7 Reasons You Can't Be an Entrepreneur with Bad Credit

The hardest thing about being an entrepreneur is getting people to latch on to your business idea. As great as it may be, when it comes to finding financing and investors, you need much more than a great idea to get others to put their own money into your project. This becomes much more difficult if you, yourself, are not in good financial standing personally. We all have mistakes looming in our financial records, but, if your credit score is dangerously low, you may not be able to start a new business anytime soon. Here are some reasons why:

1. It will be difficult to find investors.

Investors don't just want to look at your business plan; they want to look at the whole picture. Anyone who is considering investing a major amount of money into your idea will desire as much information about your financial background as possible. If you can't take care of your own finances, how can you be expected to manage a business? You will need an extraordinarily brilliant business concept to make up for bad credit, if you want to secure an investor.

2. Your co-signers might be dried out.

If you've had credit issues in the past, there is a good chance you also had to go to friends and family for loans. It's difficult to find yourself out of cash suddenly, and most of us with poor credit scores have had to go through some sort of financial downturn in order to get there. But, when it comes time to now start your business, you will need to finance some of the expenses. If you have bad credit, and the people in your life are reluctant to continue supporting you financially, you could be out of luck.

3. You look like a risk to banks.

This is a big one. Even if you do get investors, there is a good chance you will need to take out some form of small business loan from a bank. Entrepreneurs with bad credit are turned away from banks on a daily basis. You can't expect your case to be much different.

4. Securing small business credit cards will be difficult.

There are plenty of credit cards that can be granted on the spot, even with bad credit. The only problem with them is they typically have hidden fees and crazy-high interest rates. If you want to secure a legitimate business credit card, then you may have trouble taking out more credit if you are already maxed out on some cards or lacking in upstanding credit in other ways.

5. Financing business equipment will be more expensive.

No matter what you need to do to run your business, you will probably need to purchase some amount of equipment. From trucks to printers to baking supplies, there is no end to the expenses that come with daily business operations.

6. You will need extra resources for down payments.

Even if you do secure financing for business items, credit cards, or loans, there is a very high possibility that you will have to pay much more up front than you can afford. A substantial down payment is often required of borrowers with low credit scores, so if your credit is bad, this is another area where you will have to cough up some extra cash.

7. You may not get the office space you need.

Another important part of running a business is having a space to do it in. Just as you may have problems securing loans and lines of credit, you could have equally trying times getting someone to rent you a space to work. Property managers want to make sure they are taking on residents who are financially responsible and have very few late pays on their records.

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Stella Walker is a writer for Creditscore.net and an avid researcher of credit and insurance news. She is especially passionate about protecting consumers from credit card scam and providing information about good credit standing.

George Torok Host of Business in Motion Business Speaker
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Disaster-Recovery Insurance: Preparing for the Worst to Avoid an Expensive Mistake

“Expect the unexpected” is an old axiom that has global applications. It’s a piece of advice that falls into the same category of Murphy’s Law, the familiar, though pessimistic, adage that predicts, “Anything that can go wrong, will go wrong.”

Business owners often prepare for the worst and hope for the best. Large companies hire risk managers who predict risks and put together custom coverage plans, but small business owners must rely on their own knowledge or an agent to assist in creating plans. Even professionals can’t foresee natural disasters or other unexpected crises, which makes disaster-recovery insurance a must for small businesses with large investments in property or inventory.

A 2010 survey conducted by Travelers Insurance revealed that 94 percent of small business owners are confident that their business is protected against insurable risks; however, only 56 percent of those surveyed had disaster-recovery insurance.

Business owners without disaster-recovery insurance may not realize that their standard property insurance fails to cover disasters such as flooding, terrorism or other external circumstances that disrupt day-to-day operations. Unfortunately, this gap in coverage could have drastic consequences. According to federal statistics, 43 percent of businesses that close due to a natural disaster remain permanently closed; and 29 percent close in the following 2 years.

Natural disasters aren’t the only unpredictable risk factors. For example, would you be covered if a water main broke and flooded your building?  A business owner who has business interruption insurance will receive reimbursement for lost income in addition to necessary funds to repair damages. This business owner can retain employees while the property undergoes repairs. The employer without this type of coverage would be forced to lay off employees until repairs are completed – or to pay employees out-of-pocket.

