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Writing a Business Plan and Raising Capital in a Recession

The following is a transcript of an audio podcast interview with Bill Bartman on starting a business

Writing a business plan for your startup is one critical piece that most small business owners fail to take. In this interview, we talk with Bill Bartmann about his thoughts on how to raise startup funds for a new business in a recession, why he doesn't ever recommend friends and family for startup up capital, and some of the things he feels helped him start several profitable companies. Hello everybody. Welcome back to Thanks again for joining us for an interview this week. As usual the idea of all these interviews is to give small business owners and entrepreneurs ways of looking at your business and maybe thinking of new opportunities by hearing other people and other experts in the industry. So we're going to do that this week hopefully as well. Our guest today is Bill Bartmann and he's got a website called and it's a great resource for some motivational ideas and just some ideas about achieving better success in business. He's got a lot of success in business himself has started several companies in a bunch of different industries as well. So he's got some good experience on the ground level of how to have success in entrepreneurship and small business in general. So Bill thanks very much for joining us in the show today.

Bill Bartmann: Well Tim it is my pleasure. Thank you for inviting me. Well, so you've obviously got experience in building businesses yourself and one of the things that I wanted to focus on today is on the minds of a lot of business owners and that's how to get credit and funding for ideas and maybe existing businesses when it's so tough to do right now. How did you start your businesses? I know from the bio we talked about you started with basically 13 grand at a kitchen table. Did you build all your businesses from scratch that way?

Bill Bartmann: In fact I have and one of the things that I teach people is even in tough times money is available if your idea is presented in a good fashion which means we you've got to do more preparation, a little more work in the hard times, but we still can borrow money from a multitude of sources and I encourage my students not to use their own money. It doesn't matter who your daddy is and it doesn't matter how rich he might be. What you shouldn't do is take money out of the mattress or out of tin can or wherever it is you happen to be saving it. You know keep that money for the rainy days. There are people who will lend you money to start a business. So in every instance I have used, as they call it other people's money, to start businesses and some of my businesses as you know have grown to billion dollar a year revenue companies that one in particular I started with a $13,000 loan. So it is doable not just because I did it but because many, many people are doing it. Now one of the things that comes to mind first is credit cards. A lot of people maxed out credit cards and apply for a bunch to get that money. There's always that concern though that if your business fails for some reason you've got this huge load of debt. How do we kind of balance the two?

Bill Bartmann: There is always an balancing act where it's going to be risk reward on opposite sides of the teeter totter. However one thinks about it and it is you know against all odds of nature to think that you could be entitled to some wonderful reward without taking an equally large size risk. That just doesn't happen. Oh, sure, occasionally you may find someone who buys $2 ticket to a lottery and wins. You can't count all of them in one hand and a 6.6 billion people on the face of the earth. So that's not a real predictable proposition. So yes, getting in business is a risk and it's a risk that you know one should very, very carefully consider before you do it. And for some people it's like getting drunk and getting the tattoo. They wake up the next morning and saying, "what was I thinking?" Well, if you are prudent in your thought process and really look out and say okay what business can I do and are there customers for it and is there a market for my goods and my service even in the middle of recession. If you can answer that affirmatively and then sit down and write out and draw up a business plan. It doesn't have to be a beauty contest business plan that's going to win some Harvard accolade. All you're doing at a typical business plan is presenting your ideas on paper, establishing that the person at the other end of the transaction (in this case the person who likely loaned you money) that your idea has been thought through and thought out and that it has a reasonable likelihood of success. So once you've done that, now the "rubber needs to meet the road," Tim. And you say, okay, how would I go about finding the money. What could I do to raise the money? Well, there are a number of sources and let me share just a few of them with you and I'm not sure which one would be the most applicable for the people listening to this Podcast. Let me ask you this. Is there kind an order? I mean should I start with friends and family and then if that doesn't earn enough I go to credit cards like an order of safeness if there is that I should go through.

Bill Bartmann: There is in fact and you know family and friends is not the one I would start with. Family and friends are those things you're going to need on a rainy day. That's kind like that money in the mattress. If you borrow money from your friends and relatives of course that's easy we're not trying to do "easy" we're trying to do "smart." If you go borrow from your friends or your relatives and then if the business does not work and fails, coming to somebody's house for thanksgiving dinner is going to be awkward. So I don't encourage people to go to their friends and their family. Depending on the sophistication, there is a path that I'm going to take. If they've never done business before and if they're new to this concept of being in business, then quite frankly some options are not available. But let me start with the segment of society that perhaps are starting their own business and as you mentioned credit cards is clearly an alternative. It is an opportunity or a place where if you have a credit card you probably have some kind of line of credit essentially on your credit card and you can borrow against that. Now, does it have a significant interest rate, yeah and you need to be careful and mindful of how are you doing to do. So that would be one source. Another one would be your life insurance policies. Not everybody has life insurance [with cash value] but if indeed they did that would be a place to go. Then third, and this is the one that's almost unheralded right now because we hear about how banks are just not lending, is a bit like the Mark Twain quote where he said, "the rumors of my death are greatly exaggerated." The rumors of the credit freeze are greatly exaggerated. Now they are absolutely real if you're a Wall Street type company or fortune 500 companies trying to do a credit swap or you want to do a derivative trade or you're trying to secure ties alone. But 99.9% of the people in business in America don't even know what I just said. Right.

