<p><strong>Scenario: </strong><em>"Dude, we gotta invest in this money now. Now. Now. Now! Every minute we're not investing the money we have, we're losing increased sales, market share, fat profits, and our future Bentleys. I don't care what you do today; just invest our excess cash! Now!"</em> "Wait, sucker!" -- you'd say. <span class="highlight"><strong>"If we can't find concrete, solid, hard information on an investment's benefits -- we won't invest. Pass!"</strong></span> And, you'd be a smart, rockin', ridiculously-good-lookin' businessperson.</p> <h2>You = Better than 9 out of 10 entrepreneurs who close shop within 2 years.</h2> <p><span class="highlight">Ever made a ridiculously bad investment, then learned why it sucked so badly? If you're like most of us, you probably knew diddly about the investment. </span> Your friend Bucky told you he had hot stock picks, a restaurant business, and four condos for you to get rich. Just contribute whatever you can, and you'll be rich -- he said. So you gathered your entire life savings, and invested that chunk. What happened next? Kabooooooom! <span class="highlight"><strong>Investing clumsily = The primary reason why most entrepreneurs fail.</strong></span> Here's how it usually plays out:</p> <h2>Scenario B: Microcosm of how entrepreneurs fail.</h2> <p><strong>10:00 a.m: </strong>Danny thinks using a Google AdWords campaign will bring him hundreds of clients. <strong>10:30 a.m: </strong>A "fabulous marketing expert" -- who coincidentally made all his money selling his 15 "fabulous marketing books" -- advises Danny to invest 50% of his money in marketing because it's oh-so important. <strong> 1:00 p.m: </strong>So he puts 50% of his money in AdWords on advice from an additional e-book author (who, also coincidentally, makes his money selling only "How I made $205,889.32 using AdWords" - blah!). <strong>3:00 p.m:</strong> He creates his ads, submits them, and hopes for those "hundreds of clients." <strong>5 days later: </strong>He gets a notice from Google: "You owe us several thousand dollars. Pay up, buddy boy." <strong>6 days later: </strong>Danny closes shop. Files for bankruptcy. (Sidenote: Then finally figures most self-described "experts" are bad, bad, bad people.)</p> <h2>"What do I do? What do I do?"</h2> <p>Be smart. Of course that's easier said that done. Three sweet tips for ya:</p> <ol> <li> <h3>Don't put all your eggs in one basket.</h3> <span class="highlight">Ask yourself: "If this investment fails, I you have money remaining to survive another day? How big of an impact would it be if that investment fails? Is it minimal?" </span> Google, Walmart, HP, Apple, Dell, Yahoo, and MySpace had significant cash left over after their initial failures. The ones that failed that you don't hear about? Zero.</li> <li> <h3>Invest minimally at first.</h3> <span class="highlight">If one small investment falters, you'll be okay. But, if that small investment works out, things are looking good for you to invest some more. </span> Google Labs has a number of different ongoing projects; if one shows signs of hope, the company starts pumping more resources into it. Remember:</li> <li> <h3>It takes patience.</h3> Yeah, we're sure you're tempted to just throw it all on the table, and see what you get. That's why some bad people exploit those get-rich-quick schemes. As with anything though, throwing all your eggs out there is a signal for eventual disaster. Your business crumbles if you falter just once.</li> </ol> <h2>Take it from our main man, Warren Buffet.</h2> <p>He's the best investor in the history of the universe and its mama -- who <a rel="nofollow" href="http://www.statesman.com/money/content/shared/money/stories/hank/hank0714.html">urges</a> patient investing:</p> <blockquote>We have $16 billion in cash not because of any predictions [about a market decline], but because we can't find anything that makes us want to part with that cash. We're not positioning ourselves. <span class="highlight"><span class="highlight">We just try to do smart things every day, and if there's nothing smart, then we sit on cash.</span></span></blockquote> <p>The moral:</p> <h2>When in doubt, don't invest.</h2> 2006-08-17T20:02:16-07:00 true 308 why-90-of-entrepreneurs-fail-why-you-wont 0 2009-11-03T18:00:51-08:00