Crowdfunding Entrepreneurs Take Notice
ABC’s hit television showShark Tank is an exciting program for both entrepreneurs and investors. Entrepreneurs enjoy watching it because they get to see others like them pitch their products to a panel of wildly successful investors. These “contestants” get one chance to speak in front of five investors who can make their dreams come true (some, at least) right before their eyes. It is also a chance for entrepreneurs at home to see product pitches and note what worked and what didn’t work.
Investors enjoy watching because they also see a live entrepreneur pitch and pretend to be the judge. The Sharks ask tough questions to the entrepreneurs about their business plan, finances and other aspects of the company that all investors should be mindful of in their own investment decisions. After weighing their odds to make money and the competency of the entrepreneur, the Sharks either opt in or back away. The entire show is a learning experience for both sides of investing.
About four months ago I wrote a blog featuring Shark Tank judge Barbara Corcoran. She offered tips for investing in startupsto help investors make wise decisions when entering the crowdfunding arena. Today I decided to feature another Shark Tank judge and self-made millionaire,Lori Greiner. Lori is a successful inventor and entrepreneur who has 120 U.S. and international patents and over 450 products to her name. Her valuable insight on entrepreneurship is well-regarded throughout the world and especially to any entrepreneur trying to emulate her accomplishments.
In arecent Entrepreneur article, Greiner discussed how starting off lean as a new entrepreneur helped her in her early career. She often found herself doing everything for her business and the multi-tasking lead to a more satisfying experience in the end. Greiner credits her thriftful ways to learning more and saving money when it mattered most. Here is a direct quote from the article:
“In the beginning I was really, really lean. For the longest time I did it all. I played every hat. I was in the factory, doing the graphic design, the photography, the selling — literally everything. I saved money doing what I could myself. It was hard but I learned. I learned that nobody’s better than you to get your business off the ground. The experience you get is priceless.”
Do you want to learn how she did it? Greiner was kind enough to share four pieces of money advice for entrepreneurs that she implemented early in her own career. Here is a free lesson for entrepreneurs on how to save money in the beginning:
For those who don’t know the costs of operating out of an office, they add up fast. Rent, utilities, office equipment, computer equipment, office furniture, and office supplies aren’t just a one-time expense – they’re ongoing. Most entrepreneurs have a small team working with them, and if possible, working remotely is the #1 option. A competent team can work together outside of an office and with a variety of free file sharing software available, staying connected is easier than ever.
“Try to work out of your home for as long as you can, even if you have a few employees, to keep overhead low.”
Hiring too many people off the bat is a poor decision financially. Greiner mentions she has seen entrepreneurs blow their money on employees they don’t need to impress people and make their company seem more successful than it actually is. When the need arises and the money is available, additional employees will be needed to satisfy company growth. Until then, her money advice to entrepreneurs is to “hire in baby steps”:
“You answer your own phone or get an automated system. You can keep track of your own books. You have to be willing to do as much as possible by yourself up until you simply have no choice but to hire someone; and even then, you will have to stay intimately involved in the day-to-day operations, because even the best employee will never be as vigilant as you will.”
Carelessly manufacturing products before receiving your first order is never a wise business decision. In fact, it can leave you with a warehouse full of products nobody knows about. Conducting research about your market size and product demand is critical and you should always know what your competition is up to as well. Greiner explains the pitfalls of jumping the gun:
“First, you’ve put yourself on the hook to pay for all those units, even though you have no guarantee of revenue. Second, you now have the additional burden of paying for storage. Third, when you order your inventory too soon, you’re wasting the money you paid for your prototype because you’re undermining one of the main reasons you got it in the first place — to conduct your market research.
Borrowing money is somewhat of a prerequisite for entrepreneurship, but Greiner warns against borrowing from family. Of all her money advice to entrepreneurs, this may be the most intimate because it involves your personal life. If possible, she advises to avoid it altogether because many scenarios could cause irreparable damage and ruin relationships. This advice may not be as applicable to equity crowdfunding because your loved ones will actually be buying stock and not giving a loan, but a flat out loan may be a bad idea:
“It’s a gamble. It’s like walking into a casino. You never know if it’s going to work out or if it’s going to end your relationship.”
Money advice from a Shark Tank judge is money advice everyone needs to listen to. All of the judges blazed their own path to entrepreneurial royalty, and staying lean in the beginning was a strategy all of them most likely executed. Lori Greiner continues to invent, invest, publish books and be an inspiration to entrepreneurs around the world. It is important to remember that one day she was a young, inexperienced entrepreneur looking for money advice herself. Greiner obviously followed the good advice she was given, and so should you.
Thank you for reading and please leave your comments below!