It has become a cliché that entrepreneurs need to try to turn problems into opportunities. The question is, how? That depends, naturally, around the nature in the problem, but there's always clues. The tricky part is identifying them. We are likely to become accustomed to viewing things one of many ways that we miss the signs pointing from the opposite direction.
I'll offer you an example. A woman I know started a bakery in Brooklyn when i was younger. She had acquired the main city to build the business by selling equity with a group of private investors, who owned about 50 percent in the stock therefore controlled the board. The bakery had retail and wholesale customers and attracted a loyal following but was barely profitable. The founder, whom I'll call Judy, and her two operating partners recently located me with ideas that will significantly raise the bakery's profitability. They also felt strongly how the business required to expand. Judy was able to invest yet another $100,000 of her very own money and also to raise $150,000.
The problem was the board. Its members refused to authorize the increase and were blocking her from raising additional money. They didn't want their investments for being diluted. They wouldn't even permit her to take out a borrowing arrangement. One of them said they would escape her way if she would return their original investments--buy them out--but she felt every nickel comes into building the business. She talked about for suggestions to help her find the board to loosen its grip.
I informed her that she was studying the situation the wrong method. "When investors let you know they'll leave in case you just pay the money they invested, a variety offer that they are they've produced bad investment," I said. "This is often a vote of no confidence."
"So what should I do?" she asked. The answer was an uncomplicated one: Buy out her investors. Judy, however, was focused on growing the business how the thought had never occurred to her. "Listen, this is really a chance to escape a bad partnership," I said. "If you're having these complaints with your investors now, you will have even bigger ones inside future. These are the wrong investors in your case. Go ahead and raise the cash, such as the spend it on expanding. Use it to obtain them out."
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Judy was taken aback. She asked what I contemplated her want to outsource the wholesale baking, which might drive up profits. "Don't undertake it," I said. "It's a good option, so you probably should did it several years ago, these days is not the time for you to increase your profits. If you do, your investors might change their brains about cashing out. Then you'll be stayed with them."
Judy viewed thinking about paying investors to go out of as a step backward. "No, no," I said. "Don't look at this as being a negative. Look at it being a great opportunity. You've got to taking action immediately. The sooner you regain power over your company, the higher off you will end up. Then you can breathe deeply and tighten your operations, plus in a couple of years you'll be able to raise the cash to expand." Next time, I shared with her, she needs to ensure it's that loan. When entrepreneurs are beginning out, believe that equity is reasonable because it doesn't yet have value, but it really will become valuable when your business succeeds. In fact, it does not take most expensive thing it is possible to give away. So borrow the money when you can and pay interest.
Whatever Judy ultimately decides to perform, I offer her full credit to get an outside perspective. Often the main obstacle to seeing an opportunity in a problematic situation is that individuals're too close it.
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