How much money do I need to start? This is possibly one of the most asked questions around entrepreneurship.
My response is very simple, you do not finance to start, you finance ‘the start,’ you start then finance. It appears a lot of people are under the illusion that the cost of starting is solely monetary.
I have a very simple philosophy about the relationship between money and business, ‘you start a business first, then you finance it, otherwise you risk financing something that is not a business.’
A true business has the ability to attract resources. Like my friend Tarisai Mhuriro often says, a good product goes beyond the customer, because it has the ability to attract the investor. Well this may sound cliché to a lot of people, but my experience and the experiences of many others reveals this to be very true. Money on its own does not make a business, money is a sign that there is business.
If money is all you require to start an enterprise then money is all it will take for the enterprise to collapse. Enterprises that last the mile are built on much more than money.
The notion that one cannot start without money is not only misleading but promotes laziness. Starting an enterprise must be based on much more than the availability of financial capital. If you remember the wholesale youth loans, I am sure you get the picture by now.
Money follows value not the other way round. When you create value, valuable resources will flow in your direction.
Not having money from the start, allows you to create, as an entrepreneur should. Having money as you start can actually be a curse as it exposes you to shallow and rushed decisions that you would otherwise avoid in the absence of a huge financial capital injection.
For your first project or business, it is often advisable to build as much around the business as you can without injecting financial resources, then leveraging on what is built to court financiers. Like mineral resources which are undervalued at the point of extraction, most businesses are undervalued at the point of establishment.
Is it important to fund your business? Yes it is, absolutely! But to build a lasting enterprise, requires a lot more than finance.
Not all ideas are bankable, neither are they businesses. You have to subject your business or idea to a worst case scenario test before you court financiers. Elijah Tembo is always stressing on the importance of planning and developing an unquestionable value proposition. It is also important to determine whether your business is solving a problem and whether that problem is a business opportunity that actually has a market.
Multi-billion dollar establishments like Facebook, AliBaba etc were established to solve problems, then evolved into multi-billion dollar enterprises in which investors saw an opportunity to grow their money.
If you are a holder of a valid Zimbabwean driver’s licence you would know about one pre-requisite test called the ‘the hill start.’ The perfect hillstart is attained when you release your handbrake at the biting point, thus propelling the car into forward motion against an upward slope. Starting a business requires pretty much the same conditions. The Brand Guy insists that too much capital is as dangerous if not more dangerous than little capital.
Beth Laurence says the following:
“Think small. Do not rent premises if you can work somewhere else, and don’t hire employees until you can keep them busy. People who start their small businesses on cheap and create their first goods or services with more sweat than cash, have the luxury of making their inevitable rookie mistakes on a small scale, precisely because their early screw-ups do not burry them in debt, they are usually able to learn and recover from them.”
You need money, but you need much more than money if you are to succeed in business.