Another Friday, another bonus episode! As promised, we’re giving you free copies of all the chapters in How to Turn Your Idea into a Multi-Million Dollar Business. This week, it’s Chapter 2.

You can buy a copy in hard copy or kindle version. But before it gets released to iTunes and to Audible, we’d like to give it to you as a free trial. We hope you look forward to some of the other things that we’ve got that you’re going to get absolutely free here and at


  • Step 3: Securing Financing
    • Assessing Your Financing Requirements
    • Sources for Financing
    • Other Funding Sources
      • Grants and Assistance
      • Assessing Your Financing Options
      • Applying for a Loan


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Until next time!




Title: How to Turn Your Idea Into a Multi-Million Dollar Business (Chapter 2, Part 1)

Date Published: September 3, 2015

Running Time: 19:13 minutes

Hi, this is John Millar. I’m the Naked Business Coach, stripping business back to its bare basics. As a special bonus, we’re giving you a free copy of all the chapters in How to Turn Your Idea into a Multi-Million Dollar Business.

Now this is available in Amazon and you can buy a copy in hard copy or kindle version. But before it gets released to iTunes and to Audible, I thought I’d give it to you as a free trial. I hope you enjoy it, took me some years to write. And I hope you look forward to some of the other things that we’ve got that you’re going to get absolutely free.

Thanks so much and welcome to The Naked Business Coach Podcasting Channel.

The Entrepreneur’s Guide Series

How to Turn Your Idea into a Multi-Million Dollar Business (And Avoid the Mistakes that Send Most Business Owners into Bankruptcy)

By John Millar

Chapter 2: Cash Flow is King

You have probably heard the saying:

“Knowledge is power”

In business, this is very true, and this power often comes in unexpected ways. I have to admit that I really didn’t like math when I was in school, and I used to rag on all the kids who did. I couldn’t see the sense in it until I started my first business and realized that the better I knew my numbers, the more money I could make. Although I am still not a big fan of math per se, at least now I can see why knowledge—in this case, the ability to do math—can be so powerful.

In this chapter, you will learn about various financial topics, including cash flow (the most important), securing finance, key accounting information, budgeting, and taxation.

Step 3: Securing Financing

To secure financing for your business, you need to assess your financial requirements and identify available funding sources, including any potential government grants and assistance programs. You also need to understand the typical requirements and the information you need to prepare when applying for financing.

The famous rock band, The Beatles, once said: “Money can’t buy you love,” but baby let me tell you, if you don’t have enough startup money to buy the assets you need and to fund your cash flow (at least in the beginning phases of your startup), you just might be finished before you really get started. This is a common rookie mistake I see new business owners making. They lose sight of financial considerations, ending up with lots of profitable sales they are unable to fund—ironically, leading to a failure.

Assessing Your Financing Requirements

When starting a business, one of the first and most critical points to address is to identify all the potential costs you will face. These costs generally fall into two categories:

1) Start-up costs – the initial outlays when setting up your business, such as shop upgrades, equipment purchases, licensing outlays.

2) Ongoing costs – the recurring costs necessary to run and maintain the business, such as wages and rent.

It is also very important to consider including an allowance of cash, or “float,” as working capital for the early stages when you may not necessarily be generating enough revenue to cover all your costs. Maintaining some spare funds will help you cover any unexpected expense fluctuations until you can build up a sufficient cash reserve.

Sources for Financing

Various financing sources exist, each with their own benefits and costs. Carefully evaluate your specific require­ments and determine which financial options are best suited to your needs. I will present you with some financial funding alternatives in this section. Get your finances in order early on and you can really fly.

There are two critical factors related to financing: first, debt isn’t a bad thing if it is serviceable debt (meaning you can afford the periodic payments), and second it’s better to have financing available and not need it than need it and not have it! Make sure you are in a position of strength so you don’t have to go, cap in hand, begging for pennies when things get tight. As with insurance, it’s better to have it in place and never need it than need it and not have it.

Some of the typical financing options for business ventures include:

Personal Savings – Many people choose to use their retirement funds to help with the costs of launching a new business. This is risky, but if your idea is solid, you may want to do it. I am sure you have heard the countless stories about those individuals who used all their savings, opened a business, and ultimately became very successful. It sounds good when someone else is doing it, but when you put your retirement on the line, make sure you do all your research first. If possibly, you can borrow from your retirement account rather than taking a loan at the bank or withdrawing the money outright. Some account managers will manage this “self-loan” by issuing the loan and managing the payment you make back into the retirement account. This can get you a good interest rate and all the proceeds ultimately go back to you.

