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Need Money to Grow Your Business? Check Out These Smart StartUp Money Tips

Maria Aspan, Startup Money Made Easy

With Maria Aspan, Author of Start-Up Money Made Easy, Award-winning Journalist and Editor at Inc Magazine

Maria Aspan, Editor-at-Large for Inc Magazine, is an award-winning journalist, interviewing some of the top talent in the world of business, including Dallas Mavericks owner Mark Cuban, and the successful inventor and businessman Daymond John.

Maria’s new book, Start-up Money Made Easy, investigates everything you need to consider when beginning your own business and offers a look into some of the key things she has learned throughout her career.

Lessons From Daymond John

One of the first life lessons that Maria pointed to for entrepreneurs is cutting back on your personal spending while you’re launching your business. Forget about that fancy car—for a while! This was something that Daymond John picked up from a neighborhood associate when he was just starting out, and it’s been advice that has stood the test of time.

John also received incredible help from his mother, who remortgaged her house to lend him money. This illustrates the value of support from friends and family in the early stages of building a business—something that can certainly prove challenging for many entrepreneurs.

Takeaways From Venus Williams

Maria also emphasized the importance of accepting your mistakes and learning from them. In the beginning, things are always going to be tough. Maria pointed to an inspirational quote from tennis player and fashion designer Venus Williams, as evidence that even the most successful people had their struggles starting up.

Indeed, according to Federal Reserve figures, 64% of small businesses experience money problems. The lesson to learn here is that even the top business successes experience massive problems and even failures. So if you do encounter challenges, you’re not on your own. Far from it.

But as we discussed, learning from your mistakes involves several steps. Firstly, you have to neuter your own ego and accept that you’ve made mistakes. Secondly, you have to really get down to the brass tacks of understanding what the mistakes you made actually were, in order to avoid them in the future. And, thirdly, you have to be ready and willing to change.

Maria stressed that businesses are rarely overnight successes, even though this is a compelling narrative often pushed by the media. For example, Mailchimp has become a vastly successful marketing business, generating hundreds of millions of dollars of revenue, yet for many years its two founders struggled, scrimped, saved, and had no guarantee of success. So your attitude to your business, your commitment to that business, and your willingness to push through the hard times are critical.

Mark Cuban’s Words Of Wisdom

One of the lessons that Mark Cuban particularly emphasized when Maria interviewed him was not taking on debt. Don’t spend more than you earn. Don’t rely on credit cards. This is such a temptation for small business owners, particularly when times are hard, but it represents a massive gamble and a potentially costly one.

Forty-two percent of CEOs from the fastest growing private companies began their businesses with $5,000 or less of initial capital. So something small can become something big. You don’t need to start off with a massive amount of money in order to achieve massive success.

Overall, Maria was a fascinating and insightful interviewee, addressing all of the big questions that entrepreneurs might have when starting their businesses and mixing in some fascinating anecdotes about Walt Disney, amongst others.

Anyone looking to start or grow their own business won’t want to miss this enlightening chat with Maria Aspan.

Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital.  Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions.  Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances.  The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.

Read The Entire Transcript Here

Steve Pomeranz: My next guest is an award-winning journalist and editor at large at Inc Magazine. And she has a new book. It’s called Startup Money Made Easy, and we’re going to discuss her interviews with noted investors, noted successful business people like Mark Cuban, and Daymond John and others. Welcome to the show, Maria Aspan.

Maria Aspan: Steve, thank you so much, it’s great to be here.

Steve Pomeranz: Pleasure to have you. So, Maria, tell us a little bit about what the purpose was behind the book and what you are trying to cover?

Maria Aspan: Sure, the very obscure title, Startup Money Made Easy, it’s trying to be a fun and common sense and accessible guide to pretty much every question you might have when you’re thinking about starting a business, then getting the business off the ground through the entire life of the business—up to expanding it, possibly selling it someday, or retiring and hopefully doing something fun with the money you make out of it.

Steve Pomeranz: It’s a very complicated process to start a business and to create a successful business. There’s so many challenges and so many obstacles in your way. So you really kind of be very, very focused. As a matter of fact, I noticed that you had interviewed Daymond John who we’ve had on the show on numerous times as well, and he talks about his times starting. What kind of questions did you ask him and what did you learn from him?