Many small business owners purchase a standard Business Owners Policy or BOP, without researching the different areas of coverage. This may be why only 56 percent of business owners surveyed by Travelers Insurance were covered with disaster-recovery insurance. Though business owners may assume their property is protected against the unexpected, a standard BOP may be limited to maintenance and restoration. 

For small business owners who are not heavily invested in property or inventory, business interruption insurance may not be essential. However, this does not exclude the home-based business. Many independent business owners who work from home have admitted to having no extra insurance, falsely assuming that their homeowner’s insurance will be enough to protect against damages.

Most homeowner’s policies exclude business pursuits from coverage. Insurance claims filed to cover equipment, software or inventory could result in denial if an insurer were to tie the claim to a business venture. Home-based business owners who are interested in business interruption insurance should opt for a claim that includes an extra expense clause. The purpose of this clause would be to allow for the relocation of a business while the original property (the home) undergoes repairs.

Even though insurance is required to mitigate damages of the unexpected, sometimes purchasing insurance can come at a risk. A new business owner can overlook certain risks and find himself underinsured; while a business owner who chooses an unreliable agent could overspend on policies. Business owners who make self-education a priority can avoid such unnecessary and expensive mistakes.

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Carol Wilson is a versatile guest blogger who primarily writes about global business trends and finance. When she's not writing for sites like www.businessinsurance.org, she enjoys hiking and fishing. If you have any questions or comments for Carol, please send them to wilson.carol24@gmail.com.

George Torok Host of Business in Motion Business Speaker
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The Business Transition Crisis – Book Review

Who is this book for?

This book is a must read for entrepreneurs and business owners who are thinking about their succession plan or drafting an exit strategy. Every business owner must plan for that transition. Unfortunately not everyone does. If you don’t plan your business transition someone else will make the decisions for you.


What is the urgency?

This book sounds a timely warning to the baby boomers within that group. Many of those business owners will be forced into a fire sale. Baby boomers have affected so many aspects of our culture and economy as they’ve grown older.

If you are a boomer you might recall the mortgage rates of the eighties hitting the high teens. I felt lucky to lock in at 14% for five years. Prices skyrocketed when boomers were ready to buy – and they will plummet when they are ready to sell.

This book offers some startling statistics. One that might chill you is “71% of business owners plan to retire within the next 10 years, yet only 7% have a written plan for succession.”

Imagine the financial, emotional and health tolls on the unprepared business owners. Perhaps the most traumatic issue for entrepreneurs is to let go of the business they built. That’s the case at the best of times. Imagine the pandemic when the massive baby boomer crowd decides to exit en mass. That’s the crisis.


Why should you read it?

The Business Transition Crisis is a good read for any business owner even if the only thing it does for you is to help you recast your business as a product – not as your baby. That major perspective shift is necessary for you to begin and successfully complete your transition.

The book continues to offer perspective checks and guidelines for the successful business owner. You can follow this systematic approach to prepare yourself and your business for successful transition. Even if you think that it’s too early to start planning your transition it will be worthwhile to read the book, address the questions and start preparing yourself for the process.

The book is written in a business-owner-talking-to-business-owner candor. Wayne Vanwyck offers you insights from his experience as an owner of three businesses. That includes lessons from his mistakes and successes. He reveals his own painful wakeup call that forced him to address his business transition.

The author provides insights from the interviews that he conducted with hundreds of business owners across North America. The excerpts from some of these conversations are revealing. Some examples will make you cheer while others might sadden you. In every case the lessons are clear and simple. This is reflective experience speaking to you.

If you are thinking about your business transition then this book is a powerful yet clear and simple step-by-step guide to personal and financial success. You are presented with probing questions that must be addressed at each step of the process. There are checklists, action lists and tips.

There’s help on how to build your transition team and ensure that all the relevant players are working for your best interest. The book introduces the intriguing concept of working with a Business Transition Coach. This is a role that offers more comprehensive support than one would receive from a lawyer, banker, accountant or business broker.