Bill Bartmann: They aren't in that category. They are mom and pops. They are people on Main Street America not Wall Street America. Well Main Street banks are still lending. Now yes, their credit standards have taken up some but they're still lending. Well, that just means we have to work a little harder to get it. Well banks, small banks, local banks, mid-size banks are absolutely right now looking for people to lend to. They're looking for business people who can demonstrate that they have a good idea and the capacity to repay their loan. So those three choices are clearly available for people who aren't yet in business. Now if you're already in business then you get a couple of other alternatives that aren't applicable to the people who are not yet in business and I don't know if these are in any particular order but think about them this way. If you are a company that has ever done any business on credit you have receivables - people who owe you money. In a recession people will be slower by paying more slowly than they used to be during the good times and as the business owner you're kind of hoping that people will speed it up. Well you can actually sell those notes receivable to other people who owe you and you sell them to a factoring company. Now will you be required to take a discount on those notes? Yes. As an example: a hundred dollars worth of notes, the factoring company might only pay you $90 or $95. And you might say, "Gee I'm going to lose dollars $5 or $10 on every transaction. That's not a good business." Well getting $90-95 today with a time value of money might make out a very attractive proposition for you and if it is then that's certainly something I would think about. The other thing you can do and this is for companies who are in business and if they do credit card transaction people don't lend money and then don't take credit but if they you know turn out credit cards in the form of their business then you can get a cash advance from your merchant processor. So people who have been processing your credit card payments will in fact entertain (not always will they approve it) but they will entertain you come to them and saying, hey look for the last six months I've done $50,000 for the business amount to credit cards therefore it is likely to believe that I will probably do something close to $50,000 a month into the future. I'd like to borrow $30,000 now and when the $50,000 does come in you can have first "dibs" at it. Well, that becomes pretty attractive to the merchant process that has some history with you and quite frankly getting prepaid for sales you haven't yet accomplished. That's pretty attractive too. And then next, and I think it's pretty much reserved for people who have a track record or some history, and that's private equity and this isn't a family and friends kind of private equity. This is venture capital / angel fund kind of equity where business people and savvy investors who have done what it is you're doing, they've been in business for themselves and I know how tough it is to start and they also know that some businesses are going to be very successful and this is an opportunity for them to loan money to those businesses they think are going to be successful and quite frankly get a nice return/reward. Now there are over 5,000 angel groups in the United States. Five thousand different collections of people who are looking for companies that are in certain industries to lend money to people with enough business acumen to demonstrate that they in fact have a business that likely will make some good profits. Then there's another item that for people who are already in business and if you are in business you have what they call FF&E - fixtures, furniture and equipment. Many times that stuff has been purchased either for cash or paid off you know over the course of your business already and whether it be the dust you're looking at or the computer you're looking at or the equipment out in the shop or in your warehouse or whatever your business happens to be and whether you're on retail or wholesale or warehousing we almost all have furniture, fixtures and equipment. If that has any equity, if it has any value above and beyond what might still be owed on it, banks are very eager to lend on equipment loans because for them it's a hard asset. If you don't pay them back they can come and get it and they would only lend you enough to - in this case make sure that loan equal the collateral value. Those are four or five different ways that even in a tough economy right now today as we're sitting here in January 2009 in the middle of a full blown recession, that whether you're brand new to business or been in business for a while, there are opportunities for financing. There are a lot of choices out there. A couple of those I had not even considered so I'm sure there's some listeners out there who've gotten some new ideas from that which is great. Some of this speaks to the larger issue it seems about trying to start a business in a recession. You watch the news every night and there's nothing but layoffs. So there's a lot of fear that goes on and some people I guess a small voice will say, "hey this is the best time to start your own business." I mean how do you keep that positive attitude when everything around you says, "you know you're doomed to fail if you try this."

