Tuesday, January 10, 2017

WHY UGANDANS WOULD RATHER CONTRIBUTE TO WEDDINGS

It has been a perennial lament. Why as a society are we more likely to come together to finance multi-million shilling weddings than do the same to fund start up businesses?

The critics have said we are a fun loving society and we would rather consume than invest. An almost identical line with the previous  criticism is that we live hand to mouth and can't wait for returns that would come  with investment in business.

"One can understand the frustration. That while financing for start ups or businesses is hard to come by and expensive to boot, we contribute to weddings every week with no real hope of material return...
There is an element of truth in both arguments.

But if we think about it a rational person is more likely to contribute to a wedding than respond to calls for financial help from our businesses.

First of our wedding planners are more organised. Capital is a coward.It needs to be assured of some certainty. By the time we are called to contribute for a wedding there is certainity about who is getting  married, the date, the church or mosque the ceremony will happen in, where the reception will be and a reasonable estimate of how much it will cost.

Apart from the long term expectations of a fruitful marriage (This part has often been achieved by the wedding day), in the short term we will get to eat a good meal, quaff a few drinks and get to socialise with long lost relatives and meet a few more.

Weddings are the epitome of Specific, Measurable, Achievable, Realistic and Time bound (SMART)planning.

In addition intending couples have numerous mentors to call on to give the enterprise a realistic chance of success.

The same can rarely, if ever, be said for our startup projects. Often times the startup promoters may know what business they want to do, little idea about the feasibility of the enterprise and absolutely no clue how much it will cost until a return can be expected....

Not to mention with less than one in a hundred business surviving to their tenth anniversary, there is a dearth of business advisors and mentors who know how to run a business successfully.

So our businessmen seeking funds will be best served to learn from our wedding planners, especially in understanding potential funders needs.

First off it may be wiser to use ones own savings or resources to start up a business. Investors are looking for a chance of reasonable return, which can only be determined with any certainty when the business model has been shown to work. This could take years.

By the time of the wedding there is a reasonable expectation that the couple are compatible.

But assuming there is a working business model, meaning we know how revenues will come in, how much it would cost to deliver these and the business is ready to be scaled up, then it's a good time to look for external investors.

The investor is looking for four things basically, beyond a coherent business plan.

One, that the promoters of the business believe in their enterprise, that they will not bail out at the first sign of trouble. Better still that there is a meeting of minds between the investors and the start-up promoters on the future.

Secondly they would like a sense that the business has a defendable competitive advantage, that the business processes that bring it success are not easily replicable. So for example if your restaurants have secret recipes and delivery mechanism that are popular and not replicable that would be useful in rolling out a chain of restaurants.

Evidence of good management as reflected by a constant increase in value of the enterprise over time -- not the number of MBAs on the management, is the third thing investors are looking for.

And finally the investor would be looking to buy at some discount to actual value. As a businessman you would!d like to get maximum value for the share you are relinquishing but often times beggars can't be choosers.

The above  is premised on the idea that you are trying to attract equity partners and not lenders.

Not unlike a wedding. The romance surrounding the event gives it meaning, the couple can only marry each other on the day, the growth of the family is a forgone conclusion and often times the contributions a bargain price not only for the anticipated merriment but also for expected long marriage.

So it makes sense why we are falling over ourselves to contribute to weddings but don't have a similar enthusiasm for our neighbours potential million dollar company.

"They say that oftentimes a deal falls through not because of the environment or that the business is doomed but because of who controls the deal...

Potential businessmen should look more to themselves and their inadequacies to explain why they can't raise money. Otherwise we will be looking out for the next wedding to fund.



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