Its easy to be a millionaire….isn’t it?

There are people that genuinely think that if they go into business, they will end up like Richard Branson and be multi-millionaires in no time. The FT Business Guru, Robert Craven wrote a profound article referring to the naivety of new start-up business managers and the appalling things that can happen to them. “Snake Oil Salesmen” that sell “Magic Bullet” marketing systems that will solve all their problems at a huge cost, little chance of implementation, even “Guaranteed Money Back” offers…..but read the small print!

The Federation of Small Businesses give some startling facts about new start-ups. 90% fail in the first year, 50% of the remainder will fail in 5 years. Amazingly, of the 90% that fail in the first year, 25% of that total don’t even earn an income.

It’s not easy starting a new business and I’m amazed of some of the attitudes of so called “Entrepreneurs” starting a new company. Let me give one of my experiences that I’ve come across over the years so that you know, just how stupid people can be. There will be more to follow….

The Restauranteur :

This is true…. I was called by my bank manager several years ago and asked to investigate a customer of theirs, because they were worried that he was spending money on a project and had no idea what he was doing. This chap was an ex miner with a £60,000.00 redundancy and wanted to open a restaurant. Usual things, he liked cooking, he liked eating out and was a bit of a Bon vivour. So with his windfall, he found a unit in a town centre, bought a 21 year lease and then started to renovate to convert it into a restaurant. If I remember rightly he wanted to open up a type of Italian style type establishment.

I went along with The Bank Manager on the pretext that as he had an business account, the bank were looking after his interests. It soon became very obvious that this chap had a dream, did absolutely no research and was completely out of his depth. Some simple questions we asked…

Had he had a business plan drawn up and costed his project? No, because he didn’t know what things were going to cost. He got a mate in to help and between them they were project managing the job.

Ok, had he had some plans drawn up, so they knew what they were doing. Sort of, some very poor notes on a pad with some ideas, but no financials.

What was the retail unit selling before he leased it, a shop, he said selling DIY, ok then, you’re opening a restaurant you’re going to need to ask for planning permission for change of use, the council aren’t going to be too impressed when you’ve changed the use and haven’t told them. He didn’t know that bit and frankly the agents who handled the sale should have told him.

I assume you have informed the local court and applied for a drinks licence. You need one to sell drink….we then find out he was done for a D&D three years ago. So he would no chance in getting a licence.

Here’s the worst bit about this case, this chap genuinely thought that when he ran out of money, he could just call the bank and let him have as much as he wanted, because he was a businessman and that’s what banks did, give money to businesses. I know this was the late 80’s, and money sort of flowed then, but of course reality suddenly set in.

 

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