Maria Aspan: Right, well, as you know, Steve, he’s just such a great resource to entrepreneurs and so willing to share so much of his experience. We’ve interviewed him several times at the magazine as well and he told us a couple of stories, including that when he was just starting out, he got advice from neighbors, and a guy who owned a little bodega in his neighborhood sort of advising him if you really want to do this, you’re going to have to cut back on all of your personal spending, stop going out to dinner in your car for a cheaper one and just scrimp and save and put everything together to try to save up that 30 or $40,000 you need.

Steve Pomeranz: Mm-hm.

Maria Aspan: He also got some help from his mother who—at the time with his early business, he couldn’t get a bank loan—his mom took out a mortgage on their house to fund his business, which is such an amazing help, and reflects what a lot of entrepreneurs do. A lot of help that entrepreneurs get and a lot of financing that small business owners get just starting out does come down to friends and family. Which can be amazing, but also has its own share of challenges.

Steve Pomeranz: And he had quite a number of failures before the last company, FUBU, For Us, By Us. He was making clothes for the culture in Queens, where he was from. And rap was just really starting to take off and the like. So you know, but before that he had a lot of failures and he had made an awful lot of mistakes. And one thing that I remember him saying to me is that he feels that his ability to be hungry, to stay hungry was very important. He thinks a lot of businesses get too much money at the beginning. Did you encounter that with him at all?

Maria Aspan: Absolutely, I mean, that’s something that we’ve heard from a lot of entrepreneurs we’ve interviewed over the year. It’s funny you bring up mistakes. The book opens with a quote from Venus Williams, who in addition to her, you know, superstar tennis career, has her own clothing company. And we did a cover, Ink did a cover story on her a couple of years ago when she told us ultimately you know you’ll make mistakes. And the important thing is how you learn from them.

Steve Pomeranz: Yeah.

Maria Aspan: Which is just something that we hear from so many different founders. Nobody has money figured out. The Federal Reserve found…

Steve Pomeranz: Least of which…

Maria Aspan: Least of which, yeah, but like 64% of small businesses told the Federal Reserve in 2017 that they had experienced money problems. So one of the theses of the book is that you never stop worrying about money even once you’ve become as successful as Daymond John. And that becoming as successful as Damon John, as you point out, requires a lot of grit and luck and probably requires recovering from several failures along the way. So if you think you are alone in not knowing what to do about whatever money problem you are facing, you are really not, you are in very in good company.

Steve Pomeranz: I think the idea too is that it’s easy to say, I should learn from my mistakes, but it’s actually quite hard to do. Because, first of all, admitting to yourself that you’ve made mistakes, that you are the one at fault is number one, so you’re getting over an ego problem. Number two, it’s really understanding the true nature of the mistake, which is not always that apparent, and then it’s actually sitting down and going, on the next time I will know from this. So I think a lot of people kind of maybe take it personally, and it discourages them and they’re not really able to change. So it’s this ability to adapt and to change, which was so important. You know the other thing that really amazes me? You interviewed Bobby Brown or you took interviews from Bobby Brown. Now she turned a modest lipstick line into a profitable 30-store enterprise. It’s amazing how these people start so small and they’re able to figure out how to leverage their businesses to expand then exponentially.

Maria Aspan: Yes, and that’s another just recurring theme of the book that we hear from so many different successful entrepreneurs. Now you read all of these headlines these days about Uber and Lyft and Airbnb getting billions of dollars in venture capital and seems like overnight success. But so many more entrepreneurs sort of struggle and toil in obscurity for years or decades before breaking through if they do.

One of my favorite case studies in the book is Mailchimp. And I’ve covered them, I’ve written features on them, and they made something like $600 million dollars in revenue last year but that’s after 18 years. And that was just two guys in Atlanta struggling and scrimping through several years of building a business that they weren’t sure was going to take off and not being sure how they were going to feed their families, and relying on their spouses for rent and food. And they’re very successful today, but that wasn’t necessarily obvious even ten years ago.

Steve Pomeranz: Oh, it’s like the iconic story of the entertainer, the overnight success. Well, they’ve been doing this been over 15 years, but it’s overnight because they had a hit or something like that. So the ability for these two people in Atlanta to stay the course, to believe in their idea, and to keep changing with the markets. I mean those are things that nobody really seems to talk about, but those are the day to day challenges of operating a business. You mentioned other people here too, Mark Cuban, who is an idol of mine.