The book lists and explores several options of retiring from your business. In each case there are important steps you must follow to ensure the success of your health, financial security and important relationships.

The Business Transition Crisis is a book that every business owner needs to read before they retire so they can retire successfully.


© George Torok is the host of the radio show Business in Motion. He has interviewed over 450 business leaders. You can listen to those interviews free at http://www.businessinmotion.ca/ You can also listen to those Podcasts on iTunes. George is a motivational business speaker. Arrange a speech or presentation at http://www.business-speaker.biz/ or call 905-335-1997



Book review by George Torok

Learn more about The Business Transition Crisis

New Years Resolutions - help from Randy Park

Tips for making and keeping New Years Resolutions

This is a summary from an interview that Global Television conducted with Randy Park

Here is a short recap of some of the points:

When most people talk about New Year's Resolutions they are referring to breaking a habit. Basically they want to do something differently. For successful New Year's Resolution strategies, it is important to understand the nature of habits.

Habits are automatic thinking - thinking without consciously thinking - walking, getting dressed, driving a car. You can see several common characteristics:

1. the examples listed are all behaviours you have learned2. you learned these through repetition3. they are all useful4. they are self reenforcing - every time you do them they become more ingrained5. they are all controlled by your brain

Since most of the habits that we learn are helpful, our brain has evolved to make it hard to change habits. (If it was easy, we might forget how to ride a bicycle if we didn't do it for a while.) The "hardware" of our brain where the habits are stored can't distinguish between a good habit and a bad habit - it will resist changing either.

Here are some suggestions for setting up and continuing successful resolutions:

1. Acknowledge it is hard. Your conscious will is trying to change an automatic learned behaviour, and we've seen your brain resists that change for very good reasons.

2. Make sure it is possible. Let's say you're on a volunteer committee and you resolve to be on time for your meetings from now on. You calculate that if you leave work right at 5:00 p.m. you can make the meetings on time. But if in reality you are seldom able to leave at 5:00 (for one reason or another) then realistically it will be very difficult to keep the resolution. Think things through to make sure there is a possibility of success.

3. Acknowledge there will be setbacks. DON"T fall into trap of predicting one future because if you have a setback, you might be tempted to admit defeat and tell yourself that your resolution won't work since you have proof that your view of what would happen is not accurate.

4. Plan for the setbacks - what will you do? If you are quitting TV and accidentally watch a show, what will you do when it is finished? If you have a plan, it might be to finish watching the show, then immediately pick up a book (rather than saying to yourself, oh well might as well keep on watching)

5. It may be helpful to have support, for two reasons. One, they can remind you - bring into consciousness - what you were so clear on when you started, especially as your resolution gets overwhelmed by day to day life. Two, they can provide help if you do slip with your resolution.

6. Sometimes a physical reminder is useful for some people. Maybe it is a note sitting on your desk; I use alarms during the day that remind me "am I following my planned priorities?"
The key is to keep conscious both the new behaviour you want to do as well as the moments when you slip toward the old behaviour. The goal is to make your new behaviour as automatic as your old one was!

Randy Park

Upcoming Event... Randy Park and three other professional speakers are staging an evening titled "Life Skills Business Success - Essentials for Thriving in Turbulent Times." This is a fundraiser for Laura's Hope, a charity that is actively funding research for Huntington's Disease.

It will be January 26 in the evening, in Burlington; for more information go to www.the4speakers.com

Randy's second book The Prediction Trap is now in select stores. Eric Reguly of The Globe and Mail says "Randy Park's stimulating book is a must-read for anyone who wants to confront the temptation to sacrifice long-term planning for short-term gratification."
Phone: 416-703-9202 Fax: 416-703-9198
e-mail: rp@ThinkingforResults.com web site: www.ThinkingforResults.com

Hanging Tough

Hanging Tough
by James Surowiecki
The New Yorker, April 20, 2009

In the late nineteen-twenties, two companies—Kellogg and Post—dominated the market for packaged cereal. It was still a relatively new market: ready-to-eat cereal had been around for decades, but Americans didn’t see it as a real alternative to oatmeal or cream of wheat until the twenties. So, when the Depression hit, no one knew what would happen to consumer demand. Post did the predictable thing: it reined in expenses and cut back on advertising. But Kellogg doubled its ad budget, moved aggressively into radio advertising, and heavily pushed its new cereal, Rice Krispies. (Snap, Crackle, and Pop first appeared in the thirties.) By 1933, even as the economy cratered, Kellogg’s profits had risen almost thirty per cent and it had become what it remains today: the industry’s dominant player.

