Here is a small secret: 95% of all businesses go bankrupt in the first three years. That is pretty much standard worldwide. One of the things that should clue you in on this is if they come to you and say, “I have this great idea…"
“I have a million-dollar idea." Million-dollar ideas you can get for a dime a dozen. Think about that for a while and it will put you in a trance.
The idea is not important. The implementation of it is everything. The discipline to carry it off is everything.
You want to know if they have done it before.
How many people on the management team they have put together have the experience of building a successful business and exiting, or paying back their shareholders in the way that they have described?
If they come to you and say, “We have five people on the management team and three of them have taken companies public and the other two have sold companies in trade sales," has your interest improved?
If they can’t even get one person with experience to join in their management team, does that tell you something about the true value of their idea?
I don’t know whether a business is going to be successful. The only thing I want to know is how many truly successful people are leaving their day jobs to be a part of it. If truly successful people are going into it full-time, they are the ones who will make it successful.
I want to know if you have people like that on your management team. Are there people with a track record of giving investors back their money?
I have only one thing that I am truly proud of in business: No one has ever invested in a company that I managed without becoming a millionaire. That is a fact.
Anybody who gave me a dollar of capital has become a millionaire. I have never accepted just one dollar, because it is meaningless. The first people that invested with me invested $56,000. Every one of them became a millionaire.
You want people with a track record of doing that, of giving you back your money.
In the next article we’ll discuss the next question you should ask – What are you going to use the money for?
The one thing that I am pretty much willing to bet is that you have never seen a book that tells you what to say when somebody says that to you. I have been reading books on these subjects for years and have never seen it.
Over the course of the years, I have lost a lot of money, because nobody taught me what I was supposed to say. We all need someone to mentor and coach us. None of us are so brilliant that we can figure this stuff out the first time without losing a lot of money.
You can learn from somebody else’s mistakes or you can learn from your own mistakes. Which is better? Other people’s mistakes are better than your own.
Today, I want you to learn from my mistakes. I have already paid the price for you to not have to pay it.
You are going to want to ask four questions to anybody who asks for your money.
The first question you want to ask is, “When do I get my money back?" When you ask this, 99% of the time the other person’s eyes will glaze over and they will go into a deep trance. You need to be looking at their eyes when you ask that question.
When they glaze over and go into a trance, then you need to take your wallet and put it deep down in your pocket, cover it with your hands, and run away as fast as humanly possible.
If the person has never thought about giving you back your money, they are not going to give you back your money. If they have never thought about it, it is not going to happen.
Do not invest with such a person EVER.
Even if they come up with another story later, it is too late. These are not people who are thinking about giving you your money back. Stay away from them.
I have just saved you a lot of money.
Now, if the person comes back with something like, “We are planning to grow the company for three to four years, and then we are going to sell it to one of these potential buyers. We are estimating, based on our business plan, that we should be able to create this kind of value. Based on your share in the company, this is the amount of money that you should be getting back at that time." Has your interest in this discussion just gone up or down? It is going up, because this is somebody who has thought about giving you back your money.
In the next article we’ll discuss the next question you should ask – Have you ever done it before?
James Skinner has sinced written about articles on various topics from Management, Small Business and Internet Marketing. James Skinner is a world-renowned business man and philosopher. He is recognized as one of the world’s foremost business thinkers and appears regularly on Japanese television. He has built two global financial groups that manage billions in client asset. James Skinner's top article generates over 3600 views. to your Favourites.