I first was introduced to Mark Cuban. I listened to an interview when he was talking about the tech bubble in 1999-2000, and how his business was worth so much and he looked at it and he says, this is insane. This business is not worth this much but the market was ascribing a crazy value to it. So he went to a brokerage firm and he was able to hedge his positions in his own personal stocks so when the market collapsed, his money didn’t collapse along with it. I thought, man, this guy does not have his ego, he wasn’t caught up in the hypnosis of that air. This guy has got his two feet planted on the ground. Well, what did you discuss or what articles did you look at in order to write about Mark Cuban?

Maria Aspan: Yeah, so I and my colleagues have interviewed Mark Cuban quite a bit over the years. One of the pieces of advice he has given us and other people is just don’t use credit cards. Don’t get into debt. Don’t take on debt that you can’t afford to pay off. And it’s funny because that is not necessarily advice that everybody shares.

Steve Pomeranz: Yeah, yeah.

Maria Aspan: And we do talk to a lot of small business owners and entrepreneurs who do finance their businesses on credit cards. I mean, it’s an interest-free, 30-day loan, as long as you pay it off at the month of the month. It’s easier to get credit on a credit card rather than going through the hoops and all of the paperwork of applying for a bank loan or an SPA loan.

Steve Pomeranz: Mm-hm.

Maria Aspan: And we talked to Mark Cuban and Max Levchin, the co-founder of PayPal, a firm who also had a bad experience with credit cards. Jen Rubio of Away. There are all these stories, especially of these entrepreneurs as young people sort of not reading the fine print and getting in over their head on debt. And I think one big takeaway from this book, whether it’s credit cards or online loans that cater to small businesses or if you’re lucky enough to get venture capital and having to be negotiating with outside investors, the overall advice is just please make sure to read the fine print. Have advisors who you trust, too and make sure that you’re not signing something you don’t understand.

Steve Pomeranz: Well, this idea of the credit card. You often hear these anecdotes about such and such business, they started at the kitchen table and they borrow all their money on the credit cards. And they and that was the beginning of their success but it’s really almost like a roulette table bet, red or black.

Maria Aspan: [LAUGH].

Steve Pomeranz: So if you hit, fine, you can pay that back but, man, if you don’t hit, it’s ruination because that stuff, those debts, that liability does not go away.

Maria Aspan: No, it doesn’t, but if you look at credit cards compared to some online loans, for example, some of the online loan products that if cropped up in the last couple of years. Those can be even higher interest rates.

Steve Pomeranz: Yeah.

Maria Aspan: [LAUGH] So there are a lot of dangers out there.

Steve Pomeranz: My guess is Maria Aspan. The book is Startup Money Made Easy. And she has interviewed at all these wonderful entrepreneurs. So what advice was there for raising your first $10,000 in capital?

Maria Aspan: So, a couple of things. First of all, you might not need to raise $10,000. One of the big pieces of good news from the book is that it’s faster and cheaper and easier than ever to start a business these days thanks to all of the different online and digital services that are out there. There’s a study that, about ten years ago, it cost about $31,000 for the average small business startup. In 2018, we surveyed the heads of the inc 5,000, the fastest growing private companies in America, and 42% of those CEOs told us that they used less than $5,000 to start their first business. So good news is you might not need as much money as you think you might need to start a business.

Steve Pomeranz: That’s great news for the general economy too because the less friction there is for people’s creative ideas to be turned into businesses, the better.

Maria Aspan: Absolutely, and the other big piece of advice we have early on is, you may not be able to support yourself by starting your business right off the bat. Of the 85,000 CEOs we surveyed, only 28% of them started paying themselves a salary immediately upon starting their business.

Steve Pomeranz: Yeah, so how do you live? I often wondered, so how do you live if you can’t pay yourself a salary?

Maria Aspan: What we hear from people is you don’t start it full time, you start it on the side. And here, again, is where technology can make it easier to do stuff at night, on weekends, on your lunch break. It certainly doesn’t mean that you get much free time, but it’s often easier to keep your day job, work on your business, and ramp it up until you get to a point where you can sustain life.

Steve Pomeranz: Right. Well, what are the best questions that an entrepreneur can ask before they actually launch their startup?

