How I built a business with no money
Part 1 of 2
Back in the summer of 2001, I was in the final stages of loan approval to open a coffee shop just off the campus of a university in Fort Worth. I had the site selected, which was less than a block from the local dorms and major academic buildings, with no competitor within miles. I had a compelling pro forma laid out that seemed like a can’t-miss model. I had met with the Senior VP at my bank that was cheerily on board with my concept, and I had designers ready to launch with logos and other items to put my vision into action.
Then I woke up on September 11th, 2001 and it was all gone. The bank froze their commercial lending and I was finished, before I had even started. Though the experience hardly crushed my entrepreneurial spirit, I resolved to find another way around going from bank to bank, or investor to investor, the next time I launched a business.
In the fall of 2007, the right idea cam along, and it had been long enough since my last experience that I was ready to give it another try. However, determined to learn from my history so as not to repeat it, I struck out looking for ways to build my model without investment capital. This was tough, especially since I’m a writer and my wife is a minister: a generally lethal combination when it comes to economic prosperity.
Given that all I had was an idea, I had to make sure it was something I could present clearly and compellingly to potential partners. But even before working on my pitch, I had to come to terms with a few things on my own. Since I could not pay employees, the initial people that helped me get my company off the ground would only do so because they had a vested interest; this meant bringing them on as partners, which meant less control overall for me. It was very important, then, that I chose carefully who I teamed up with, as I could not just cut ties later on and find someone better.
Aside from identifying people with whom I could work well, I had to make sure they brought skills to the table that I didn’t already have. This brought with it some inherent challenges, trying to learn how an introverted writer – that’s me – a manically social big-picture entrepreneur and a computer programmer would progress without killing each other.
The key for us has been a healthy respect for each skill set that the other partners bring about which the rest of us know very little. Stated another way, I don’t micromanage the computer programmers approach to our website, and the other guys don’t meddle in my approach to delivering content. In turn the big-picture partner is set loose to do what he does best, not tied down by responsibilities that might otherwise hamper his energy and creativity.
Another compromise I had to make was actually giving up even more control as we began to grow. I decided early on that the big-picture guy, who is out front helping us grow our capacity, would not be as motivated to do so if his margins didn’t increase as we hit certain performance thresholds. So although he begins with only a ten-percent ownership, he has the opportunity to grow his share to nearly twenty-five percent. Granted, this percentage comes right out of my pocket, but the way I look at it, a smaller share of more revenue is better than a big share of almost nothing, which is what I’d have if I tried to do this whole thing myself. Also, I did make sure that, although I’m willing to give up some control and a good deal of the profits to motivated partners, I didn’t put myself in a position to have myself usurped in my own company. So even at the highest level of performance we’ve estimated, I still maintain a fifty-one-percent interest in the business.
With my foundational team in place, we started looking for ways to start spreading the word about what we do with little or no cash. For us, we recognized that word-of-mouth would be huge, so we approached a few key players who we knew could help us get our message out to their network of friends, partners and prospects. Though we’d offer varying types of free services, most of the people we talked to were excited enough by our model to help us out for nothing. After all, most other businesspeople appreciate the drive of a young company with a strong vision, and they enjoy being a part of your success.
Christian Piatt is the president of www.MyWordTree.com, providing writing, editing, marketing and design services for businesses.
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