It is only a theory, but not without reason. Too many new business plans start with a large loan when it’s not necessary. Markets and changing times have too many factors for anyone to be right all the time. Real estate flipping is a bit more predictable and depends more or less on how many people are in your address book. But new ventures.. What actually makes a concept successful?
Does the logo need to change? Will your “need” expire in the second year of a three year plan? Does the product need excessive engineering or is it best to shoot from the hip? Can YOU shoot from the hip at this target market or do you need to hire an expert? Which expert should you hire or how should you hone your own accuracy? How do you know who to hire for this industry?
The questions for new ventures can only be answered with testing. EVERY concept must be tested before we have an answer and textbooks aren’t crystal balls with which to see the future.
So, what may be a vital element of a successful NEW business plan? I call it “sustained and out-the-door solvency”.
Raise capital through pre-orders. Sell it before you manufacture it, but know that you can deliver. Call it “pre-order”. It’s kind of what Real Estate flippers may do, asking for a small loan to do a sale they already have lined-up start-to-finish.
You could make ONE edition of ONE prototype product that is extremely expensive and auction it at a high price to fund future products. But, make sure that, while business volume may be very low in the beginning, at least it is solvent by definition of orders involving procedures, payments, and revenue. If it’s profitable out the door, then “more of the same” could more likely be a good system. Affiliate marketing and other word-of-mouth requirements could help define the rate of proper speed of business growth naturally—just don’t let books and tapes interfere with original product, they should help, and why not include them in the original product line if they are profitable?
With sustainable marketing at the get-go, each of those market variables and testing needs can continue without betting the house. Loan officers might like you to think otherwise, but do them a favor: don’t borrow unless you have your own evidence to prove you have already paid yourself back, then you can pay back others.
IMHO, loans are much better for EXPANDING an existing and solvent small business—loans and large investment balloons must never be an essential for the beginning phase. If throwing more money was actually the secret, then you don’t know what other market guesses you just got lucky with. Then, in five years, you won’t know how to re-invent.
Joseph managed a dungeon for 12 years before managing Egypt. He literally couldn’t fail because he was at rock-bottom by definition. Learn to walk on the ground, then do high-ropes later.
For me, it’s only a theory since I myself haven’t even done it, but I have to have SOME kind of theory when I’m starting out. Everyone does. If I turn out to be right, you’ll probably read about it in text books.. five years after the fact, maybe even later. Just remember, you read it here first. On practical subjects, such as business and ministry theories, school is “behind the times” by definition. But that’s okay, I’ll help the classroom catch up to the actual field of work when my time comes. Call it, “special education.”