Richard Branson represents the best-case scenario for most entrepreneurs dreaming of becoming society's next billionaire CEO at a thriving company.
Those at the top didn’t get there overnight, however. They faced the same struggles as you have, the same as the rest of the entrepreneurial crowd.
In a recent blog post, Branson wrote that now is the best time to start a new business but warned against the dangers of neglecting cash-flow management. He made the case that cash-flow issues are the biggest killer of young companies, citing as proof his own sale of Virgin Records for the benefit of Virgin Atlantic.
Other founders would agree. Sramana Mitra, founder of One Million by One Million, told Quora that tartups are addicted to venture capital, which can lead to a warped perception of funding and, ultimately, failure to thrive.
For young companies, finding the resources and network necessary to succeed often doesn’t fit into the budget. But by thinking counterintuitively and spending money on gifts rather than consulting fees, entrepreneurs can foster new relationships and secure invaluable mentorships.
Why gifting beats paying for consultants
Every startup needs mentors, but few can afford the high prices that high-quality coaches charge. According to Sage, 93 percent of small and medium-sized businesses surveyed said they believe a mentor would help them succeed.
When our own company was young, we needed guidance we couldn’t afford. Instead of shelling out $10,000 a month for a consultant, we tried something different: One of my personal connections, who wasn't a mentor but had that level of knowledge, is a big fan of Brooks Brothers clothing.
When he came to our city to speak, I knew I had to blow him away and inspire him if I wanted him to act on our behalf. So, I created a once-in-a-lifetime experience by sending thousands of dollars of Brooks Brothers clothing to his Ritz-Carlton hotel room, no strings attached. That gift made him feel appreciated in a way that retaining his services never could have done.
As a recent CNBC article suggested, investors and mentors care less about entrepreneurs’ ideas and more about those individuals' personalites. What better way to create goodwill than with a thoughtful, well-executed gift? And what better way to gain the ear of an experienced mentor? Although my connection never became a full-time mentor, he did offer us valuable insights on several critical occasions and opened doors that $10 million in advertising couldn't have done.
Ironically, then, the message here is that giving away money in the form of gifts can be one of the best strategies you choose to increase the amount of money coming into the business. Asking for handouts is less effective than offering something valuable to a person who might later return that investment through shared wisdom.
How to use gifts to grow a business
Giving gifts shouldn't be reserved for holidays or just close friends and family. Follow these four tips to leverage gifting as a tool to increase your company's cash flow:
1. Ask for advice, not money. When you send a great gift, don't expect money, in return. If your contact reaches out after receiving your gift, use that opportunity to ask for advice. Mentors don’t want to believe they are only as valuable as their bank accounts -- they want to know you appreciate the knowledge and experience they have to offer.
Daniel Jacobs was a 21-year-old nobody before he decided to email some of the most important people in the business world. As he wrote in Business Insider, he received multiple responses to his cold emails from presidents and CEOs of major companies, eventually securing multiple mentorships, because he asked only for advice.
Ryan Bethea, a friend of mine, did the exact same thing as a senior graduating from the University of Southern California, and because of his handwritten notes, he has built amazing friendships with some of the world's most powerful CEOs.
2. Focus on practical luxuries. People love to receive cool or useful things they would never buy for themselves. Personalized products, niche gadgets and other universally stylish objects appeal to a wide audience and serve practical purposes. The best gifts are those your mentors will use over and over again -- and they'll think of you when they do so.
Gifts in these categories can range from a high-tech coffee machine to a set of top-quality kitchen knives to an engraved wine tool such as the Australia-made Code38. These products and others like them are practical gift options for possible mentors. Don't forget to personalize your gifts with your mentor's name as well as the name of his or her spouse to make an even more memorable impression.
3. Keep it classy, never cheesy. If you want to give a gift that falls into a common category, such as a mug or an apparel item, choose a high-end version. A $20 sweatshirt with a team logo from Walmart is a burden, not a gift. The same goes for a $10 mug from the mall. Instead, send a $100 mug that's the best of its kind, or sports gear straight from the source. Not only will a nicer gift represent you well, but will also last longer than something cheap, consistently reminding the recipient of the person who sent it.
We once worked with a startup that was trying to get noticed by the president of electronics at Target. The startup thought it had tried everything, but it hadn’t realized this man was a serious fan of the University of Minnesota team. After we sent him a huge 50-inch plasma-sized carved-wood plaque bearing the team's logo and fight song, the startup was able to set up a meeting within a week.
4. Remember to follow up. Regardless of the gift you send, ensure it makes its way to your intended recipient. It's not uncommon for packages to get lost, or even stolen, in large corporate settings, or for accompanying notes to accidentally be thrown out. If you use a delivery service or a third party to help execute a gifting campaign, that participant can reach out to your potential mentor to confirm your gift was delivered.
Then, once you know your gift has reached your potential mentor, continue to nurture the relationship beyond that exchange. If he or she sends a thank-you note, use it as a jumping-off point to continue talking. And if you see a grateful post about your gift on his or her social media, or you continue to hear about it months later, you'll know your gift was a hit.
When cash flow is tight, spending money on a present sounds like a luxury or waste of money, not a necessity. But, giving gifts isn’t about begging for favors, though; it’s about making personal connections. When your budget shrinks, a single gift to the right person can provide the shot in the arm your company needs.