One of the biggest hurdles among entrepreneurs in starting a business is finding the financial startup capital. In this episode, host, Anthony Frischknecht, talks about this hurdle and gives understanding about the finances needed to build your business. While sharing his own experience, he taps into the overhead expenses entrepreneurs also need to consider along with their own personal finances that might be affected in the process. What is more, Anthony then gives some tips on how to look for the startup capital you need.
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Starting A Business: Financial Startup Capital
I want to discuss financial startup capital. If you’re starting your business, usually this is one of the biggest hurdles you have to get over. The simple fact of the matter is you’re excited and got a new business you’re starting. This is probably one of the biggest areas where people get hung up. The fun part is figuring out “How am I going to build this? What am I going to do?” You start breaking down the numbers and you look at the fact that you either have a little bit of money or you have no money. I would say there’s a significant amount of the population that ignores it all together until it comes to putting something together. It took me a long time to figure my finances out. I grew up poor. As much as I can say that people that were around me, we had the least amount of expendable income or extra income at all. My father was a carpenter. He spent the majority of his time working in his business and not on his business. It took me several tries to understand what that meant.
Up until around 2010, I started to understand finances. When I started my grow, I had income coming in from the work itself, but I had no idea what I was truly spending on my personal stuff and to live day-to-day, eat, keeping a house over my head and stuff like that. I had a CPA of mine, a good friend started talking to me about how I needed to have budgets and stuff. Most people hate to hear that word budget. It’s not fun. It’s like going on a diet. If you’re going on a diet, who wants to do that? Nobody does. When he was pushing that on me, it forced me to think about everything in my life and how I was going to achieve it. I appreciate it because it might be simple to a lot of people out there, but it was not to me. I pretty much had been living paycheck to paycheck my entire life because I didn’t know any difference. He didn’t show me directly, he explained it to me and I’d took it from there. As I was building up my business, I wasn’t receiving all a bunch of income. I at least knew what my overhead expenses to pay for my lifestyle and anything extra was going towards the business.
It’s still this way now until either the SAFE Banking Act or federal legalization happens. It’s still to this day that there are no loans for people in the cannabis industry. It’s all private money. We’re starting to see money come out from a little bit of stock market. There is some IPO stuff happening. There was nothing back then. We had to be careful with our money. The flip side of that was we couldn’t go into debt because we could only spend what we had. We’re starting to see some of those examples. It’s starting to happen, especially up in Canada, I read an article. The company was Essence. They were struggling financially and it’s only been legal in Canada for a year.When building a business, you've got to change your mindset and understand that problems are going to happen. Click To Tweet
From what I’ve been hearing is they’re under the gun when it comes to keeping up with compliance. I don’t want to go too far. I’ll go back to the finance side. With compliance, you don’t realize how much it takes to keep up with that. Depending on what state and what country you’re in, everybody’s rules are different. We averaged about 20% of what we brought in was going towards compliance. That’s almost like another tax. It was ridiculous but you had to do it. Before it was regulated, you didn’t have that text. You had some income. There’s a tax piece. You also had to pay your employees, your overhead and everything else, so it left nothing. What we’re starting to see financially is these guys didn’t realize the burden of the compliance and what it’s going to put on their business. It’s all great out there. I understand. Everybody’s like, “I’ve got projections.” Projections are great as a guide, but when it comes down to it, it’s performance and how you perform in your company. What happens at the end of the month when you have to pay everybody? You find out quick that CannTrust had destroyed $77 million worth of flower.
I’ve had to destroy $250,000 and that was killing me because we needed the flower to sell it. I believe CannTrust, that’s what got them in the situation. From what I’ve been hearing up in Canada is that their legalized system is suffering. We’re not hearing much about it down here in the United States. I can see that’s going to be spreading down to the United States. Once we go legal, you’re going to start seeing companies that have all this promise. They’re going to be going under, which is unfortunate, but it’s also part of capitalism. One of the great things that makes the US awesome for opportunities for you out there that are looking for investment opportunities. That time is going to come very soon.
