Today I talk with my friend and band-mate Ryan, who started in mini-golf course in 2012. I’m grateful for his honesty about his difficulties getting financing. Looking for a loan yourself? Then read on …

Elizabeth: The tales you hear about entrepreneurs, or read in magazine articles about someone who starts a business, make success seem inevitable and easy.
Ryan: Yeah, they don’t tell you about the first sale, or how many cold calls they had to make. That part always gets skipped over for some reason.

And the interviews are not random, right? You only hear from people who succeed. You don’t read magazine stories that go, “Well, I spend five years and I tried to do a startup, then it failed.” I want to talk to people that succeed and people that didn’t. And people who have just started and don’t know yet if they will succeed.

Talking about money also seems to be a no-no for a mission-based business. Someone who starts a bakery or organic farm. You’re supposed to be in it because it’s your dream, and if you’re thinking about money, you’re not really “giving it your all.”

So anyway, could you give me a little overview Aloha Falls?
Aloha Falls is a Hawaiian-themed miniature golf course in Libertyville Illinois, about 40 miles north of Chicago. We took over a course that was built in 2002 and shut down in 2007. We renovated and reopened it on June 8, 2012.

It was built during a time when many cities took land that they had on their books that they couldn’t really do anything with and built things like golf courses, miniature golf courses, sports complexes, etc. Libertyville was one of these; they built a 169,000 square foot sports complex with a driving range and a miniature golf course nearby.

They ran the mini-golf course for about four or five years, fairly successfully. Then in the fifth year, 2007-2008, the housing bubble burst. I guess they decided it wasn’t worth the effort, so they cut back to very basic maintenance which still meant weeds growing everywhere and standing water throughout most of the course. Their thought was that a developer would come in, buy up the land, demolish the course and turn it into something great, but after four years it hadn’t moved.

So to this day, the Village still owns it. The land that we sit on is for sale, so at some point, a developer might comes along and say, “Hey, I want to buy all this land,” and Libertyville can say, “Yes, no problem. Sure. Here you go.” Then the developer can say, “We don’t like your golf course. Get off,” and they can kick us off. They give us three month’s notice, and we have to leave.

Did the idea for the golf course come because you wanted to own a miniature golf course, or because you were working in Libertyville and you drove by every day and thought, “That’s an empty golf course. That’d be fun.”?
I didn’t really choose miniature golf. Miniature golf kind of chose me. My office was across the street from this course. I drove by it every day since 2005, so about three years when it was operational, and then three years when it was shut down. Those last three years I was finishing up my MBA, and I kept looking over thinking, “Somebody should really fix it up and make it look nice. It’s in a good area. Why doesn’t somebody just do that?”

I finished my MBA, got ambitious and a little bored with my job, and thought, “Well, I guess that person is me.” I called the city and asked, “Hey, is this property for lease? What’s the deal? Is it for sale? What’s going on with this?” Just that one phone call started the whole thing in motion.

Wow. Were they nice when you called, or were they like, “What are you talking about crazy person?”
I had to convince them: ”Hey, look. I can’t buy it, but I can lease it for a number of years. I’ll give you money. All you have to do is give me the keys to the building. I’ll renovate everything myself. I’ll pay for it. I will make money for you, but you just have to give me a lease.” I would give them money in exchange for fixing up the property. Win-win, right? It took 10 months to convince them. We signed that lease two weeks before we opened.

And I don’t mean to make them sounds like bad guys. They were very nice, and they’ve been very helpful in getting everything going. There’s just a lot of people that only meet once a month that you have to talk to in order to get things done. They wanted to get the land off the books, not lease it, but I didn’t have 2.7 million dollars to buy it.

How did you get financing? Did you go to a bank? Did you finance it by yourself?
I went to so many banks, so many investors, so many different people. My first thought was to go to the village of Libertyville and tell them, basically, “Hey, here’s how much I’m going to put into your course. How about you give me rent free for the amount of money I’m putting into your course? I’m putting in, I don’t know, like $30-50k of work into a course to make it look nice. How about you just give me like 6-12 months of rent for free, depending on what my final number is? It makes your property look better, it makes you look better. At the end of the day, if I walk away from this, you’re losing money anyway, so what do you really care?” kind of thing.

I spent about six months trying to convince people that that would be a good idea, but that failed, horribly. They basically said, “Yeah, we don’t want to put any money into this.” Eventually I was able to get them to give me about $5,000 to fix things that they had cannibalized from the building over time. They still had a fully operational sports complex and a driving range, so say, when the toilets broke in the driving range, they went over to our building and just yanked a part from the toilet and put it in over there. The only thing I was able to get them to pay for were basic services that as a landlord you have to provide such as working toilets and fire extenguishers. That was one of the very small victories that I was able to get.

Then did you go to banks? Did you go to friends? What did you do next?
I had some money socked away. As they say in the entrepreneurial world, you have to have some skin in the game. So I did. I had probably about 25% of the needed investment and I was looking for a bank or an investor to give us the remaining 75%.

Overall it was about $75,000 for actual improvements and about $25,000 dollars for cash flow purposes (That’s very important for all those future entrepreneurs out there, always maintain those cash flows!) So I was looking for about $75k from an investor and I figured I could sneak by with $50k.

