How not to start a business

So after many years of trying to break out of the "9-5" and achieve "financial freedom", I've learned a good few lessons on the way which I wish I'd been told before I began. Surprisingly it's not all sunshine and roses and so this is information that will NOT be given by people selling courses promising financial freedom. Not that these people necessarily say anything untrue, but they will of course be selective in the information they present in order to show their products in the best light possible, in order to increase sales. This brings us onto lesson number 1:

Lesson One - The Buck Stops With YOU!

First of all, nobody else is going to help you, really. Family might, if they can, but most people are too busy dealing with their own problems to help you with yours. Either you get it right, or you get it wrong. If you're wrong, you pay the price and no-one else. So Due Diligence is SO important! If you get into bed with the wrong person, YOU will pay. Not them, Yes they shouldn't do it. True they should be more trustworthy, honest, decent etc. But if they are not, they are not. And usually with small amounts of money (i.e. in the thousands) the legal costs of recovering it are greater than the value of the money. Dodgy people know this and so they will sell you "products" for a few thousand each then leave you in the dust. Once that's happened, there's basically NOTHING you can do about it. Unfair? It sure is. If you get yourself into a mess there's no one else to blame but yourself. And there is no one else that will dig you out of it either. Deal with it.

Lesson Two - People Have an Agenda

This is closely linked to lesson one. Ultimately you have to look at lots of different sources of information, and think about why that person is saying it to decide how valuable or truthful that information is. I'm going to be blunt with you, I have three reasons for writing this article. First and foremost is a benevolent purpose, to help people who try to walk the same path I have walked, hopefully with less stress than I have been through (yes people can be good). Second of all, to drive traffic to my own personal website (yes I am a self-interested person like everyone else on the planet despite what they may say). Third of all, to vent my frustrations at not being wiser and having made bad decisions.

If you are smart, then you would have thought about my intentions before you even started reading this article. And you would be evaluating what I write against those intentions to see if what I'm saying is truthful or not. IF YOU DID NOT DO THIS, then I'm afraid to say, you are as foolish as I once was. I can tell immediately that you are gullible and will believe what other people say without thinking critically about it and analysing it for validity. You are WIDE OPEN to being taken advantage of. Watch out. The best example of this I came across recently was a "quote" by JFK that was posted on Facebook. The "quote" was written next to a picture of him writing on a desk. I did a bit of digging around and found NO EVIDENCE whatsoever that he ever said this or anything remotely like it. I could not find one single source or public record that he had said those words. Yet on the Facebook post there were all sorts of reactions to it etc. People had not bothered to check it and just because it looked good, people bought it.

People that sell methods of getting rich, are trying to get rich themselves by selling you those methods. They benefit from people BUYING THEIR PRODUCTS, not from people actually getting rich. Therefore their goal is not to make you rich, but to make you think they can make you rich so you buy the course. If they worked on commission based on the increase in your wealth then they would be incentivised correctly and you could much more easily trust what they say. For example, people that have bitcoins will promote bitcoins, as they directly benefit from more people joining the party. Look to see what someone's agenda is, what their incentives are, and see if you can really trust what they are saying. Maybe they are telling the truth, maybe they are telling part of the truth, maybe they are distorting the truth, perhaps they are out-right liars.

Lesson Three - Deal with Facts

Due diligence is an interesting one. If a poor person is offering you financial advice, be careful. If a divorced man is offering you marriage advice, watch out. If an overweight person is offering you nutrition advice, continue at your peril! As for me, if you just started reading this article you basically know nothing about me and have no idea if what I'm saying is true or if I'm just making it all up. You should have a think about it and see if it is true for yourself. Maybe you should check out other parts of my website and see if I talk sense (again I am cleverly plugging other articles to generate more traffic MWAHAHA). You should ignore what people say. Look at what they DO.

If a guy is selling you a course on how to make money, ask him for his latest tax return before you shell out for the course. Find some PROOF that he has actually made the money he claims to make. Maybe he makes more money selling courses than he does doing the thing he's telling you to do? Then maybe he should be running a course on how to sell courses instead of whatever other product he's selling. You need to check if there are facts backing up what this person is claiming. If someone is selling a "business opportunity" then think about why they are doing that? Maybe if the business was so good they would make money by doing it not selling it? MLMs spring to mind. A good, value for money product, should be easy to sell and make you lots of money just by selling it. And for a potential business, what's the market size? How many potential customers are there really? I mean, realistically, actually people that genuinely will buy that product. What type of person are they, how do you market to them? How many competitors are there? If there is a potential client base of 2m, but already 4000 suppliers operating in the marketplace, you've got to do much better than the average to get more than 500 customers. Have any surveys been done surveys to estimate demand for the product? Get the facts.