Finances, if you don’t know what’s your living expenses are, I would get on that right away and make sure that you understand how you’re going to feed yourself while you’re building your business or at least have a side job. I had several side jobs while I was doing this too. Some people say, “I got to focus on all my efforts on my business.” Yes, but you also have to eat. You have to work your second job as much as possible to feed yourself and all of your extra time goes to your real business. There is a Facebook group that I joined called Side Hustle. It’s interesting because there’s a ton of people on there that I believe are looking for something side of the work on like Uber or Amazon sales to be able to afford a little bit of extra. I’m sure some of these people are going to be able to take their side hustle and turn it into something bigger. For now, it helps them with their gas money. Even if they’re saving up for something, I know so many people that are afraid to work a couple of jobs. They have the time for it. If you have an extra few hours a week, there is so much opportunity for what I call the side hustle. These opportunities are out there.
Figure out how you’re going to feed yourself while you’re building your business because the stress of that can easily kill your dream. It’ll also give you excuses not to build your business, “I got to do this.” You’ve got to change your mindset and understand that these problems are going to happen. Have a plan in place to decide how am I going to overcome these issues as they come along. Most people like to call it the trenches. When you’re in the thick of it, you’re building your business. You’re not concerned about what am I going to eat for dinner that night. It’s going to come about.
You’re going to have the money for your budget. You’re going to use that and it’s not going to be a problem. It’s a great stealer of success is not having those little plans in place. I’m talking from my experience. I had to learn all this stuff on my own, especially if you are out there starting your first business ever and you happen to be starting cannabis, power to you. That’s a lot to take on. I applaud you for taking those steps. You got your finances in place, now you got your business. You’re going to start doing some research and seeing what kind of money you’re going to need. You either grow your extraction or your product manufacturing. All these things are expensive.
I spoke about what business you’re going to be in one of my other episodes. Understanding the numbers is researching these. There wasn’t a lot of information out there a couple of years ago, but now we’re starting to see statistics. There’s a company out of Boulder, Colorado called BDS Analytics. They have some solid information. They have some paid information, free information. From what I’m seeing, the quality of their information is good. There are several others. I would go in, look online and see what else is out there. There are also these production companies and these event companies, they also are gathering information from a lot of the people that are subscribing to their newsletters.Spend more time trying to figure out what is going to work best for you and your life. Click To Tweet
There are plenty of things out there that you can take advantage of to understand the numbers. Being able to truly break this down to what makes sense. I don’t care if you have a spreadsheet, Google doc, pen and paper, whatever you have. Put those numbers down so you can look at them. Always give yourself a cushion because there’s going to be unknowns throughout this. If you don’t have a lot of money, which most of us don’t, look for opportunities in underdeveloped markets. Colorado is a developed market. If you gave me several million dollars, I wouldn’t go into business in Colorado. It’s saturated. Opportunity is not there. I would take that several million dollars and go somewhere where the opportunities are, where people aren’t looking.
That’s where you’re going to be able to stretch your dollar the most. You’re also going to put yourself in a better position when it comes to selling or partnering up with another company. Whatever you decide at that time, it’s going to be different for everyone. The finances are going to help you be successful. Nobody goes into the business saying, “I don’t want to be successful.” They go into business, “I’m going to be successful.” There are a lot of tools that everybody uses for so many other parts of their life, finances for every part of your life.
I would suggest if you don’t have anybody to talk to, reach out to some guys that are either CPAs. Spend a few hundred dollars talking to these guys. Spend some time trying to figure out what is going to work best for you because it’s silly. If you’re going to be cheap about spending $300, $400, $500 to $600 exploring what finances you’re going to need, you’re not willing to invest in your company or yourself. That’s a huge waste of time and it’s a big loss. You’ve got to get out of that mindset since you’re investing in your business. When you think about how much it costs for this advice, that’s crucial advice for your success. You want to be 61 and the business to be successful. Being able to have your plan in front of you and your financial plan is what’s going to help you sleep at night.Make sure that you understand how you're going to feed yourself while you're building your business. Click To Tweet
As an entrepreneur, you’re going to be woken up all the time and I want you to be able to sleep at night. Your family, especially your wife or whoever you’re a partner in your life, whoever it may be, your significant other. If you have that plan in place, you were able to show them and that’s going to take the stress off of you. That stress is going to help you to be able to think clearer and make better decisions. I do talk about this in my book, From Black Market to The Man. You can go ahead and visit my website or you can go on Amazon and find it there. This should be some very helpful information for you. I appreciate you reading. I look forward to talking to you soon. Thanks a lot.