The Trump Blog

I can't stress enough the importance of choosing partners wisely. I've had eight business partners over the course of my various professional ventures, some of whom I brought to the table and some of whom others brought to the table. Every partner was a friend of an existing partner. Everyone was a known quantity.

Nevertheless, not everyone worked out. Sometimes people didn't pull their weight; in a few instances, partners didn't bring in contract opportunities when they had an equity stake in the company that required them to land new business. At other times, individuals had other priorities and were unable to sustain their commitment to the venture. The result is that some partners left of their own accord. Some were escorted out, and others were kicked out. Bringing someone into your company as a partner is a decision of paramount importance and should not be taken lightly. Many say, and I agree, that from a legal and fiscal standpoint, the relationship of "being in business with someone is second only to being married."

To understand what your potential new partner will bring to your enterprise, start by asking him or her the following questions:

• What specialty knowledge and expertise do you possess? (Also known as “human capital”)

• What synergy can you bring to the team? (intellectual capital)

• What relationships and contacts can you bring into the fold? (social capital)

• What experience and intuition with our customers or industry do you hold? (cultural capital)

• What monetary contributions or credit are you willing to invest? (finan­cial capital)

• What amount of time and effort are you willing to contribute? What sac­rifices are you willing to make? Is this a priority? (sweat equity)

 Also, avoid the mistake that many cofounders commit when they come together to found a business and arbitrarily divide the ownership equally (i.e. two partners who say, “Let’s just split the business 50/50.”).  Equity stakes should be divided based on the contributions that various partners bring to the table as a result of their answers to the questions listed above.

It’s one more area where it is vital to have partners who can separate the business from the personal.

 Cash flow is the number one headache for entrepreneurs. If more money is flowing out of your company than is flowing in, you could take a loan to temporarily correct the problem. But since borrowing can dig your enterprise into a deep hole, I would urge you to apply the remedies listed below. They will help you address the underlying problems instead of avoiding them:

Collect money up front. Depending on your industry, it might be customary for you to deliver your goods or services without being paid up front. But why shouldn’t you secure money from clients ahead of time, by asking for a third or a half of the total amount due upon signing an agreement? You can receive the balance upon delivery, because it pays to get as much as you can up front.

Collect accounts receivable. The most effective way to get paid is to keep track of what you are owed, without allowing invoices to get “stale.” Also remind customers of what they owe you and print the words “Remit in 30 Days” or, “Due Upon Receipt” on the invoices you send. And remember that because companies go out of business, getting paid promptly is sometimes the only way you can be assured of getting paid at all.

Stretch out the amount of time you have to pay your vendors. To avoid having to negotiate a timetable on every invoice, establish trade credit accounts with your vendors so you can repay an agreed-upon minimum amount each month.

Liquidate inventory. If you are in a cash flow crunch, liquidating or returning inventory or assets can raise cash quickly. I know one company that generated money quickly by selling a batch of slow-moving products on eBay.

Retain cash. Capture some of the cash that flows through your organization. Set it aside for those “rainy days” and you may never have to endure another cash flow crunch again.

It takes capital to start a new enterprise. Yet capital is more than just money. It comes in several other important varieties too:

• Intellectual capital is made up of the experience, knowledge and skills that reside in your startup team. Groups with rich intellectual capital have tremendous collective energy. They can accomplish far more than the same individuals ever could on their own.
• Social capital embodies all the professional, personal and social contacts that serve as resources to you and to your team. As the old saying goes, “It’s not what you know, it’s who you know.” Even though that saying is not strictly true (what you know is critically important too), it does contain an element of truth.
• Human capital refers to the knowledge, experience, training and skill set that you, your employees, your partners and all others bring to your venture. Remember, human capital is vitally important because it can be used immediately, during your launch phase.
• Cultural capital is knowledge about cultural norms, preferences and standards. It can be knowledge about demographic groups, communities, organizations and market segments. This is the last kind of capital that most people weigh when they are contemplating a startup - yet it can be the most critical in today’s crowded marketplace.
• Financial capital is money - the capital that most people think of first. Yet it is more than just cash. It actually comprises: 1) Any direct contribution of money or assets that you and your teammates make; and, 2) Potential funding that you can obtain.

How to Unlock the Potential in Those Capital Forms

New organizations have another asset too - one that enables them to maximize the value of the five forms of capital that I define above. This extra asset is sweat equity.

Sweat equity is a catchall word that encompasses all the hard work and time that new entrepreneurs invest in getting their new enterprises off the ground.

There is value, after all, in simple hard work. It can mean working consecutive all-nighters to meet a deadline. It can mean pulling out all the stops to get a meeting with an investor or a new client. It can mean answering your cell phone in the middle of the night to answer a customer’s concern.

If you apply sweat equity to maximize the return from your capital resources, your new enterprise can become a potent new force in the marketplace. You will be starting your new enterprise not from the bottom of the success ladder, but from a leveraged position, well on the way to the top. And what could be better than that?

Editor’s note: For more great insights from Dr. Randal Pinkett, spend some time with his excellent book Campus CEO: The Student Entrepreneur's Guide to Launching a Multi-Million-Dollar Business.

If you’re an ambitious student or if you know one, the time to start a business is now!

I would like to take this opportunity to congratulate the three winners of the first Most Promising Campus CEO Contest. They are Catherine Cook (first place), Corey Kossack (second) and Seth Flowerman (third). Catherine, a high school senior, is founder of myYearbook.com. With 1.7 million members only two years after going live, myYearbook.com is one of the fastest-growing sites on the Internet. You can read more about Catherine and all the finalists by clicking here.

Why did I put so much effort behind the contest? Many of you already know me as the winner of the fourth season of The Apprentice. Earning that opportunity meant fame, a hefty salary and the chance to supervise some challenging projects for Trump Entertainment Resorts in Atlantic City.

But if you were to ask me to reveal the real success secret that led me to my Apprentice victory, I would have to point to the fact that I was a student entrepreneur. During my student years, I launched no fewer than five businesses on different campuses. I started one of them with my roommates when we were students at Rutgers University. That enterprise has now grown into BCT Partners, a multimillion-dollar business. Today, I am chairman and CEO.  

The benefits of starting a company while you are a student are unequalled. Let me point out just a few:

• First, your earnings make it possible to graduate college without going into debt. That is what I did.
• Second, the skills and aptitudes you develop allow you to build one success on another for the rest of your career.
• Third, you can keep your business, or sell it, after you finish school.
• Fourth, an educational institution is an ideal place to tap into the knowledge of top business consultants - your instructors - without paying an extra dime.
• Fifth, you can meet influential alumni, rub shoulders with venture capitalists who are looking for promising enterprises and build a strong network of people who will support as you widen your professional activites.

 And those are only a few of the reasons. I am such a strong believer in student entrepreneurship that I wrote a book, Campus CEO,to inspire and advise students who want to launch businesses while they are still in school.

So if are a student dreaming of success, my question to you is, why not now? Of if you know students who have the drive and the vision to start enterprises, I would encourage you to encourage them.

I firmly believe the entrepreneur’s mindset - of creativity, resourcefulness, courageousness, vision and resilience - is empowering and I hope to help foster that outlook in talented young leaders everywhere.