| "But Everybody's Doing It" | | | | harvest.Rule number two: Ask yourself how you are |
| Are you familiar with that plea some children make in | | | | going to pay back what you borrow-collateralize your |
| an attempt to get what they want based on the | | | | own loan if at all possible. Be willing to sell something |
| behavior of their peers: "But everybody's doing it"? | | | | such as a nicer car that you own for a more modest |
| Should you, as a business founder or one who wants | | | | one, for instance. Be willing to sell all of your "stuff," to |
| to be, use credit cards, just because a majority of | | | | the extent that is necessary to raise funds (preferably |
| your peers are using them? Ironically, the answer may | | | | up front, prior to starting your business; if you sell when |
| lie in the same type of parental analysis that might be | | | | you are desperate and strapped for cash, you will be |
| applied to a child's situation. Are you mature enough to | | | | at a unique psychological disadvantage).Rule number |
| handle the freedoms and responsibilities that are | | | | three: Consider whether or not you absolutely must |
| associated with the behavior? Do you know what you | | | | have whatever you are purchasing on a credit card. If |
| are getting into?Have you checked your credit card | | | | you are charging expenses such as payroll, ask |
| statements and account terms lately, and read the fine | | | | yourself other questions, such as "do I need these |
| print? What those disclosures say, once they are | | | | employees?" What alternatives have you considered |
| translated into non-legalese, is that if you use the credit | | | | in lieu of paying cash for their services? Maybe you |
| card account, you both understand and agree to the | | | | should make them partners to the business and |
| terms. Have you noticed default interest rates (if you | | | | arrange for them to invest with their own "sweat |
| miss making even a single payment on time) in excess | | | | equity" contributions to the enterprise. Have you |
| of 30 percent? These default rates are not all that | | | | considered temporaries, interns, freelancers, |
| dissimilar to those of loan sharks, especially in light of | | | | outsourcing, or virtual assistants? Have you fully |
| the fact that they have emerged during a period of | | | | automated your business, for example, with Internet |
| record lows relative to interest rates set by the Fed | | | | enabled ordering systems?Rule number four: Manage |
| and corresponding prime interest rates (the most | | | | your credit card debt with a vengeance. Pay your |
| favorable rates granted to financially substantial | | | | credit card bills on time and protect your credit in every |
| commercial borrowers). Are you aware that | | | | way possible. Use an automatic payment service |
| bankruptcy laws have radically changed, and that it is | | | | through your checking account provider, an online |
| not nearly as easy to walk away from credit card | | | | service, or the credit card companies themselves-don't |
| debt as it used to be?Do you realize that complaints | | | | ever be late. Send two payments just to increase the |
| about credit cards have been ranked among the top | | | | odds that one will arrive by the due date. Send |
| four consumer complaint categories based on data | | | | payments by certified mail, if need be. Do not |
| from state and local consumer protection agencies | | | | accumulate balances if they can be avoided. |
| (just behind automobile repairs and home | | | | Remember that just about every letter from a bank |
| improvement)? Have you used your favorite search | | | | that starts by stating, "We value your business," |
| engine and combined various words and phrases such | | | | probably includes a change in terms; a change of |
| as "credit cards," "consumer complaints," and "hate"? | | | | terms is just about always in the bank's best interest |
| (Be prepared to wade through millions of hits.) It does | | | | and not yours, with few exceptions, such as when it is |
| not take much perusing to come across stories of | | | | the result of a legal settlement against the bank.Rule |
| woe written by consumers who have been tricked | | | | number five: Watch your own margins. Credit cards |
| and trapped by credit card companies. You need to | | | | started out as a convenience, such that one did not |
| understand that some banks are engaging in predatory | | | | have to carry cash; they were used as a short-term |
| lending practices.There are stories being told by people | | | | pledge against cash that one had, and would pay back |
| who signed up for a low rate for the "life of the | | | | at the end of a billing period (e.g., monthly). They were |
| balance" only to later receive a notice that in the fine | | | | not designed as a long-term source of capital. |
| print it was disclosed that the bank could change this | | | | Because they are unsecured (although even this is |
| rate based on factors such as credit ratings (and other | | | | changing), as a vehicle for financing they usually come |
| criteria, at the sole whim of the institution). Many banks | | | | with higher rates. By using credit cards unwisely, you |
| have sent these notices although their customers have | | | | are doing the exact opposite of what entrepreneurs |