If there is an "investment" "opportunity", then what type of investment is it? Don't just look at the juicy returns they offer, think about other things like - how does this investment actually make a return? Does it just "sound good", or can you actually understand exactly how it works and how it makes money. And has the same sort of research been put together that demonstrates the reliability of this particular investment. Market research, business plan etc. I got duped into "investing" in a scheme which promised exponential growth. I was reticent to begin with, but got pressured into it and stupidly agreed. Of course being a mathematician I KNEW it was impossible to achieve exponential growth for a sustained period of time. You very quickly get to a point of earning billions every few seconds. Completely unrealistic. Of course I let the shiny rewards I was promised cloud my judgement and went for it. Turned out to be a ponzi scheme (o rly?) and the guys that ran it went to jail. The money however, was gone.

If someone is asking for a loan, find out what they earn. Find out what they spend money on. Find out if they have other debts. Find out if they have collateral. Find out why they didn't just go to a bank and get a loan from those guys (maybe the bank declined for a very, very good reason). Ignore the noise, and get the facts. Look at what can be verified and make your decision based on that. Do what Judges do. They will always, before making a decision, check BOTH sides of a story. They will thoroughly investigate the case for and against, using FACTS that each side presents, before making a judgement. So before you decide to start a business, did you look over the government business statistics? Do you know how many businesses there are, what the average size of a business is, how many hours they work? How does the industry you are entering compare to other industries? What are the pros and cons of each? Again, before you start dreaming of all the cash that will be rolling in, also think about the potential downsides that you will encounter.

If someone is asking for a loan, find out what they earn. Find out what they spend money on. Find out if they have other debts. Find out if they have collateral. Find out why they didn't just go to a bank and get a loan from those guys (maybe the bank declined for a very, very good reason). Ignore the noise, and get the facts. Look at what can be verified and make your decision based on that. Do what Judges do. They will always, before making a decision, check BOTH sides of a story. They will thoroughly investigate the case for and against, using FACTS that each side presents, before making a judgement. So before you decide to start a business, did you look over the government business statistics? Do you know how many businesses there are, what the average size of a business is, how many hours they work? How does the industry you are entering compare to other industries? What are the pros and cons of each? Again, before you start dreaming of all the cash that will be rolling in, also think about the potential downsides that you will encounter.

Lesson Four - Manage Risk

That brings us onto managing risk. Football I feel is a great example. Christiano Ronaldo is one of the richest people in sports. He makes millions, something like $90m in 2016 alone. That is pretty good. So you ask Ronaldo how he did it, and he says "Well I played lots of football, then I got a job playing football for Manchester Utd, then I got paid loads and scored lots of goals and went from there". And you think, hmm that sounds easy! I will make my millions in football! Except of course it doesn't work like that. What about the hundreds of thousands of academy drop outs, those that get injured, have a bad run and get fired, or just never make it.

Did you think about the risks you are taking on before you get involved in a business. What if it makes no money for 3 years? What if I have to work 80 hours per week and end up earning less than my "9-5 job"? What if that guy never pays me back? What if this is a big scam? What if the partnership breaks down? What if the investment goes bad? My mother always said, never invest more than you can afford to lose. I accept that in life you have to take risks, but you should think about what you are exposing yourself to and are you willing to deal with the bad things that can happen as they inevitably will. And have you taken steps and measures to minimise the chances of bad things happening? Are you wearing your seat-belt? Don't lend without taking collateral. Don't invest without an exit strategy. Never work with someone without a contract. Don't start projects without having facts and data to know what you're getting into. Protect yourself or pay the price. There is an important concept in life. That is "Risk vs Reward". Generally speaking if you want a bigger reward, you take on more risk. The lowest risk strategy is to put £10 in a bank account and cream the interest. Of course the reward is low. The highest reward is to buy a £2 lottery ticket and potentially get millions of pounds. Of course the risk is, it's almost a guarantee to lose your money. So if you start aiming for bigger and better things, YOU WILL TAKE ON MORE RISK AND INCREASE THE CHANCES OF BAD THINGS HAPPENING. Accept that, be ready for it, and try to manage it and plan for it.

Lesson Five - Learn from Others

Look at how other people do things. Judges are professionals. Their job is to make judgements on the truth of things. They check facts and look at both sides. Do the same. If you lend money, look at how banks do it. They are the pros. They check income and expense, credit history, they get collateral. Do the same. Look at sports people. They are in great physical condition. If that's your aim, find out how they do it and learn from them. Do they go boozing every weekend? Probably not. Look at people that are actually rich if you want to be rich. How did they do it? Did they inherit lots of wealth? Do they have great contacts? Do they work hard? How are they successful? Do they take ridiculous risks without protecting themselves? Do they do MLM? Look at people that achieve great things, sportsmen, scientists, entrepreneurs. How do they live, what do they do? Find out.

