Many men with brilliant ideas hesitate to launch their own businesses because they lack the necessary funds. It is undeniable that a lack of capital is one of the main causes of business failures. Capital is crucial. However, a man who is driven need not let a lack of money stop him. There is still true to the adage "Where there is a will, there is a way."
Sometimes a business concept is so lucrative
that folks with money will "grub stake" you to launch it. This is how
many well-known companies got their start. One example is Hires Root Beer. On a
farmstead in 1877, Charles E. Hires found the recipe for his root beer.
Publisher of the Philadelphia Public Ledger George W. Childs sat down next to
Mr. Hires in a street car one morning. Why don't you promote that root beer of
yours, Mr. Hires? he asked.
How can I promote myself? asked Mr. Hires.
"I don't have any money." "Advertise to earn cash. Come on over
to the Ledger office, and I'll instruct the bookkeeper to hold off on sending
you any advertising bills until you request them.
He was a man of action, Mr. Hires. He was aware
that nothing could be accomplished without risk. He agreed to Mr. Child's
proposal. Since then, the Public Ledger has featured an inch ad every day. It
started to pull steadily but slowly.
When finally the advertising income was
enough to support Mr. Hires' request for his bill, it came to $700. However, it
was a wise investment.
It gave the funding needed to launch the Hires
company. Mr. Hires invested all of his profits in advertising for ten years,
withdrawing only what he needed to make a subsistence life. He became one
of the biggest national advertisers in the nation, with budgets of more than
$600,000 per year.
It is occasionally possible to persuade an advertising agency to extend loans in order to launch a firm when a product has
high repeatable properties. Some of the bigger agencies might agree to take
shares in a company in exchange for advertising expenses if an idea gives
prospects for mass advertising.
The following are a few of the well-known
products currently available on the market that were launched in this manner or
are owned in part by advertising agencies:
Van Camp's beans, Pepsodent, Barbasol, Bon-Ami,
Sapolio, and Palmolive soap. It will be seen that these products all share the
following two characteristics:
They are items that can be sold to the general
population (l), and they also happen frequently. This final requirement is
crucial since, in most cases, you need to spend money equivalent to the selling
price of the initial purchase to persuade someone to test a product. Therefore,
the article's repeatability is your only chance to turn a return on your
advertising. It must have genuine merit and possess a standout quality that
will enable mass media (the press or the air) exploitation.
Creating a stock company and selling the stock
to friends and nearby businessmen with extra money to invest in another option
to finance a firm.
Maintaining voting power over the company is
crucial if you want to avoid being gradually removed from the picture after
getting the company out of the red and into a profit-making position.
Keep 51% of the common or voting stock as
remuneration for the concept, the patents, or whatever it is that makes the
firm appealing. Incorporate your company for double the amount of money
required. However, it is preferable to finance a business using its earnings in
a pay-as-you-go fashion, instead of setting up a stock corporation. The
following are the justifications for this: (1) When you sell stock to others,
you are essentially bringing them on as partners. The risk of dissent increases
with the number of partners because you will have less influence over the
company's policies. (2) Minority stockholders typically contribute little to a
company after the original capital, unless they are employees. There is no
justification for giving them 49% of the revenues. For the use of their funds
and the risk they assume, they are entitled to a "rental," but in the
case of a successful company, common stock dividends frequently represent a
return of several hundred percent a year.
instead of setting up a stock corporation. The
following are the justifications for this: (1) When you sell stock to others,
you are essentially bringing them on as partners. The risk of dissent increases
with the number of partners because you will have less influence over the
company's policies. (2) Minority stockholders typically contribute little to a
company after the original capital, unless they are employees. There is no
justification for giving them 49% of the revenues. For the use of their funds
and the risk they assume, they are entitled to a "rental," but in the
case of a successful company, common stock dividends frequently represent a
return of several hundred percent a year.
If you don't have the money to establish a
business, you'll probably discover anything in that chapter that can be sold
profitably in your neighborhood. With this strategy, you can quickly amass
$1,000 or more for startup funding.
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