You Said It! Q & A with QB Community Member Adam Wegener
What’s on your mind right now? We know folks who work for themselves have plenty to say about the business of doing business. That’s why we want to share your insights, ideas and best practices. Today, we’re chatting with QB Community member Adam Wegener.
Adam started his company Trash Amps because he wanted to create a DIY kit so makers could build their own affordable, portable music amplifiers from everyday objects like soda cans or Mason jars. But getting this economical product to market came at a high price, which is why he decided to get by with a little help from his friends (and family).
Asking those closest to you for start-up cash can come with a whole set of issues. It’s awkward. Stressful. What if you can’t pay them back? What if the transaction sours your relationship?
Adam, who was a featured vendor at QB Connect 2017, realized these potential pitfalls were actually opportunities in disguise. Not only did he pay his family and friends back on time, with interest -- he successfully built an ongoing trust with his funders while cranking his business up to ten.
Adam at his booth at QB Connect (credit: @trashamps)Adam, when did you realize you needed to ask for funds from your friends and family?
I started my business with a friend who had built an amp. He built another one and showed it to our friends who said, "Hey, we'd like to buy one!" So we built ten, and then we built 50 and then we built 100. Then we built another 100. It was after my business partner and I parted ways when I said, "I think I want to build 500.” That meant investing in an injection mold and a kiosk at the mall.
I needed some money for that. I had a little saved up, but I had college friends who are engineers and very frugal. They had money, and two of them each loaned me $5,000. I paid them back a year later. Now I have friends who will loan me $10,000 and $20,000 dollars because we've built up trust.
Were you interested in sharing ownership with your investors?
When I first started the business I gave one or two people five to ten percent as ownership shares. But I really like the idea of personal loans, keeping the ownership between myself and my business partner. My investors get more interest than if they put the money in their savings account, and I'm getting a lower rate than the bank would give me. It’s a win-win situation.
Would you recommend this fundraising approach to other business owners?
I would, but I really think it depends on who is involved. There are definitely people who I wouldn't trust giving that much money to. It’s one thing if the lender is thinking, "Well, I may never see this money again and that's okay with me.” But if you’re really counting on getting that money back, I would ask to see a plan. Ask, "What are you doing with this money, and what's your plan to pay me back? What's the timeframe?"
I've always paid everyone back, and that's given me good credit with my lenders. Now I can say, "Hey, last time it was $5,000. I paid you back $5,500 with interest. How about now lending me $10,000? Would you be okay with that?" This has worked for me, but I think you have to be really careful about money and friends and family.
A Mason jar speaker in the wild (credit: @trashamps)Yes, borrowing money from people you know personally could potentially strain a relationship. How do you deal with that?
You know, I started my business with a college roommate, and we later went our separate ways. We split everything in half like a divorce. The really sad part is he was one of my best friends but still to this day we still don’t speak. It’s sad that our business came in the middle of our friendship.
One way to avoid this is to be really clear up front when you're working with other people. You have to establish who is doing what and how much are they compensated. This applies to taking personal loans from people and borrowing money from friends and family. Be really clear up front.
Before you go
QB Community members, have you borrowed money from family and/or friends? What do you have to say about working with close friends or family?