Bill Bartmann: And I agree with that small voice that says this is the best time in the whole world to start a business and you know it still means you have to be prudent and think your way through. In a recession everything becomes cheaper, the cost of doing business is reduced, the cost of advertising, the cost of rent, the cost of employees, the cost of insurance, the cost of all the marketing things we would normally do in a business all become reduced because of the law of supply and demand. Which means that a number of people used to be on the business decided to get out of the business. And its an old axiom when a crowd is running in one direction the guy who runs the opposite direction most likely will make all the money and that's just the way it always works. So it is in a recession when some great companies like Microsoft or Sun Microsystems get started - in the middle of what most people think were the worse of times and both two examples have done pretty well and my business the one we spoke of a bitter go or I start with $13,000 and grow into a billion dollar company that was during a great recession. So I love it when times are bad and here's an example that everybody can relate to. If we went back in time say three yeas ago and said if you wanted to be a realtor the competition for selling your services was really tough because it seems like about every third person you met was a realtor. Back in that day you didn't need to have a lot of business acumen to sell real estate because prices were escalating so rapidly that you know it seemed like everybody was a real estate buyer and all these realtors wanted to help people buy or sell property. So when you went to a soccer game or a hockey game or your church or the bowling alley you know somebody in that group was probably a realtor. Well now the times have gotten a little tougher, the economy is coming down and real estate certainly has fallen off. A large number of people who used to claim to be realtors, quit being realtors. Though the market is down and they are few real estate transactions and there were a bit ago, there is a lot less competition than there was a bit ago and on a relative scale there are still more opportunities and there are no competitors. So in this environment it's the best time for people to start a business. If you had talked to somebody, which you do already through your site obviously, who is starting a business now, do you have a couple of tips or advice for them that says, "here's some of the things, that I think after looking back on my success, has really opened doors for me and worked well for me."

Bill Bartmann: Oh, I do and the first and most important thing now you know again I've got some business credentials behind my name but this isn't even a business premise - it's a personal premise - but if it is not in place the likelihood of your business succeeding is greatly reduced. That's having the self-esteem or self-confidence or self-assuredness and if you don't have that challenge, you are insecure, you are uncertain, if you're just not sure this is a good idea for you then getting in business in good times or bad times is probably a bad idea. You need to get the ground floor built first and that means that we need to get to a place where we feel pretty good about being us. And I don't mean that in an egotistical way or thinking we're better than somebody else that's not what I'm saying. I mean accepting ourselves, flaws and all, when we get to a point where say okay this is who I am and this is what I am and yeah, I've got some strengths. I've got some skills. I've got some experience. Oh, yeah, I've got some defects and I've got some deficiencies and I've got some mistakes behind me and I wished I hadn't made and I accept them too. But just because I screwed up once or twice or just because I got it wrong on occasion that doesn't mean I don't honor the things that I have done well and right. Well, if you can get to that kind of mental attitude where you feel okay being you then you're ready to really make the first step in the business and you know because you've been to my site. It is really about being prepared and that means as much as people hate to hear these words. They have to be able to create a business plan and again I'm trying to write the great American novel or to impress somebody with how big it is. What they're really trying to do if they do it well and right is just communicate what their business idea is and what the issues are and what the concerns are to be and how they plan on dealing with those concerns. It's kind of like back in school when we learn English that all people really want to know is who, what, where, why and how. That's all everybody ever really wants to know. So it's going to answer the who, what, why, when and how about the business idea you've done or about to start. You've written a business plan and I don't care if that's on one sheet of paper. I don't care if it's on the back of a bar napkin. Okay, I would like to think it you wouldn't want to put on a bar napkin but it doesn't need to be some impressive tome. It just needs to be you communicating clear thought and if you can do that and quite frankly you're already on your way to being successful in business. That's the one thing Tim that most business people don't do and we know statistically that 90% of all businesses will fail in the first five years of their existence. I hear it a lot but the reciprocal percentile that I've heard most recently is 93% of the business that fail don't have a business plan. Now again I don't know if that's statistically accurate but I'll accept it for the sake of argument and saying that sounds right, that sounds logical, that sounds historical. And then you say "is that a coincidence or is that a consequence?" and it's pretty easy for me to answer if the number is correct. It would be a consequence that if you don't have a business plan then you're really not prepared to get in the business and you're not prepared to start your business and the likelihood of you being one of those 90% that failed was really, really high and all you and all you had to do to move over into that other percentile was to do a little bit work before you start. Did you kind of grow up with that entrepreneurial bug? Did you have parents that maybe did that? How did you get into that in the first place?