Maria Aspan: So there are several, and I’m so glad that you asked because the first chapter of the book is generally about this. How much money do I need? What sort of business do I want to start? Is it a product-based business? Is it a service-based business? And that will help determine how much office space you need, how many other employees you need to hire. A service-based business is often cheaper to get off the ground because if you’re an expert financial advisor or lawyer or consultant setting up shop for yourself, you already have the expertise and the contacts. And you might just need to set up your computer at a desk.

Steve Pomeranz: That’s true.

Maria Aspan: If you’re making cupcakes or t-shirts or a tech product, you’ll probably need to hire engineers or t-shirt makers or cupcake makers and figure out a place to actually make the product. So, and then,  of course, where you live also affects that very much.

Steve Pomeranz: What about research looking at the market and the market size and who the top players are? Is that important for very small startup?

Maria Aspan: Absolutely. And we highly recommend writing a business plan that looks at those industry conditions, and it also just projects how much you expect to make and what you expect your numbers to be right off the bat. And business plans famously don’t survive at the first contact with the enemy.

Steve Pomeranz: [LAUGH].

Maria Aspan: They often are more theoretical but-

Steve Pomeranz: Yeah, I know you’re making five-year projections you know that you’re going to grow at 15% a year, it’s like huh, really? You know?

Maria Aspan: [LAUGH] exactly.

Steve Pomeranz: I don’t know what world that actually exists in, but it’s not the real one, you know?

Maria Aspan: But it is important to spend the time to think through your numbers, however unreal they may be. And, practically, if you are going to apply for a loan or if you’re going to ask friends and family for money or ask more official investors for money, the bank, the credit investor or possibly even your family members might ask to see your business plans.

Steve Pomeranz: Yeah, oh, you need to have that, sure.

Maria Aspan: So it’s always good to have a piece of paper.

Steve Pomeranz: Yeah, I remember the old story about how Walt Disney when he was building Disneyland, he had his artist actually draw out the full map and the conception of what it would look like because he says he was flying to New York to talk to the bankers and he would say they were wholly uncreative people. And they needed to actually see [LAUGH] what the project was going to look like. I think if you’re looking at your financial plan or your business plan, you’re thinking, well, I’ve got to really paint this picture so those uncreative people that have all the bucks will kind of see my vision. I think that’s kind of what you’re saying.

Maria Aspan: Exactly. Just think of yourself as Walt Disney.

Steve Pomeranz: Okay, there you go. One thing that I want to mention about the wonderful aspect of having a successful business is the multiple that you can earn based upon the value of the business which is based upon the excess cash flow that a business is making. Let me explain that very quickly. So we’re all employees and get our paychecks and it’s a set amount, you’re making X number of dollars a year.

But when you own a good business, you have that paycheck, but in addition to that, the business is generating excess capital, let’s say just going into the bank, we’ll say. And as a return on that capital, so someone down the road can look at that excess money, say, well, I still got to pay a salary, but I had this excess money that the business is generating that’s worth something. Maybe I’ll pay 10 times the value of that excess capital. and so I can get a 10% return. And then all of a sudden, sometime in the future, there’s a big lump sum payout available to this person when they sell. This wealth creation is what I see, as an advisor, being the greatest contributor to wealth in the United States. And owning your own business is a way to kind of get out of the kind of a wage-slave mentality.

Maria Aspan: Absolutely, that’s a really good…so then I’m glad you bring that up. There were over 10,000 businesses sold last year, according to the business marketplace Biz Buy Sell, and it’s increasing every year, so we’re really seeing that wealth creation go up.

Steve Pomeranz: My guest Maria Aspan, award-winning journalist and Editor-at-Large at Inc. Magazine. Her new book is Startup Money Made Easy. Maria, thank you for taking the time and sharing it with us.

Maria Aspan: Steve, thank you so much.

Steve Pomeranz: To hear this in any interview again, or if you have question about what you’ve just discussed, please visit our website at stevepomeranz.com to join our conversation. And while you’re there, sign up for our weekly update for upcoming live events in our important topics we’ve covered this week straight into your inbox at stevepomeranz.com. So to hear this and interview, again, if you have a question about what we’ve just discussed, go to our website, stevepomeranz.com to join our conversation.