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Can I just get this out of the way. I was an idiot when it came to getting the money to start my business. Obviously I didn’t feel like I was at the time, but within a few months I knew, as the great Jim Rohn would say, I knew I had ‘messed up’. Funding a business is hard for a reason.

For a start, I had no experience in how to fund what I wanted to do. That’s a good reason to get it all wrong, but not really an excuse to how much of an idiot I was.  I’d been to Business Link, and did the lesson in writing a business plan and funding a business. I’d even taken it to the bank. My business manager, to be, read it through and asked me some really awkward questions, (you know the type ).

funding a business

Firstly, what money was I planning to put into the business? How much money did I have to tie myself over until I started to make a profit…(awkward) When was I going to start to make a profit?

These are not questions you want to hear when you are so excited about the idea that’s burning inside your head. Do you remember that time when all you could think about was going it alone? I still remember it well. So these questions threatened to put a bit of a dampner on things. For a start, I didn’t have any money sare that I could use in funding a business. Next, I didn’t have any money saved for cash burn and as for profit and loss, I was going to be a Locksmith, not an accountant.

I was such an idiot. The business manager, must have seen me coming, with my Business Link folder and my standard business plan. ‘NO, I’m sorry. You need to go away, and come back with a better plan. You’ll need money to live on and it will run out very quickly if you’re not making a profit….’

Now I have a problem. I had already decided to leave the RAF and told them such. The plan inside my head was amazing. No-one in my city was doing what I wanted to do, so surely, how could it fail? On top of that, I was going to be paid by the RAF for 18 months, while I worked my notice so what could go wrong? Why wouldnt they lend the money I needed for funding a business?

Mistake number One. Listen to someone with experience.

Up to this point I could be forgiven. I was just one of many dreamers that had woken up one day, wanting to make a go of being in charge of my own fate. The point where this changed was ignoring the advice of my business manager ( what did she know ) and also not discussing it with anyone else that may question me. So I did what any of us would do and applied for three credit cards, with a total limit of £20,000 and got all three granted (but didn’t mention this to anyone). This was my land for funding a business.  Then, instead of arranging sensible finance for my £20,000 equipment I needed, I put it all on the cards, maxed them all out. I’m actually cringing now as I think about it. If you are thinking about this, don’t be an idiot.

Mistake number two. Understand what you sign up for

Not understanding minimum payments. The cards had 9 months interest free. Unfortunately, I didn’t even think about how much the minimum payments would be. This was partly because I didn’t have a cashflow forecast and partly because I was far too busy doing important stuff like….a logo….and business cards! ( I told you I was an idiot).

funding a business

Maxed out

The biggest shock was when the credit card statements started to arrive. The payments were many hundreds, that I didn’t have. I honestly thought I would have nine months before I needed to pay anything! I’m so embarrased, but I need to get this out and in the open. Now I considerd myself to be smart. I did an engineering apprenticeship, was selected for RAF Aircrew and was promoted in the shortest possible time, so how did I have such an idiot brain?

Mistake number three. Live like you are skint.

Despite my stupidity, I had the best possible chance to make up for it. With 18 months pay, while I set up my customer base and gained experience, all I had to do was watch what I spend and save some of the money…..I didn’t. We carried on living like I was in the RAF, on nearly £40K, which twelve years ago, was good money. I wish I had known, but I  just carried on regardless. With three months to go, I was barely covering my business costs!

funding a business

How did I survive? Well we did, with two tiny children and little income from the business.  This will take another blog entry, but for anyone thinking about leaving a perfectly good job and starting out alone STOP!

Honestly answer the following questions.

How much can you expect to earn once fully experienced in the business you are planning? So if you are going into plumbing, how much does a plumber earn? Find out. Talk to experienced plumbers, do not believe what they tell you on the Armed Forces resettlement adverts, or any course for that matter. Do the research. Email plumbers and ask them, look at job adverts.

How long will it be until you are earning that amount of money? It takes a long time to get up to speed. As a Locksmith, it took me at least five years. How are you going to make up the shortfall in cash? If you can’t answer this, then it will end up as debt of some sort and debt is what will sink your business before it even gets going. Believe me, I know.

Lastly. Why are you starting a business? Have you just had enough of where you are working? Is it that you can’t face another job interview? Maybe you’re seeing the business you work for charge your time out at £50 per hour and you’re only getting paid £10 (There’s a good reason for this). Whatever your reason, make sure you’re honest with yourself. I knew that I was interested in self-employment because I was running a part-time business years before in the RAF and loved it. However my main motivation was not having to do interviews that I would get rejected from. I put my family at a real risk of homelessness, just because I couldn’t answer these few questions, oh, and because I was an idiot, funding a business.


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