Bill Bartmann: Well, my dad is a janitor and my mother cleaned other people's house for a living. I'm one of eight kids. We grew up in our own side of the river tracks and I literally grew up on welfare and however you would describe poverty that would be us. Now we thought it was you know kind of a great day when Salvation Army dropped a food basket. I'm not crying poor or complaining but I'm kind of putting in contact that I was on the other end of the Donald Trump Syndrome. There is nothing disrespectful to Donald or anybody whose father happens to be wealthy. I kind of wish I could have been adopted. I didn't get adopted that was the bad part and I think I became an entrepreneur out of necessity. I think I took on this willingness to take some risk maybe because I already knew what the alternative was that if I didn't want to take some risk my life was ordained. I was going to stay exactly where I was born. I was going to stay exactly where my early life was and I didn't know what was out there in front of me but I knew what was behind me and I didn't want more of that. Maybe it isn't relatable to many people on this call and again maybe it is. Now if we don't like where it is we are in life we have to change that. You know there isn't a tooth fairy. There isn't a Santa Claus and wrestling isn't real. You know we have to go do this by ourselves and for ourselves. That means we have to put some skin in the game and do go it. Well, I learned that at a very early age and fortunately, you know it's worked very well for me. Now that doesn't mean I haven't failed. I have failed. I have a business that were cataclysmic failures and I've had some that were phenomenal successes but that's part of being an entrepreneur is knowing that both can happen rather than just having one that's ordained to happen and that's just exactly where you started. What do you think made the difference between those ones that were failures and the ones that were huge and successful? Any connections there?

Bill Bartmann: There were. Failures happened, except for one stray example, in my early life. Not my youth but certainly you know as a young businessman. I thought I was pretty smart and I thought I knew what I was doing and I thought I didn't have to the follow rules. I don't mean like I'm unethical or illegal, but I didn't write a business plan. I'd just say, hey I know a lot about this topic so I'll just go start and do. In America and this is a great, great country we have this belief system that if you wanna be a doctor you have to go to medical school and if you want to be a lawyer you have to go to a law school. If you want to be a businessman you don't have to do anything you just start. Well, isn't that silly? That's kind of illogical. Just because I can start a business it doesn't mean I'm capable of starting a business. You know maybe I should do something. When I started businesses before I was even capable of you know growing them or running them or managing them I didn't bother looking out to see what the problems might be that could come and sure enough they came and I wasn't ready. Maybe I have to spend some time before I start - and not forever. You don't go to analysis paralysis where you have to figure out every single thing and every single eventually because none of us was smart enough to do that. But at least I had to sit down and think my way through what are the issues. Who are my customers? What will make them wanna buy from me instead of somebody else? What do my customers really want? What should I charge for this? What are my competitors charging for it? What's going on out there in the industry that I need to be sensitive to and aware of and make sure I deal with. Just sitting down and asking and answering those few questions. It's amazing. And sometimes Tim they'll tell you not to start. Sometimes they'll tell you your good idea is a bad idea. Sometimes using business plan software to help you write it down will talk you out of starting the business you otherwise might have done. Maybe that should happen more often. Maybe that might be one of the most valuable reasons to do the business plan. Surely you might use it for investors but just being able to talk through the idea and maybe passing it off to people you trust so you save time and money.

Bill Bartmann: Oh, indeed. And wouldn't it be better to learn that before you're fully invested, before you're fully committed I mean we do it in our relationships. We don't meet somebody in the bar and get married that evening. We instead have our first date and a second date and a subsequent date and then we finally start going steady and then later we get engaged and then eventually we get married. And that's the way we deal in life. Why should we just come up with a really good idea tonight and start a business tomorrow? We're really not that ready. Maybe we have to think about it a little bit. Maybe we had to experiment a little bit. Maybe we ought to bounce it off a few people. Maybe we should have to explain it to somebody once in a while not because it's any of their business but because it make us better if we can explain it. Well, Bill we've just kind of scratch the surface here and covered a lot of topics. If somebody wants to know more about you and what you're doing now where should they go?

Bill Bartmann: Thank you Tim. is one of my websites and is the other website and both of them I hope are very, very informative not only where I've been, my failures and my successes but where I'm going now. Where I'm going now is why you and I are talking. I'm on this mission to turn the business failure rate in America around. And I know that sounds stupid and naive and you're listeners may be thinking, "who do you think you are?" It isn't about me. It's about teaching people the basic truth that I just shared with you. We already got enough. We're already smart enough. We already know enough. Now let's apply that in a process that will give us a much higher likelihood of success rather than just starting with a bunch of macho bravo baloney that could end up messing up our business and then messing up our marriages and messing our life. And all it requires is just to think about a little bit. Alright. Well, listeners of course we'll link to both of those websites and you can find out more about Bill. Bill thanks very much for your time today. I appreciate it.

Bill Bartmann: Tim you're very welcome. I enjoyed it. Have a great day.