Starting capital: take money from relatives

Start-up capital

At first glance, this idea is good — to take money for start-up capital from relatives. I borrowed money from my brother or a friend to promote the business, and there are no problems: you don’t have to pay interest, you can return it when your money from the business appears.
However, taking money from relatives to start a business is far from always the best option to start your own business.
Moreover, sometimes this is the best way to quarrel.

Situation: “money for start-up capital received from brother”

Imagine the situation: your brother gave you money. At the same time, he asks when you will return this money. And here are two options:

— or you will not be able to name the return period,

Or the timing will be too optimistic.

Why? Yes, because you really have no idea when the business will finally break even and start making a profit.

Even if you turned out to be a reasonable entrepreneur and made a preliminary business plan (which does not always happen), then the probability that the business plan will be embellished is 99%. And this means that you will return the money later than you expect.

So your brother:

— or will not receive an answer to his question, which will be disappointed in the depths of his soul,

— or receive a deliberately incorrect answer.

Continuation of the situation: money for start-up capital received from the brother in a month

Your brother will ask for the first time, “How are things going? What’s with the money?»

“Everything is fine,” you answer, “already spent.”

And you will start telling in a fascinating way what a wonderful repair was made or the equipment was purchased with his money.
The brother, of course, nods, but in the depths of his soul disappointment stirs again.
In two months, your brother’s wife will want to buy a fur coat and will certainly remember that the money for a fur coat, which is so needed right now, for some incomprehensible reason, is still with you, and not at all in her wallet.

As a result, the second question will arise: “how are things going? What’s with the money?»

During this time, your business can develop in completely different ways:

1) An optimistic option (God forbid, it will be so :))

It’s good if from the first day customers themselves begin to resort to you and beg on their knees to provide a service or sell a product (depending on what you start doing). But here already, the probability of development of events in such a scenario is less than 1%. Promoting a start-up business is a difficult and responsible task.

2) A realistic option (you need to rely on it)

Practice shows that the first money appears no earlier than 6 months after the start, and in most cases — no earlier than a year later.

What, in this case, to answer the brother, and then his wife? Six times: «it’s okay, wait another month.»

As a rule, such behavior leads to omissions and even a quarrel between relatives and friends.
Even if you later return the money, the black cat is already running between you.
Was your project worth ruining your relationship with a friend or family? After all, the sediment will remain both with them and with you?

And how should you be in this case? How to repay the debt to people who went to meet you halfway? How not to lose their credit of trust?

You will find answers to these and other questions in the following articles.

The next article in this series is » Start-up capital: take a loan from a bank «.

Start-up capital