The Start Up Company

The other day I got an inquiry from my home page. I gave a quick phone call to follow up and the people (an impending partnership) wanted to find an investor in order to obtain a sustantial amount of money to build a building, in which, they were going to be a start up business.

I have worked with a number of start up businesses over the years and can tell you that the 2 reasons why businesses fail are: 1. lack of capital & 2. lack of managerial expertise.

Taking on an investor has its whole range of problems including loss of control of the business entity. Using invested money to create a balance sheet, of no value to the partners, is not a sound start up principle. Taking on long term or permanent debt at the outset rather than concentrating on dealing with short term debt is another pitfall. Then, there is the problem of the size of the building. In two years, let's say, if the business takes off, the building might be too small. Now it has to be unloaded.

A start up company should run as lean as possible and deal with only having short term debt to keep the problems at a minimum. Otherwise, what is the cost of your education in becoming a businessperson?

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