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Monday, October 10, 2011

MONEY: Starting Your Own Business...Dealing With Banks

      The present job situation sucks.   That sucking sound may create an opportunity for a person who is smart enough to turn it to his or her advantage.  Smart has nothing to do with how much education you have.  In the course of my life I have met people with college degrees who were not smart enough to pour piss out of a boot.  Even if the directions were written on the sole of the boot.  Steve Jobs was one of the richest men in the world and he was a college drop out.  Another of the richest men in the world was John D. Rockerfeller.  A story I heard about him sort of says it all.   He had never went to higher schooling but was a genius at business and marketing.  Supposedly one time he was touring one of his refineries and had some of his new employees with him.  One of the employees took the opportunity to beat his own drum by stating,  "Mr. Rockerfeller I recently graduated from Harvard before coming to work for you.  May I ask where you graduated from."   Mr. Rockerfeller looked at him and stated. "'Son I did not have time to go to college.  I was to busy creating you a job."

      Business is often about knowing how and when to take advantage of an opportunity when it presents itself.   I was a high school drop out who went into the Army.  However after leaving the service I understood the value of an education.   My high school and first year of college were finished via the GED program.  Being somewhat older and knowing what I wanted to do, which was be self-employed I took courses that furthered my goals and did not necessarily followed the prescribed curriculum.  I have an associate degree in business and one in recreation and leisure services with the balance of my hours in commercial art.  The management degree was of course to understand management,  my goal in the rest of my classes was to make playground equipment, the rough timber kind, and to know how to do my own advertisement.  I worked my way through college tending bar, doing yard work and landscaping with a little bit of commercial tree trimming to make ends meet.  My education ended in the middle of one of the worst recessions since the great depression. At least until this one came along.  This meant it was a dead job market.   So I created my own business.  I did part time work for a local mobile home dealer and managed to turn it into a very lucrative business.  I did mobile home repairs and service and also expanded into building wooden decks which were the rage at the time.  It was not that I was that smart, but I saw a need and met it.   That is half the secret of getting a job in hard times. The job eventually went belly up.  Not because of a lack of business.  It was a combination of two other problems.  One was not managing my money and to much celebrating of my success.   The other and more critical was being to honest.

      Long story, short my celebrating caused me to get a divorce.  Then I went to the bank to restructure my debt so I could pay all my bills on my own.  My whole story was poured out to the loan officer, who I thought of as a friend.  I had never missed a payment and over a couple of years had built up a $15,000 line of credit.  This made me able to go in and get the money just based on my signature.  It was always on 90 day notes which was no problem.  My system was to go out take orders and then get a check to pay cash and get a major discount on my materials.  The stuff was already sold on contract.  It was just a matter of going out doing the work.  My system was to mark up the materials, add in my labor and then when it was all done take the banks share and pay off the note and pocketing the difference.  Which later came back to haunt me as I had a run in with the IRS over three years of back taxes.  Just believe me if you do nothing else, pay your taxes.  In all the time I ran my business, there was never a late payment.  Which is how my credit line grew from the original $1000 to $15,000.   A couple days after the meeting with the loan officer I had an order inbound.  As usual I went to the bank to get my money to pay the delivery truck driver which was how my contract was set up.  It was a cash only business.  The girl at the counter informed me my line of credit had been closed.  I asked to see the loan officer and he told me he made the decision based on the fact I was getting divorced.   He no longer felt I was credit worthy and cut me off.  His actions literally put me out of business.  My half truck load of supplies were on the back of the truck and the driver had to return two hundred fifty miles to Nashville, Tennessee and unload my order so he could get to the remaining orders on the truck.  My supplier cut me off over that screw up.  Having never missed a payment or being late I was suddenly out of business.   A small note about justice...The bank later went out of business and the loan officer started his own business and he went bankrupt.  There is justice in the world.   Sometimes you have to wait awhile to see it.  It  has to do with reaping what you sow. 

     There was a couple lessons learned from all of this.  First never, never ever give a bank anymore information than you absolutely have to.  Keep your cards and your problem to yourself.  Know what the bank wants to hear and say it in a way that makes them happy.  Generally you will get what you want.  They want to make money and "that is all that matters to them."    As long as you present yourself well you will get what you want.   I know this is true because later in my self employment career I used that system to balance my books more than once.  If the banks had known what to look for and had paid attention they would have known I was totally over extended, but I played the system and won.   The second thing I learned was that you should never mix your private life with business and never, ever let your bad habits guide your business decisions.  Had I known more and not had my vision obscured by my bad habits I would never have gone to that loan officer.  My business was seasonal and what I should have done was used my credit line and resources to develope other enterprises to carry me through the off season.   The resources were available to me.  It was my own incompetence that cost me.  Not properly using every advantage you have available to you will cost you in the long run.  Budgeting also can cost you.  Just because money seems to be flowing like water does not mean that the well will not slow down or go dry.  If it does you have to understand and know how to turn the water back on.   You can only do that if you are totally focused and bad habits tend to make you very unfocused.  No matter how smart you think you are the system changes and so does what is needed to survive. 

     This is the first of several posts I will be doing on how to start your own business.  The topics will be.  Finding Your Idea,  Getting A Loan,  Staying In Business.

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