Money: The Root of Business Success
By Future Energy Solutions CEO Daniel Gold
I believe in the entrepreneurial spirit and great startup ideas. But, there’s never a guarantee of success. I’ve seen far too many excellent business concepts crash and burn because they lacked adequate capital. Cash flow is the life blood of a start-up or growing business.
We’ve all heard people say, “Money isn’t everything.” Perhaps…but when it comes to helping a business grow, money is extremely important – if not a necessity. As an entrepreneurial businessman, I’ve learned when your funding is limited…so is your potential to grow. Most people simply don’t have the wealth to keep a company moving forward at a pace that enables success. To preserve cash, many entrepreneurs wind up making short-term decisions or choices that are contrary to their long-term goals.
That’s why securing financing is so important. Call it whatever you will – venture capital, a credit facility, or a structured financial partnership – it’s money businesses need to keep growing, expanding, adding customers…and stay alive.
In short: product is important, but capitalization and positive cash flow is the business fulcrum that truly generates growth. The obvious question, then, is how do they get it?
Here’s the rub. Banks and investment firms aren’t going to give big bucks to a business that’s not already established, has no solid business plan or, worse still, negative cash flow during the initial stages of growing a business. To qualify for the top-dollar without having to part with a major chunk of your business, you need an impressive track record, a deliverable action plan, and solid financial footing. That’s how we recently secured a debt facility of $75 million for Future Energy Solutions from Orion Energy Partners. We showed four years of strong revenues, a solid platform with a real action plan, and the prospect of continued growth in a sector that offers huge potential for the business to become an industry leader through superior technology and a unique approach to its customers.
Probably not what a startup wants to hear, but that doesn’t mean they can’t be successful. I started smaller – a $10 million senior credit facility…a $30 million equity investment, which began with an initial loan of $2.5 million – before qualifying for a larger injection from my Partners. The key to ongoing growth is to structure the business for success during its early years without general expenses “front running” sales. Then, “feed” it the cash it needs while ensuring general expenses are kept in line with growth so as to not unnecessarily burn through available cash.
Bottom line: money is key…but so is vigilance and business acumen. You can manage the cash burn in the early years along with available cash. If you use your cash wisely and maintain growth as your primary objective, the business can flourish.
Just remember, in business…positive financial margins, good staff and team members, and managing cash flow are all key components to a growing, successful business.
In summary, a well-structured business with a solid plan of action, clearly defined unique selling points and goals, and wisely spending cash as one grows are all crucial elements in setting your business on a path to success.