Raising capital became really disappointing really fast. A lot of people in the area knew our course and seemed genuinely excited, but nobody would give me a loan. They knew it had operated, and many had actually been there. One banker said, “Oh, yeah. I have five daughters and my eight-year-old had a birthday party there in 2005.” I’m not a banker, so it’s hard to tell if people were excited because that’s their job to be happy kind of like a waitress being nice to you because she wants a tip kind of thing, or if they were actually legitimately excited.

I went to big banks, I went to small banks. I found out that a lot of banks are owned by other banks, so if you go to one bank, you’re actually going to a bunch of other banks. I met with a banker to review my business proposal, and she said to me, “Hey, I just got this from this other bank. Just so you all know, we’re all the same place.”

They’re all the same bank? Wow, I had no idea. That’s crazy.
Yup, these five little banks—five different names, and I went to two of them. At the second one she already had had the business plan sent to her. She politely told us, “Just so you know, these other three are us too, so don’t go there.”

The banks want to see that you actually have an asset, equipment or something that you can sell if the business tanks. In a miniature golf course, our expenses are landscaping, sidewalks, concrete, flooring—things that you’re not going to be able to get back. These are all expenses that a bank doesn’t want to fund which is probably fairly stupid on my part to try. I thought it was such a small amount that they wouldn’t care, but that was wrong as well.

Really, unless you have that amount of money in cash, or you have some assets that are worth that much, there’s really nothing you can do for debt financing, which begs the question, “If I have $30,000 in cash, what am I coming to a bank for?” I should note that if you’re a US veteran, you can apply for special financing and get funding that way, but that wasn’t available for me.

Financing is the most frustrating part with business plans. It’s the part I dread the most and is the thing that almost no other entrepreneur talks about. You can find a creative way around most things but financing, man, there’s nothing you can do. So many banks said, “Yeah, we don’t really have any options for you. It’s a great business plan. We’re very excited for you, but we don’t have any money for you.”

So what did you do? Did you find friends to invest? Did you get credit cards?
Credit cards are always a horrible idea, so naturally I applied for two. Luckily my credit was pretty good, so I got cards with zero APR for an 18 month period. I had 18 months. Guess I’m going to spend 20 grand on this card, and hopefully I’ll have enough money to pay that back each month.

I did eventually come across one bank who was willing to give me a kind of collateralized loan. It wasn’t like a home equity loan, but it was an equity loan, and my mom was willing to put her house up for collateral, so I could get the remaining amount of money that I needed.

Not ideal by any means. You’re still putting up your own assets, somebody else’s assets, and it’s pretty scary. If I had to do one thing, I would say I probably would have made more connections before, friends or something, to get a small amount of financing from those friends instead of resorting to family. But of course your mom believes in you and luckily for her, everything is going pretty well. She should make her money back eventually, heh.

Lastly, I did try Kickstarter and some of those crowd funding sources. That also failed. Kickstarter required a product, a physical product like a T-shirt. There wasn’t much we could give people for miniature golf course, besides an experience.

Okay, so you put together the funding, repair the course, and open your doors. How did it go?
We opened Friday, June 8th, 2012. June 9th we actually had a pretty good day. It was nice outside, and people drove by and stopped in. Sunday the 10th was a little slower. Then Monday, Tuesday, and Wednesday we had probably three people show up each day. Kids were out of school at this point, so I was like looking at my business plans thinking, “Oh, my gosh. This is horrible.”

I’m pretty sure I came home on Tuesday or Wednesday in tears to my wife, saying, “I have screwed this up for our family. I have made a big mistake. I don’t know what I’m going to do. I don’t know how I’m going to pay all this back.” Credit cards, I had $36,000 dollars that I had to try and pay back in 18 months. I’ve got my mom’s house as part of a collateralized loan. I’ve got 25 grand of my own that was in a bank account and is now gone. I said to her something like, ”I don’t really have anything to offer you anymore, so hope you stick it out with me.”

She tells me now that it was one of the scariest moments of her life. But she was very encouraging, and said “No. It’s been three days. You can’t give up yet. You didn’t work this hard to get this far,” and gave me a pep talk. Then Thursday everything started to turn around. We had a big group of 50 or so kids show up from a daycare center and people packed the place. We made more money on Thursday than we had the first five days we were open. That weekend we booked our first birthday party.

Since then it’s been the steady growth that I kind of expected. But that first five days, ooh. I was … those were some scary days. I’m totally thankful that I only had five days. I know a lot of entrepreneurs went through years waiting for that moment where they realize it’s going to be okay.

You’ve been in business now for four years. Have you gone back to see how close your results are to your business plan? Are your numbers and your ideas for what you would do pretty close? Or was it like … “No, it’s hilarious. I wasn’t even close at all.”
That’s a fun thing to do. When you make these business plans, as an entrepreneur, you have just the highest ambitions for everything you do, and you say to yourself, “Well, of course I can add on this thing, and of course I can add on that thing.” That’s obviously not true. We tried to add food service, just a small little hot dog stand with some interesting toppings, and I decided this winter that it was time to cut our losses on that. The mac ‘n’ cheese hot dog is still a brilliant idea, but a miniature golf course isn’t the place for it.

I was right about miniature golf revenues though—and by close I mean within about 15-25%. Which probably sounds like we’re not even close, but for entrepreneurs entering a new market, 20% off is about as precise as it comes. I take some sort of strange pride in that, and not because I love being right. I think it somehow proves or vindicates me to some of those bankers and investors that looked back at me like I was absolutely insane and had no business starting a business.