Credit Cards – Credit cards do provide a quick, easy source of funds to run the business. The problem with using credit cards to fund a business is that credit card debt can easily—and very quickly—become unserviceable debt, or an out of control obligation you are unable to repay. The interest rates are steep and various triggers exist such that if you miss a single payment by even a day, the rates can skyrocket, not just for the card you missed the payment on, but on all your credit cards. You might as well be resting your head in a “financing guillotine.” Unlike not being able to repay a loan from your retirement account, missing payments on a credit card will also adversely affect your credit rating—and thus your ability to obtain credit in the future.

»»Friends and Relatives – This is another common source for new business funding. The problem with tapping into friends and family is that you may strain the relations with loved ones if you are unable to repay the debt. In a sense, you are borrowing against those relationships and they are part of the collateral for the loan. Those family outings might get even more stressful than they are now and the relations a bit more strained if unpaid loan money comes into play.

»»Angel Investors – The issue here is that you will add a sort of “glass house” atmosphere to your company such that others will become involved in your operations. What I mean by glass house is that you will need to operate more transparently so the investors can see everything as it unfolds. This can increase the stress because those outside forces can make demands or try to impose changes in your operations. Maybe you do not want that added stress during the initial phases of your startup. This can also be a good thing because the increased visibility keeps you more accountable. Those outsiders looking in may see some of the problems before you do and they may be able to give you advice to help correct the situation. You do, however, lose a certain amount of freedom since you need to appease these investors, who in many cases don’t know hardly as much as you do about the particular type of business you are starting.

»»Leases – The tradeoff with leasing is that you will be putting a lot of cash into the expense side of the business rather than the asset side. Think of it this way: would you rather (1) rent an apartment to live in or (2) buy a house using credit? If you buy it, your house will (in all likelihood) gain in value and someday you will not need to make any house payments and you can use the rent money for something else. The subtlety here is that even when you take out a loan to buy a property, the bank in essence still owns it until you make the last payment. This option does give you more control than a lease however, because your name is also on the title, and unlike a rental or lease property, there is no manager breathing down your neck or threatening to exercise the exit clause in the lease. With option 2, if property valuations trends continue up as they have historically, your net worth will rise with the value of the property, and so your business will have increased in value. This is something you can monetize when/if you sell. You will be more attached to the property with option 2; on the other hand, if you rent, you can move easily and you are not stuck if property values fall. Lease payments are also typically a bit higher than mortgage payments.

»»Bank Loans – Here, as with using funds from investors, you need to answer to someone for the money you have borrowed. Banks will be less intrusive than investors in the day-to-day operations, but if you default they will also foreclose on whatever assets you put up to secure the loan. If you used your personal home as collateral, and your business fails, you will risk losing it. Compare this to borrowing money from your rich granddad. He will likely not boot you out onto the street if you go belly up, but Christmas dinner may be a little sketchy at the end of the year!

Other Funding Sources

Grants and Assistance

Grants and other funding programs may be available from the federal, state and territorial governments and in some cases from local councils. Generally there are no grants available for starting a business; however, there are grants and other assistance programs for activities such as expanding your business, training, research and development, innovation and exporting.

This seems amazing to me considering how much effort you must put into getting a driver’s license so you don’t crash and burn while driving your shiny new car. In comparison, it’s almost ridiculous how easy and cheap it is to start a company that has the ability to crash and burn your life.

Assessing Your Financing Options

To ensure that you are getting the best deal on the best possible products, it is a good idea to research the different types of loans offered to small businesses by banks and other lenders. With a finance broker, you can compare interest rates, fees, and terms as well as any other associated costs to find the best deal for your business needs across a variety of lenders. Do not get locked into the products a particular bank or financial institution may have at the time you start your business.

It’s also a good idea to watch for special offers, because it may make sense to take advantage of them, and don’t be afraid to negotiate—the market for financing is very competitive, so it’s worthwhile pushing hard to minimize your lending costs.

Applying for a Loan

If you decide to apply for a loan, be sure that you accurately prepare all the necessary documents and information the bank or financial institution needs to process your application. Loan applications require many details, including:

A description of your business

Your personal credit history

The amount and purpose of the loan

A repayment schedule

Financial statements, or projected financial statements for a startup

Security or personal guarantee

Lack of cash flow and under-capitalization (not enough starting and working capital) are the two biggest killers of businesses young and old, so don’t gloss over this section. many people have come before you knowing full well the importance of cash flow; even so, what killed their business during startup?

Cash flow problems.

Hopefully by now your checklists and plans are getting bigger and better. Let us take a wander through the “land of nod” where accountants can speak gobbledy gook and give you some really simple but powerful concepts that, if you better understand them, will allow you to ask your accountant and bookkeeper more informed questions. These profession­als really can be your best friends in business, and talking in their lingo will help you build a longer-lasting and more meaningful relationship.

John Millar

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