This can be very annoying..
At times I have definitely spent too much money too quickly – thinking that money would keep coming in.. But there is often a cycle of hard and easy times. You do need to prepare for bad times, but it is jolly hard. I get into a mind set of it being ok to spend money, then find it hard to stop.

At a business level, trying to find good investment money has been the hardest thing.

Investment money comes at a price, and I am not always sure I want to pay that price!

You need to prepare data very thoroughly for all the institutions. Getting external experts, if you do not have one in-house is a good idea. They can lay the data out in the right way, and also talk to the institutions in their own language. Very handy..
We have used:
www.langdowns.co.uk

If the experts are any good, they will initially do their own audit on your business, and advise you where you really stand financially both in terms of viability, but also on how likely you are able to attract investors. And also as to whether they want to take you on as a client.

Like the famous advice for representing yourself in court – do not be your own council – those who do often lose their case. The same for finance – just because you do have the maths knowledge to add up a profit and loss account, does not mean that alone you can run the finances as well as a proper money man. The good money man is a significant asset, and can help you focus your energies on what you are good at, while letting him keep you in check on spending, achieve a good balance sheet and make you look as good as possible with the banks, Inland revenue etc...

Venture Capital

I have a few friends in the venture capital business. This business has a number of different sectors, from startup, to buyout, to recovery.. They all have one thing in common – how do they make a return on their investment. “Where is the exit point” The joke goes that you can tell a venture capitalist going into a hotel – he is the one looking for the exit on the way in.

They want to know the strategy for making there minimum of 3x return on investment. This usually involves selling the company off to another company in that market. Or, less commonly now, floating the company on the stock exchange.

Both of these strategies require that from the time they put the money in, there is a clear plan on how the money is going to be spent, the business grown, and the resources within the company strengthened to make it attractive for another company to buy, or the float on the stock exchange.

One of the biggest no-no when approaching a venture capital company, is that you “want to pass the company down to your children”. This is completely contrary to their thinking – they want to sell the company in around 3 years for about 3x the money that they invested. And don’t think you can change their ideas of how they should run their business.

They will also want to put in a money man that is on their side. Not really a mole, but instead a positive role position to ensure the plan is kept to. A good thing, if you both want the same result – a get out in 3 years time for lots of money..

A good UK web site for information on venture capital companies in the UK is:
www.bvca.co.uk

Money from rich mates

Done this twice – both ending in loss of friendship with the rich mate. In my experience it is a bit like the venture capital scenario, except not as well defined before it starts. If things go wrong there is a lot of finger pointing and recrimination.

If things go well, then usually there is a disparity as to who has put in the most – the engineers in terms of hard work, or the money man who has done much less, other than to put in money at a lucky time.. I do not think there is a lesson to learn here, other than whether the company goes well or fails, there is a good chance you will fall out with the money man if things are not clear when you start..

Banks

These can be slow, cumbersome, and hard to find the tickling point where they will go yes. They usually have specific lending levels that can be approved by each manager before having to pass the decision up to the next level. If you find the amount that the man you are talking to can say yes to, then you only need to convince him. The more you ask for, the higher up in the organisation it goes. This is pretty obvious, but be aware at any point, there will be a maximum that the person you are talking to can approve.

Banks will not be quick to call in problem accounts, they will try and help... But at some point they wall call in the money if you are not repaying what they want.. My wife and I lost a house to this system..

Again, no particular advice. You have to put things on the line if you want to borrow money. Go in knowing that bad things do happen, and try your hardest to make sure they don’t. DO NOT be frivolous with the money you are borrowing. Spend wisely on the things that will make the business grow. Sadly I did not – I was running a 7 series BMW before I should have done.. Oh well, back to the Proton..

Do not borrow money until you are sure that you really are ready to go out on this limb.. It can break..

Money is jolly tricky to do without, but even when you have none, hard work makes things happen. No, this is not meant to be a corny line - it does.. You just have to keep at it..

Bouncing back. Many successful businesses started with very little money, or made some, then lost it.. Then came the tricky bit, they had to bounce back... The tricky thing is bouncing back - that is where the family and or business partner can really help.., they were just clear minded and focused on getting from one step to the next.

Amateurish mistakes. Gosh, I have made loads of these.. The first one I remember was with the bank manager. He asked me why they should lend me money (against my house). I told them we had a better mousetrap.. He believed me and lent me money. The amateurish thing was that I thought that was the most difficult bit done. All I needed now was to make my product and sell them. A reposed house later, it was clear that getting some money to start things off is not the tricky bit.. Making it actually work as a business is the tricky bit.. Engineering and cleverness is ok, but can you run a business..

Exclusive Club

The last thing to remember on money, is that the greatest of engineers have often been bad with money. One of my engineering heroes is Isambard Kingdom Brunel - one of the greatest Britain's who ever lived, and an Engineer! He went bankrupt.. That did not make him a bad person - in fact, like many engineers, probably got bad money guidance, and was conned along the way.. Whatever the reason, just because you do not make the money side work initially, it is no reason not to try. If Brunel had not done his thing, because he knew he was going to go broke, then the world would be a lesser place. The money people might think they are the main men, but no one rembers them.. The ideas people are the heroes.. Have the ideas and just do it, mistakes or otherwise.. but do it.. These pages are here to try and help you do it without the same hardship as others.. but still do it!