If there’s one thing that Hollywood demonstrates to the business world over and over again, it’s a precarious willingness to take a debt-ridden risk. Entertainment is inherently risky because there’s just no way to tell what will be a box office hit and what will flop. The latest example is Batman v Superman — an epic battle between two of the biggest super heroes. Warner Brothers put an astounding $400 million into making the feature film and even though nearly a half-billion dollars went into the budget, the results are at best, mixed.“’Batman v Superman’ box office down 68 percent in second weekend,”</em> a Fox News headline reported. “Warner Bros. Mulls Releasing Fewer Films as ‘Batman v. Superman’ Stalls,” a Hollywood Report headline revealed. <em>“Was The $400 Million Warner Bros. Put Into ‘Batman v Superman’ a Good Investment?” Forbes asked. Whether the film ultimately turns a profit or not, Batman v Superman is an epic business lesson about the huge risks of debt.
Batman v Superman: Epic Business Lesson
One unfortunate reality of starting, or for that matter, running a business, is access to capital. Money is simply a necessity to start a business, so many would-be entrepreneurs think. It’s this mentality which causes a barrier between dreaming and acting. Many people have great ideas, but, it’s what you do with your idea that matters. You don’t have to reinvent the wheel and you don’t need a perfect pedigree, you just need vision, a plan, and the willful dedication to make it happen.
Bootstrapping is both bigger and simpler than saving a dime whenever you can. If you boiled down the philosophy of bootstrapping, it would run something like this: lack of money, employees, equipment — even lack of product — is actually a huge advantage, because it forces the bootstrapper to concentrate on selling to bring cash into the business. In other words, for the bootstrapper, business is all about just two things: making product and selling product. —Inc.com
Batman v Superman makes headlines for more than one reason. Yes, it’s a huge production, but it’s the money behind the core aspect of production which is the focus of so many news stories. It’s the sheer amount of money it took to create which is often a larger news item than the film itself. The reason is obvious: the film is a huge risk, and when so much money is at stake, that risk skyrockets. If the movie doesn’t exceed the amount already spent, it demonstrates why business debt is so risky. When you’re starting a business, it’s very tempting to take-on debt for the sake of having capital. However, it simply adds to the aggregate amount of risk you’re taking. That’s an unnecessary chance, because there are ways to start a business without a lot of money and without using debt:
- Start with what you really know. One great why to avoid racking-up debt is to start with what you really know — really. There’s just no need to venture into unfamiliar territory because you can rationalize just about anything. Sure, it may be a great business for others, but, if you’re unfamiliar with its dynamics, you are far more likely to fail and lose more than just your pride. The fact is, it’s easier to start with your core competencies and then branch out incrementally later on.
- Begin part-time, if possible. Another unfortunate myth too many first-time entrepreneurs believe is they have to “jump in with both feet.” If you don’t know where the current will take you, that’s just too risky of a proposition. Instead, create a manageable schedule to start part-time and when you are comfortable, begin to transition.
- Tell everyone you know about it. The fear of failing and/or asking for help is something that can be quite difficult to get past, but, if you really want to succeed, you cannot get there on your own. Talent, vision, and drive are all wonderful traits but you need help and by telling everyone you know about your new business, you are creating a combination of customer base and referral network.
- Stay far away from unnecessary expenses. While some expenses can be avoided, others will be necessary. Be discriminating of what is and what is not a necessary expense and you’ll do yourself a huge favor time and time again.
- Understand the risks of credit card and loan debt. There’s no such thing as a business credit card account. You personally sign for it, you are liable for what is spent. Understand that every time you make a purchase with a loan or a credit card, you are adding a lot more to your liabilities than the out-the-door purchase price.
In addition, you should get to know the term “sweat equity” intimately. The beginning of every new venture requires a lot of work and though you might be able to hire right away, do so sparingly. By contributing personal sweat equity, you’ll learn all there is to know about the industry and your own business on a firsthand basis.
If you’ve been involved in bootstrapping a business or have something to add to these observations from your own experiences, contribute to the discussion. How have you dealt with starting or growing a business on a shoestring budget? What are some other creative ways to put an entrepreneur on the road to success?