Alan Checks in On a Post

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Hi John,
  My first thought upon reading through this thread is if s/he built a 1/2M business why is there so much urgency to move to a small import/export business?  Did he lose the business or just wants a change or it isn't making him as much income as he needs?  Also, did his spousal arrangement change?

I can relate to what he's saying though.  You look at your bank statement/investments, see the balance steadily declining and every day that goes by the pressure mounts to do something, but you're paralyzed fearing that you'll make the wrong decision and be in an even worse situation than you were before.  You have daytime nightmares of ending up on welfare or in a shelter, you drive by the poor side of town and think that maybe you'll be there in another year and could you survive?  Worse yet, if you have dependents who look to you for their comfort and security, you fear letting them down.  What would happen to little Joanne if you couldn't afford her braces, tennis lessons and organic food and she had to live in an apartment on the wrong side of town and walk to school dodging winos passed out on the street?  I know it sounds extreme and it would probably never come to that, but the papers/news have stories just like that, albeit to a very, very small minority of people, but you think "that could be me".  It doesn't help when "everyone" knows that 4 out of 5 business fail within the first year (at least that's the adage).  

I found that there's a word for this, peniaphobia, fear of poverty and I think people like your correspondent (and myself) have it to one degree or another, not because we're born with it, but because we fear that poverty is just around the next corner if we make the wrong decision.  Fear of failure, lack of confidence, poor self-image all contribute to it and you find yourself paralyzed, unable to make a decision.  Under those circumstances, the cog in the machine job that you hate and is killing you with stress seems like the lesser risk.  So, you stay working for someone else, dreaming that there's a better way, knowing there's a better way and seeing people like you, John, who have successfully found it, but still being unwilling to take the risk ourselves.  I think your correspondent is right at that point or near it and that's why he wants a rock solid guarantee that he'll be successful before he makes a decision to try.

The need for a business loan is separate issue related to the urgency and expectations of income, I think.  I saw this in your class last Spring, students who were looking for the big score and wanted to go out and borrow $100,000 to start their business off.  As you noted then, they probably had little chance of getting an unsecured loan for that amount, there was a lot more risk involved and the profitability wouldn't necessarily be any greater than making repetitive smaller transactions.  I think those students had gotten ahead of themselves, they were already thinking of what they could buy with the profits rather than thinking of how they could start and grow a small business from scratch with the smallest amount of risk.

Your correspondent mentions that there is "no money" to start the business.  You talk about $5000 as a starting point.  My reaction is that $5000 does seem like a good starting point and if your correspondent doesn't have it then it makes sense to stay in that dead end job for another year and couple it with more frugal living until the $5000 can be saved.  It doesn't fit into your correspondents "urgency" timeframe perhaps, but there is a low point where all of the advice in the world isn't going to solve all of the obstacles within an urgent timeframe.

Let's suppose your correspondent is in a situation that a lot of people reportedly find themselves today; they've lived lived beyond their means for many years and now must pay the piper, but have so much debt they can't.  I don't know if this in anyway related to your correspondents situation, it's just a suppose scenario.  I don't have a lot of sympathy for them and perhaps that makes me a "bad" person, but while they were enjoying their fancy car, flat screen TV, expensive vacations, state of the art cell phones and dinners out, I was saving my money and paying off my condo and car loan.  To those people, including your correspondent if he is in this category, I say get on Craig's list or eBay and sell off the luxuries and then sell off the almost luxuries and then sell a little bit more.  Sure, they probably won't get near what they paid for them, but they can't be choosy in dire straits.

Just getting rid of cable and cell phone service for a year is probably, what, $1200 or so?  Sell off the plasma TV for $500, go to the library instead of buying books at Borders, go to Safeway instead of Whole Foods and make meals at home instead of going out.  Trade the expensive car in for an older less expensive model even if it isn't stylish and stop buying clothes unless it's because your kids are outgrowing them and even then check the Goodwill and all the sales and buy cheap, non-designer labels.  I bet that $5000 would come a lot faster than your correspondent thinks.  It's just that too many people can't imagine living without an expensive cell phone package, an XBox and cable.

You've said a lot of this in your responses to your correspondent, but he doesn't seem too convinced.  I do have some understanding of his plight because of my own fears and lack of confidence and I have them even though I do have $5000 I could risk.

Alan

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