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.
