Smart planning for the start-up years
Tom S. Gillis is a successful Houston entrepreneur who has been
starting and selling businesses for more than 50 years. His book,
Guts & Borrowed Money (Bard Press), is used by the
University of Houston's Center for Entrepreneurship and
Innovation and covers the critical stages of running a
business.
Entrepreneur asked Gillis for his thoughts on money
management in the start-up stage:
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Entrepreneur:How do you determine how much money you
need to start your company?
Tom S. Gillis: You need enough capital to cover all
expenses until you reach the break-even point. You break even when
the revenues from customers pay all the expenses, including your
salary, with a little bit left over for repayment of debt. But all
businesses don't have the same capital requirements.
Entrepreneur:How does an entrepreneur determine his
salary?
Gillis: The entrepreneur ought to receive a paycheck only
after employees and bills are paid.
Entrepreneur:What kind of bank is more likely to loan
money to a start-up company?
Gillis: The key to opening the door to bank funding is a
proven record of loan repayments. If you don't have that, the
next best things are collateral and a profitable operation.
Still, all banks are not the same. Some specialize in small
businesses, while others concentrate on midsized and large
businesses. Talk to as many bankers as you can, and establish
banking relationships as soonas you start your business. It's
best to have a relationship with a bank before you actually need
money.
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