Lesson Six - There's no Free Lunch

Basically don't be daft. Money is hard to get. Everyone wants it. If someone manages to convince you there is an easy or simple way to get money, then you've been duped. Think about it. If there really was just this simple little trick to make millions, EVERYONE would be doing it. They are not, so it's obviously not true, Yes you can get lucky, this is called GAMBLING. Yes some people are successful, but you can BET it's not because of some little trick they used, or some scheme they invested in or something like that. It'll be down to personal attributes like, their network or contacts, their charisma, their hard work, their ideas, their leadership skills, their daddy's inheritance etc.

Lesson Seven - Study Economics

Like, what makes you suddenly think you will be a great businessman? The seminar? Running a business doesn't automatically make you money. Same way as playing football doesn't automatically make money. To make money from a business you have to be a good business person. To make LOTS of money you have to be a GREAT business person. Same in ANY other industry. The great players make the most money. Do you really have the skills to be a success on this project? I could easily give a talk and explain that kicking a ball about can make you millions. It can, that is true. But it's RARE that people are skilled enough to make that amount of money, Most footballers are in the middle or bottom tier, either as amateurs or semi-professional or just earning a similar wage to other professions. It takes a certain type of person to run a business. They need certain attributes, same as a sports star. Sure, you can learn those attributes, but HOW LONG WILL THAT REALLY TAKE? I could learn to be an actor, but it WILL be a long and slow road, because I cannot act. To make more money than someone else, you need to be able to do things that person cannot do. It's that simple. Life is competitive, play to your strengths.

Like, what makes you suddenly think you will be a great businessman? The seminar? Running a business doesn't automatically make you money. Same way as playing football doesn't automatically make money. To make money from a business you have to be a good business person. To make LOTS of money you have to be a GREAT business person. Same in ANY other industry. The great players make the most money. Do you really have the skills to be a success on this project? I could easily give a talk and explain that kicking a ball about can make you millions. It can, that is true. But it's RARE that people are skilled enough to make that amount of money, Most footballers are in the middle or bottom tier, either as amateurs or semi-professional or just earning a similar wage to other professions. It takes a certain type of person to run a business. They need certain attributes, same as a sports star. Sure, you can learn those attributes, but HOW LONG WILL THAT REALLY TAKE? I could learn to be an actor, but it WILL be a long and slow road, because I cannot act. To make more money than someone else, you need to be able to do things that person cannot do. It's that simple. Life is competitive, play to your strengths.

Lesson Eight - Always spend less than you make

Always. Never, ever break this rule. If you have to violate this rule, you are doing something wrong. If you cannot raise your income, lower your living standards. Live in a smaller house, a different part of the country, go out less. Much better of course just to make more money, but you have to do one or the other. When you start down that road of over-spending, it's a long, long, very long way back.

Lesson Nine - Forget About Money

Money is the surface of the real game. The real game is, how can I help? How can I become more valuable to other people? How can I make other people's lives better? What am I good at? What do I need to improve? What can I offer people? If you don't have the answers to those questions, you probably should not start a business yet. For some strange reason we all know we will not become movie mega stars. But we are so easily convinced we will become business people stars. For some strange reason I decided to do MLM and sell products that I have ZERO interest in. I literally was only doing it for the money. When the money doesn't show up and the hard work begins, you lose interest and pack it in.

Lesson Ten - Be Smart

Have a strategy, have a plan, control risk, and focus on the right things. Think through your plan, is it credible? If someone came to you and told them the exact same plan, what would you think? Would you invest in that? "Uh yeah, so I'm going to like try this MLM and maybe it will make some money, and if it doesn't I'm going to go online and look for ways to make money and then like, um maybe go to this seminar and like, um..." No. Just no. Unbelievably I did something not too far off of that. Your plan should include things like: "I will do X, because of these FACTS I have reason to believe the outcome will be THIS. If that doesn't happen I have contingency plan Z as backup" etc. If a plan is good, like a game of chess, you can see there will be checkmate in a certain number of moves. Don't be afraid to make long term plans. Better to plan to be rich in 5 years and actually get there, than plan to get there in 6 months, find you didn't, and waste 5 years anyway running around on different failures. The road to the top is long and hard. I'm not saying don't go for it, but don't be so stupid to think you can get there in 6 months if you are starting from the bottom. If it's what you want, find out what you need. Find out what skills you need, develop them. Find out what risks you're taking, and make sure you're ok with that. I'm not saying don't do it, but as another friend of mine says - "Know before you go".

(Published on 2 Feb 2018)