CAN YOU START OR GROW YOUR BUSINESS without money?
Sure, you can. Is it nice to have access to a big budget behind you? No question. But, the reality of business is that you are often forced to work with little or no money- that’s just the way it is. I meet a lot of entrepreneurs who challenge this, who say certain things are impossible without money – things like running a business. I disagree. I come from a poor background where funding to start a business is hard, if not near impossible, to come by. Yet, I’ve been able to start many businesses. In fact, I’ve heard this challenge so often that I decided to do something about it. I climbed Mount Kilimanjaro. I didn’t use my own money and had no climbing experience at all, so I treated climbing the mountain like a business project. I broke it into chunks, spoke to experts about each chunk, decided what I needed to do, and then went out and got the support, including financial, to do it.
After I did it, I wrote a book about it. It is possible to do the things of your dreams, even without money.
With that clearly said, there is no doubt that finding a financial backer – from a bank to an angel investor to a corporate supplier development programme – can be a breakthrough for a small business.
Achieving it is a worthy aim. But, let me be frank. The fact that you have registered a company and sketched out some ideas on a napkin, that you have gone as far as getting some stock into a few shops, does not entitle you to a loan! It does not make you worthy of finance. To get financial support, you have to do the hard work. You must grapple with the detail of Stages 1, 2 and 3 in this book. You have not only to read through the questions, you actually need to do the exercises. You need to write down the results. Only once you have gone through all of this, in detail, should you even think of expecting to qualify for financial backing!
CREATING FINANCIAL PROJECTIONS
WITHIN YOUR GENERAL PLANNING, to achieve your business strategy, you need to pay special attention to profit.
Profit is the primary focus of a great majority of business models. It is, quite simply, goal number one. Without profit, your business isn’t going to be worth much. Without profit, your business won’t be able to give you want you want. Without profit, your business is unlikely to survive.
So, how much profit will the future business generate? The answer to this question isn’t always obvious. There are several methods you can follow to answer this question:
There are often industry association and other reports available within your sector. All you need to do is ask or do some Googling to see what might be applicable to your business. In fact, in some sectors, there are actually website calculators that allow you to enter specific information and generate an answer.
A financial projection is essentially a projection you create to imagine the future path of your revenue and expenses. The more work you have done to dig into the details of your business model and understand the full scope of your costs and your potential future revenue, the more value a financial projection will be to you. The less work you’ve done, the shakier your financial projections will be.
Watch out for the hockey stick!
One of the most common mistakes people make when developing financial projections is a lack of honest focus. They let themselves imagine a very typical scenario. The business starts slowly (representing the challenges you are experiencing right now),
and simply gets better, the further you look into the future (representing your dreams and hopes, rather than any hard facts, or reality). When you make this mistake, the graph of your financial projections will look like a hockey stick:
Financial projections – that are based on fact, research and a lot of hard work – tend to look a lot more like the same hockey stick lying on its side.
Which hockey stick does your plan look like? What does that say about your thinking process?
A WORD ON PROGRAMMES AND INITIATIVES
IN A COUNTRY LIKE SOUTH AFRICA, with its terrible, socio-economically damaged past, it is crucial that the government and private sector run programs and initiatives designed to boost the prospects of success for emerging businesses. Several of these programs exist at government level, and the private sector runs development programs across many parts of their value chain.
Please understand two things, however, when you apply to enter these programs:
There is a lot paperwork involved and, depending on what stage of business you’re at, you need to watch out for applications, interviews, and meetings stealing so much of your time that you struggle to maintain your business.
I have seen many legitimate businesses, which deserved funding, fail. Sometimes the failure can simply be a result of the candidate lacking collateral for a loan. Given the high risk of business failure, this happens more frequently that it should. I have also seen inefficiencies or incompetence in these systems that simply exclude some businesses or people, for no obvious reason.
The bottom line then, from my perspective, is that you need to put in the hard work to get finance. When other peoples’ money is at stake, you need to prove your worth. I urge you, however, to keep working at your business while you seek that miracle backing. Nothing succeeds like success.
When you’ve been through this book in detail and you’re satisfied that you’ve completed every possible task and challenge in it – when you’ve decided, in other words, that you deserve financing – then the next step is simple.
Contact the bank, funding agency, potential investors, or organization you’re targeting, and find out what they require from you to access their loans or inventor funds. You’ll have most of the material they require should you do everything in this book.
Remember, the more applications you do, the easier it gets, with the first usually being the hardest.
OK
You’ve interacted with a small group of customers – now it’s really time to get out there.
Of course, the world is filled with salespeople. The average modern human is, in fact, exposed to anywhere between 3,000 and 20,000 advertising and promotional messages per day[1].
It’s not enough to talk to a lot of people. You have to talk sense.
And that brings us to Stage 3.
