Sign in to follow this  
Frank Turley

Capital for start-up

Recommended Posts

Somebody told me this years ago. "Starting a business without capital is kind of like being the Butterscotch Man. You have to get warm in order to run, but you have to run in order to get warm."

I am not a maker of butterscotch, but I get a kick out of this saying, nevertheless.

Share this post


Link to post
Share on other sites

Frank,

It's an interesting thought on the paradox many entrepreneurs face. 

I've seen quite a few entrepreneurs whose recipe for success involved a well-stoked fire fed with other people's money.  I've seen a lot of talented, hard working, and well-funded people fail .  When I compared them to dullards who  seemed to just "fall into" success, I fell back on the old "life's not fair" line.

Then one day, it dawned on me that a lot  of failed entrepreneurs benefit from hindsight.  I'm not saying that success requires failure, or struggle because that's obviously not true for everyone.

I think that business success depends on timing and opportunity more than any other factors.  Lots of small businesses are based around the craft, product, or services of the entrepreneur.  There's a tendency to assume that "build it, and they will come", is a sound strategy to get steady revenue.  This is partly due to the successful dullard who slaps up their shingle and the world clambers to buy from them.

Getting to where you can see the opportunity is only half the solution.  I live in a town where most of the restaurants aren't very good.  I can see an opportunity for a restaurateur committed to good food.  The problem is that on average, the folks in town haven't seen a pay raise in nearly a decade.  Prices for everything have gone up, and as a result, lots of restaurants are closing.  No amount of advertising, interior finishes, or incredibly good food could change the fact that people in my town can't afford to eat out.  In contrast, the first entrepreneur to launch a good restaurant in better economic times, will be way ahead of their competitors.

 

Share this post


Link to post
Share on other sites

Twisted,

I've never heard that phrase but it's funny.  I think it's especially funny if you take a cynical view of advertisements.  How often do you encounter an advertisement that just reeks of "manure"?  

Somebody's hard-earned money went into spreading fertilizer on pavement.  It's not enough to just fling manure at everyone, you've got to land it on fertile ground.  

My extremely limited experience with modern "marketing people" taught me that they're big on spending for online advertising.  When pressed for results, they'll generate charts and graphs from Google, Facebook, etc. showing you how wide they threw the fertilizer.  There is no data on "conversion" which is when an advertisement reader becomes a client by making a purchase.

Ask them how thick the fertilizer needs to be before you'll see green shoots and they'll tell you it "depends".  On what?  They'll tell you how one client spent for years before they saw a gain whereas another client's business took off after a single ad buy.  With answers like that, what proves the advertising made a difference at all?

While it's doubtlessly true that potential buyers need to know a company exists to be customers, I think there's a huge difference between marketing and advertising.  I've yet to meet a "marketing" person who actually knew how to secure customers for their fee.  Everything works on faith rather than fact.  For all the hype about Artificial Intelligence and gains in social media, there's precious little benefit to the small entrepreneur.  Facebook and Google will happily take your money to generate lots of charts and graphs about demographics and data points.  They can't and won't guarantee that your advertising dollar will make any difference to your sales whatsoever. People are spending outrageous fortunes to generate better online statistics.  

Getting back to your original idea, I think there's a lot to recommend using your capital effectively.  If the majority of your paying customers have a few social functions in common, it's a no-brainer to make sure you capitalize on the marketing opportunity.  I know a very successful business owner who sponsors an annual charity event that constitutes about 80% of their advertising budget.  Their competitors are hammering out radio ads annoying the morning commuters year round.  Speaking for myself, there are some major advertisers I consciously avoid doing business with because of how much they annoy me.

As a society I think there are too many situations where we replace difficult research with simplistic proxies.  Nobody's willing to do the work to know how to measure efficacy because we've ceded this power to mindless trust in machines and institutions.  Even a cheap toaster comes with a warranty to mitigate the buyers risk.  Why is it reasonable to believe that marketers/advertisers are "gatekeepers" if they can't offer any guarantee to deliver paying customers?

The brutal truth is that advertisers and marketers lose faith in their own process when they share the risk. 

Share this post


Link to post
Share on other sites

I remember that phrase being used in "Hello Dolly":  wikipedia:  Vandergelder spontaneously repeats a saying of Ephram's: "Money is like manure. It's not worth a thing unless it's spread about, encouraging young things to grow." 

Share this post


Link to post
Share on other sites
On 15/11/2017 at 4:19 PM, rockstar.esq said:

Speaking for myself, there are some major advertisers I consciously avoid doing business with because of how much they annoy me.

So it's not only me then.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

Sign in to follow this