| not even missed a payment, which is clearly egregious. | | | | must do: you are, in effect, buying (capital) at high |
| You'll note that these are not "shady, off-the-wall" | | | | prices, and selling your good or service under |
| banks relative to the names that you will see | | | | circumstances that reduce your own margins. That's |
| mentioned-these are brand name banks engaging in | | | | not a formula for being competitive in the long or short |
| shady business practices.The banking industry | | | | run. If you can't raise the price, consider ways to add |
| constitutes a powerful lobbying force, which exercises | | | | value so that customers would be willing to pay more. |
| considerable influence with lawmakers. History's | | | | If you can't do that, perhaps you should go back to the |
| "haves" have always enslaved the "have nots," | | | | drawing board. You might have an unprofitable product |
| economically, if not literally. Do not count on any help | | | | or service on your hands.The above rules take us all |
| from your elected officials whose names appeared on | | | | the way back to the basics of a viable business idea: |
| ballots in the first place due to political contributions | | | | do you have a product or service, for which you can |
| from the industry. According to an article in the | | | | demand an adequate price, and sell and deliver in |
| Washington Post (Jim VandeHei, March 27, 2005; | | | | sufficient volume, at a profit-after paying all necessary |
| Page A01): "Credit card and banking companies, who | | | | and ordinary business expenses? Bootstrapping a |
| are leading the lobbying effort, were top financers of | | | | business startup to get it off the ground is to be |
| Bush's two campaigns. MBNA, Credit Suisse First | | | | admired when it works, but a lack of resources is one |
| Boston LLC, Bank of America Corp. and Wachovia | | | | of the most cited reasons for business failure-so |
| Corp. were among the top 20 contributors to Bush." | | | | beware. It should be noted that many entrepreneurs |
| (Shortly thereafter, sweeping changes to bankruptcy | | | | cut themselves short and go without health benefits, |
| laws, favoring credit card companies and the banking | | | | insurance, training and self-development, adequate time |
| industry, as referenced above, were passed by | | | | off, and numerous other perks as well as necessities |
| arguably, the banking industry's, and not "your," | | | | that foretell their ultimate demise. We all have ideas, |
| legislature.If You Must Use Credit Cards, Practice | | | | and many of these ideas are quite clever. You don't |
| "Safe Swiping" | | | | have to be a managerial "somebody" to have a great |
| If you do decide to use credit cards to start your | | | | idea, either. (Corporations can sometimes act |
| business (or as a consumer in general), you must find | | | | downright "dumb" in failing to harness the creative |
| ways to protect yourself from the risks involved. | | | | power of rank and file employees). Nevertheless, the |
| Practice "safe swiping" every time you slide that credit | | | | pages of business history are strewn with the |
| card of yours through a card reader and charge on | | | | wreckage of otherwise visionary plans, gone |
| your account. This is no different than safe sex, or | | | | awry.Perhaps the most critical issue is whether or not |
| anything else that might put you and your well-being at | | | | you can enlist the support that you need in every |
| risk. It helps to establish certain rules to go by.Rule | | | | context that is necessary to launch and operate your |
| number one: Don't be in a hurry to start a business if | | | | business. It's a pretty good sign when you tell four |
| you do not have the resources to do so in the first | | | | friends about your idea and they all immediately pull out |
| place. If everyone you talk to is skittish about your idea, | | | | their check books. Are you truly prepared to start your |
| you really need to question its viability in the first place. | | | | business? You'd better be pretty sure of your answer |
| Turn over every rock looking for alternatives. Finding a | | | | before you take the entrepreneurial plunge, especially if |
| backer, such as a supplier who wants you to succeed, | | | | you plan to fund your startup with credit cards.Dr. |
| or finding a customer who commits to purchasing and | | | | Robert Lahm is the founder of several businesses and |
| advances the money up front, would represent two | | | | Web sites, an entrepreneurship professor, a public |
| such alternatives. Save money in your personal piggy | | | | speaker, and a writer. His typical topics include |
| bank and accumulate resources. Start out with a | | | | creativity and innovation, careers, start-ups, and small |
| revenue source from some activity that feeds into a | | | | business marketing. Webmasters and other article |
| longer-term vision. For example, develop a part-time | | | | publishers are hereby granted article reproduction |
| business into a full-time business over a period of time. | | | | permission as long as this article in its entirety, author's |
| Think small and manageable. Think of planting tiny | | | | information, and any links remain intact. Copyright 2005 |
| seeds, and nurturing growth until it's time to | | | | by Dr. Robert J. |