≡ Menu

The high cost of free money

Two of my clients recently asked me how to go about qualifying for a subsidy.

I’m not a fan of subsidies. Make that, I DETEST subsidies. And that comes from experience, because in my first business, I made the mistake of chasing after subsidies, and that eventually cost me my business.

My first business was in technology development, and of course there are lots of programs, subsidies and other sources of local, provincial and federal monies available. My mentor was a well-meaning professor in the Faculty of Business at the local university, and of course he encouraged me to apply for these funds to help me get started.

So I wrote proposal after proposal… Oh how well researched and written those proposals were! I must have spent a good three months writing a proposal that got me a whole $10000 (before I had even done any work on the project!)

Remember that the primary purpose of subsidies is to advance a political agenda, that of the granting authority. Because there is a political agenda to subsidies, the granting body wants to keep a certain control and accountability over how the funds are spent. I agree, this is prudent oversight from the point of view of the public purse. However, to me, the entrepreneur, this means paperwork to apply, as well as paperwork during and paperwork afterward. And government paperwork is rarely profitable…

Even more insidious is the dependency that gets created between the micro-business entrepreneur that receives the grant or subsidy and the government that grants it. In my opinion, the main reason that micro-businesses don’t have enough funds is because they don’t do the most important thing in business, which is selling. In my first business, that was definitely my problem. It was more “comfortable” to apply for a subsidy than to risk going out and selling. And receiving a subsidy seemed to have a certain “prestige” attached to it (hey, the government gave me money, so I must be doing something good!).

But those subsidies kept me from doing what was most important, which was picking up the phone, making appointments with clients, and booking contracts! And because I didn’t create a profitable cash flow (which can only be done by adding value to clients), I never made money, and I had to close my business.

Consider this… why is it that only companies in “trouble” get subsidies, and successful companies don’t need them? Why is it that such a small percentage of those subsidies or loan guarantees are rarely paid back?

If government money is going into a supposedly money-making enterprise or sector, run away. Because I bet, dollars to donuts, that it is a black hole. Don’t get sucked in.

Now, if the agenda of the subsidy is in alignment with your goals, objectives and values, then there may be some merit in considering applying for a subsidy (notice the *very* conditional way I structured that statement). Just remember, caveat emptor. Very, very caveat.

I’m a big believer in Sell-Design-Deliver. I rarely do things now that have not been validated by a client putting real money on the table. This ensures that I find that sweet spot between my passion, needs and desires and the passions, needs and desires of my client, free of the distorting agenda of an outside government. And money from clients is the most valuable money of all, because it means that I am really adding value to my clients, that they appreciate what I have to offer,  and creating wealth, prosperity and independence for me.

“Free” money carries a high cost. If you really need money fast, the best way to get it, with no strings attached, is to go out and sell!!!!

{ 1 comment… add one }

Leave a Comment