The problem with an investment in your business

During my 25+ years of doing serious business I have seen and been part of investments in companies that have gone on to be a huge success. I have also seen (and not been part of) investments that have gone on to be total failures.

As a mentor and influencer, I talk to thousands of people about ideas, business, growth and investment. Here is my take on business growth through investment.

What most people fail to realise is that VERY few businesses get off the ground and become serious success stories through investment. Most successful investments are made at a stage when the business has already PROVEN its concept and is on a rapid growth path. This is where investment takes the business to the next level.

A wise investor, such as a private equity, usually goes in at this level, where revenue generation and rapid expansion are already happening.

Unfortunately, most new entrepreneurs think that their idea is INCREDIBLE and if only they had investment, they can go on to become millionaires. This is such a common misconception.

In fact, I will go as far as to say, nothing can be worse for a new business than investment! Most entrepreneurs, if they are lucky or clever enough to get investment (usually lucky), see investment as free money and they blow if faster than a lottery winner.

The investor usually gets a tax break and can’t do much about the loss and the entrepreneur blames everyone and everything for not succeeding. They go from “if only I had investment” to “I had the investment, but all these things happened which were out of my control!".

Sounds familiar? Do you GET what I am saying?

I am certainly not saying that the above is the case with all investments in entrepreneurship. However I can assure you that if you are a budding entrepreneur looking to start your business based on your amazing idea, you need to stop being greedy at the outset and wanting it the easy way. There is no such thing.

You need to work hard, LEARN through trial and error and prove your concept. You need to be so comfortable and good at business, that you in fact, will not even need an investment. Do you see what I mean?

Otherwise, chances are that you will never make it in business. I have seen so many great ideas, so many strong start-ups, so many top entrepreneurs FAIL miserably because they got investment and they just didn’t get it! They didn’t get the fact that money doesn’t guarantee anything! If it did, all these businesses that get investment would be super successful, wouldn’t they?

If an idea is not great, if your methods are not viable, if your marketing is not good, if you don’t understand profit and loss, if you are not enthusiastic and passionate, if you don’t want to do the hard work, an investment is not going to help you! If anything, it will make you very complacent.

This is what usually happens. In the search to wisely spend your investment, you will either blow it on crap people who can’t do the job properly or greedy people that will rip you off because, hey, at the end of the day, it’s not your money! Or you will simply just lose the money because you are not experienced enough. Investment doesn’t bring experience. And even worse, it is experience that is a much needed pre-requisite to hire experienced people!

Notice the important word in the above paragraph? It is “spend”. Why should you spend the investment? If you are lucky enough to get investment and supposedly wise, you will keep it for when it is really needed.

Having seen so many concepts by so many high powered entrepreneurs with great ideas, fail, I can be pretty certain of the above. Investment is fantastic when you are already growing and need money and personnel to take it to the next level.

In my opinion, investment is a curse at the outset of a business - for the majority of start-ups. It means nothing. It guarantees nothing. If anything, it makes you give shares away to become lazy.

What you get is money, what you lose is your passion and your connection to the universe which would have been super-productive as a result of your desperation to make it and to be successful.

Money waters down the desire, the drive, the resourcefulness and the specific path that most businesses and entrepreneurs need to follow to make it to the big time.

Instead of thinking an investment will make you a millionaire, start thinking how you can get your idea off the ground by yourself. At best, you can think of a loan. A loan puts you in the right frame of mind because you need to come up with the necessary plans and hard work to pay it off. An investment does not put in place that same road-map.