram, DM, someone asking me, “Dan, can you loan me $5,000? Dan, can you lend me $10,000? I’m going to pay you back. I need to start this business.” It’s almost sometimes a handout. Here’s the thing, just because someone is successful, they are not obligated to help you, if you don’t help yourself. By looking at the requests, I know the level that you are at. First of all, clearly you have not studied my work. Maybe you saw one post of mine and then you submit a request and say, “Dan, give me some money.” Here’s the thing, if you studied my work, you know I’m all about adding value before I ask anything in return. It shows me you have not studied any of my work. Second is you don’t approach a successful people asking for something. You approach a successful person, adding value, giving them something first before you ask anything in return.
The third is if you have no money, think about if I’m betting on horse racing. You as a jockey as an entrepreneur, you suck because you’ve never done this before. The horse, your business, your idea probably sucks too. If I was to bet on a horse, why would I bet on you when I am getting approached by an award-winning jockey with a track record with a horse, and I turned down 99% of those opportunities? I don’t even know you. Why would I give you money? It is your fault. Let me give you four ways that you can find money to fund your business. Number one, you can find money. The first group of people you go to is what they call sharks. They are the people on Shark Tank. They are the venture capitalists in the world. They are the professional investors in the world. Chances are maybe many years ago, they started like you, like me. They were entrepreneurs and now they’ve made their money. They have a pool of money and they are looking for smart investments, experienced entrepreneurs to invest in.
There’s a reason why they are called sharks. Chances are they want to make more money. They want to put their capital to work. They only usually invest in proven investments. They bet on proven award-winning horses or jockeys. They don’t bet on an idea. They don’t bet on pie in the sky. That’s why you see on these shows and people say, “I’ve got this widget. I’ve got this idea. I’m very passionate.” You have no idea how to win the race. You have no business skills. You have no business acumen. The fact that you have none is the fact that you need $5,000, $10,000 to grow your business. Believe it or not, that tells people a lot. When you’re dealing with sharks, knowing that you could get money from them if you can manage to convince them. However, you will need to be prepared to give a good chunk of your company because they’re risking their money on you. Chances are they have a lot of experience in business. They might ask for a big piece of your business.Sharks want to make more money. They want to put their capital to work. Click To Tweet
Chances are, if you’re reading this, 99.99% of the people reading this, you’re not going to get money from venture capital. You’re just not there yet. Number two, it’s what I call dolphins. The dolphins, they are the financial institutions. They are the banks. They are the credit union. They are institutions where you can borrow money. Many years ago, even trying to get a line of credit for $2,000, they wouldn’t give it to me. Now, my bank is calling me all the time, “Dan, do you need money? I can loan you some money. Do you need a mortgage? Do you need more line of credit? Do you need another credit card? Do you need more financing for your deal?” I said, “I don’t need money.” “If you need it, give me a call.”
Here’s how usually banks work. They loan you money when you don’t need it. Dolphins, they loan you money when you don’t need it. They don’t loan you money when you need it. They don’t loan you money when things go wrong. They don’t do that because bankers, dolphins, they are very conservative. Although you might think dolphins are nice animals, don’t be fooled by that. Dolphins can also bite your head off. The teeth are as sharp as a shark. Don’t be like, “I’m dealing with a dolphin. They’re nice.” They make their money on the interest, the money they loan you. They’re a money-lending business. They want to protect the investments. It’s no different. There is a time and place for dolphins. Chances are, maybe if you’re starting from scratch, this is your first couple of businesses and you don’t have a track record, it’s very difficult for you to borrow money from dolphins.
The third is what I call fish. Fish is your family and friends, your relatives, your brothers, your sisters, your mom and dad, your vendors and your suppliers. Chances are not to put you down, those are the people who are dumb enough to loan you money. They will be dumb enough and say, “You’re a good guy. You’re a good girl. You’re hardworking. I believe in you. I’m betting on you because of the relationship,” not because of your track record, not because of your skill but because of relationship. “Here’s $5,000. Here’s $10,000. I would invest in you.” I remember I borrowed money from my uncle to start my business. I lost all his money. He was a fish. I’ve done all of that.
The best way to find money to fund your business that I believe that I’ve used my entire career is you get the money from your customers. How do you get some money? You go out and sell something. You get some sales. It’s the easiest way to get it. You don’t come to me and say, “Dan, gave me $10,000.” What can you do for me? Offer your service, offer your skill and offer your expertise. You make the money. Show me that you can make money. Show me that you can add value. Go to your customers. I have done business with the dolphins, I have done this with sharks, but ideally, go to your customers. Sell something.
Let’s say you’re a digital marketer. You want to start a digital marketing business. You want to help people do graphic design. You don’t need a lot of money. You don’t need to borrow a ton of money. Print business cards, create all these fancy things. Go sell something. Get your first client, that’s how you get the money. You get the money from your customers. “Dan, I don’t know how to sell.” That’s why you don’t have money. You don’t have money, you don’t know how to sell. What makes you think you will know how to sell when they give you more money? When you get more money? It makes no sense. If you don’t how to swim in a swimming pool, what makes you think you know how to swim in a lake? What makes you think you know how to swim in an ocean? You’ll be drowned. You’d be dead.Money goes to the people who don't need it. Money goes to the people who know how to multiply it. Click To Tweet
You can’t even do the little kick in the swimming pool. You can’t even float at the top. That’s what I’m talking about. You can also get money from the customers in many other ways. Maybe it’s paying events. Get them to pay in events before you even make the thing like a Kickstarter. You have an idea, you’re going to pitch it. You’re going to get it out the marketplace and you see if people like it. Have your customer fund your business. It’s the best because there’s an invested interest or even a subscription model. Have them pay on a monthly basis. I love that model. Paying events, subscription, Kickstarter, all of those ways can have your customer fund your business. You get that going first and you prove your model.
Once you have a proven model, then you can take it to the dolphins or even the fish and say, “I’ve got a good thing going on. I’ve done as much as I could with my ability. I’ve gotten to this point, but now I’ve got a proven thing. I want to scale.” When you talk to the sharks, when you talk to the dolphins, they’re more likely to listen to you and say, “You’ve got a good thing going on. You have already got revenue.” Before you make the thing, you’re making money. Before you even do anything, you’ve got reoccurring income every single month, “This guy is not so bad after all. Maybe he’s a decent entrepreneur. He’s got half a brain. Maybe let’s bet on this guy.” That’s what I’m talking about.
That’s how you fund. It’s never about the money. Money goes to the people who don’t need it. Money goes to the people who know how to multiply it. It is not lack of money, it’s you lacking the ability to attract money. It’s not about lack of money. There’s so much money out there. Banks, investors, they are flooded with cash. They want to put their money out there because every single day the money that’s sitting in a bank, they’re not putting to work, it’s costing them money. They want to invest in good deals and good entrepreneurs, but the problem is there are so few of them out there. When you approach them, when you have the right mindset, the right skill, they would fund your deal. Your customers would fund your deal.