You’d think that everyone would want to emulate Kellogg’s success, but, when hard times hit, most companies end up behaving more like Post. They hunker down, cut spending, and wait for good times to return. They make fewer acquisitions, even though prices are cheaper. They cut advertising budgets. And often they invest less in research and development. They do all this to preserve what they have. But there’s a trade-off: numerous studies have shown that companies that keep spending on acquisition, advertising, and R. & D. during recessions do significantly better than those which make big cuts. In 1927, the economist Roland Vaile found that firms that kept ad spending stable or increased it during the recession of 1921-22 saw their sales hold up significantly better than those which didn’t. A study of advertising during the 1981-82 recession found that sales at firms that increased advertising or held steady grew precipitously in the next three years, compared with only slight increases at firms that had slashed their budgets. And a McKinsey study of the 1990-91 recession found that companies that remained market leaders or became serious challengers during the downturn had increased their acquisition, R. & D., and ad budgets, while companies at the bottom of the pile had reduced them.

One way to read these studies is simply that recessions make the strong stronger and the weak weaker... Read the rest of this article

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The lesson seems to be - are you focused on the long term gain or short term avoidance of loss.

Where do you want to be in 10 or 20 years?


George Torok

Business Speaker

Host of Business in Motion

Creative Facilitation

Creative Facilitation

• Do you want to generate tons of creative ideas?
• Do you want to examine and develop your strategic plan?
• Do you want a creative facilitator to guide your group toward creative solutions

The Process of Creative Facilitation
A creative facilitator should move your team through the creative process. Are you designing a new program, promotion, product, or process? George Torok can work with your group as the impartial process expert to help steer your team over the obstacles and through the process to achieve your new creation. George Torok will lead your team through the creative process with probing questions and occasionally calling time-out when emotions flare. He’ll nudge when you need to be nudged and steer when you get off track. Depending on your situation this facilitation session usually takes at least a full day. It often takes a few days.


Some things you should know about creative facilitation.

• Nothing is sacred.
• Assume nothing.
• Your facilitator will state the rules.
• The rules might change.
• Your facilitator will ask you questions – tough questions.
• Your facilitator will listen to the group.
• Your facilitator might challenge the perspective of the group.
• Your facilitator will help cement where you are and where you are going.
• Your facilitator is there to help move the group in a best direction.
• Your facilitator might be like good medicine. Sometimes it will be good for you but it will taste awful.
• When the day is over – your facilitator leaves and you must act on what you agreed.
• You creative facilitator will point out possibilities, incongruities, lessons from other organizations, and the overlooked obvious.

George Torok

Creative Facilitator

Creative Problem Solving

Graduate of the the Creative Problem Solving Institute

One way trip - corporate life to entrepreneur

Corporate life to Entrepreneurship is a one way trip

Curious that I haven’t written about this topic yet. Read this article in the Financial Post by Deena Waisberg if you are considering taking the step from corporate ranks to entrepreneurship and think that you can always go back to corporate life. Be warned!

When talking about entrepreneurship this aspect is almost never discussed. One of the draws of entrepreneurship is the freedom to make your own choices. But everything gained comes with a price. The price of leaving the corporate crowd to become an entrepreneur is that you can’t go back.

_____________________________


Taste of creative independence sours 9-to-5 job
Point of no return
Deena Waisberg, Financial Post
Published: Monday, April 30, 2007

Everyone has advice about what it takes to become an entrepreneur, but no one talks about the fact entrepreneurs cannot go back to being employees. "Once entrepreneurs get that feeling of freedom, it's in their blood forever," said Dan Sullivan, who has worked with more than 11,000 entrepreneurs in his role as president of The Strategic Coach.

Read the rest of this article.

_____________________________

After serving 20 years in corporate life I became an entrepreneur. I relish the freedom. Occasionally a corporate job ad catches my eye. I amuse myself by thinking, “At one time I would’ve jumped for that job.” Of course I have no desire to go back and I believe that despite my experience I would have difficulty getting a corporate job. The biggest obstacle is that I would not tolerate working for some one else again. The attitude that is necessary to succeed as an entrepreneur would be catastrophic in the corporate office.

Deena Waisberg’s closing line is good advice to wannabe entrepreneurs dreaming of escape from the corporate cubicle.

“So think carefully before embarking on the entrepreneurial journey. More often than not, it's a one way trip.”


George Torok
Willing Entreprenuer
Host of weekly radio show, Business in Motion

PS: I will never go back to corporate life.

Monday Morning Manager: Harvey Schachter

Monday Morning Manager by Harvey Schachter

For upcoming and current managers and executives here is a quick way to capture and digest nuggets of management wisdom. Read Harvey Schachter's Monday column in the Globe and Mail or visit his blog at Globe and Mail Morning Manager.

It's a positive way to launch your week.

Harvey Schachter is a Battersea, Ont.-based writer specializing in management issues.

George Torok
Host of the weekly radio show, Business in Motion

Test Your Business Systems

Test Your Business Systems

When do cars break down the most?
When it is extremely cold or extremely hot.

It is the extremes that test any machine.
It is the extremes that test any system.

The best way to test any equipment is to subject it to extreme conditions.

So how do you test your business systems?
How do you test your customer service?
How do you test yourself?

If you haven’t tested your systems you really don’t know if they are good. If you are afraid to test them – that speaks volumes about your confidence in your business systems.

Are you testing your business systems under extreme conditions?
If not – you don’t really know if they will work when you most need them.

It’s no excuse to say, “Service was bad because we had more customers then we expected.”

Test your business systems under extreme conditions. Then fix the things that break down.


George Torok
Host of Business in Motion

Bill Gates’ Secret Weapon: Stop to Think

Bill Gates stops to think at least twice a year. Bill escapes to his wilderness lodge every six months for one week. It is during these times that he develops strategy for Microsoft. It was one of these thinking sessions that helped him to move his company to embrace the Internet and the related opportunities.

How often do you stop to think? Really think? About your business; about your future; about your life? You should invest at least one day every three months thinking. Try it – one out of 90 days thinking. That is only four days a year thinking. That is not a lot to ask. But imagine how much more that would be than your competition.

Schedule that undisturbed time to think. What could be more important that thinking? Yet we too often are too busy doing stuff without thinking. Your business will survive and thrive only if you think. Your life will be more satisfying if you think.

You might say that Bill Gates has time to think because he is the richest guy in the world. The reality is that, he is the richest guy in the world – because he takes time to think.

What questions might you ask during these thinking sessions?
What business are you in?
Where is the industry going?
What trends do you see?
What threatens your business?
What are the unknowns?
How can you distinguish yourself from the competition?
What other questions should you be asking?
What issues/ decisions are you avoiding that you need to confront?

Think!

George Torok, host
Business In Motion

Entrepreneur Map

Direction and forward motion is the sign of an entrepreneur.

An entrepreneur picks a direction then moves in that direction.

Most often they have not figured out the little details. And often they discover the details as they move forward. So naturally they make lots of mistakes as they move and that is perfectly okay. The worst mistake would be to wait and figure out all the details before they move. That might be too late.

After my second year in university I decided to travel around the world: a bold vision. And a ridiculous and dangerous plan according to many who attempted to advise me.

My plan was simple. I would head east until I returned home and I would be home within a year.

That was my plan. Simple and measurable.

And sure I had a list of places I wanted to see. No one place on that list made my journey, but collectively they all did.

One year later I returned home. I had visited all the places on my list and then some. I have traveled through 22 countries, five continents and across three oceans.

My plan was simple – head east, be home within one year and experience as much of the world as I could.

That is how an entrepreneur thinks - clear goals, simple plans and measurable results. You will encounter some unknowns along the way to be decided by the overall plan.


George Torok
World Traveler