Day: February 13, 2017

There is an old saying that investors bet the jockey over the horse. Horses come and go, but a really good jockey is a rare thing and lasts a lifetime.

The discourse about lack of funding being the most critical challenge facing small businesses seem to have been overestimated to a degree that it’s been formed in the neural pathways of many entrepreneurs.They blame everything, even internal problems on lack of funding. On the flip side, newspaper headlines continue to feature many emerging businesses whom recently have secured funding from local and foreign investors. When I analysed these businesses side by side with the total stock of funds in Nigeria looking to invest in emerging businesses, (which my data happens to put at $6 billion), I believe the major issue here in Nigeria is that we have very few fundable businesses.

You need to understand the difference between a viable business and a fundable business. Certainly a non-viable business should not be fundable, but many viable businesses are also not fundable. Fundamentally, a viable business means that your business is on its way to self-sustaining revenues, while a fundable business means your business has the potential to fundamentally change the lives of a large number of people and can generate optimal returns for investors.

Financing a viable business that is not fundable will just be mere experimenting. Nobody wants to experiment; they want to either light up a fire that they are sure of or pour gasoline on a fire that is already burning – a $1million business idea is different from a $1million business, investors are interested in the latter.

Hence, before you source for funding or come up with excuses why your funding request was rejected, be brave and look at your business with honesty: does it look and feel like a fundable company?

So here we go, how do you make your business fundable?

For your business to be fundable, your business plan need to clear, scalable, possess huge market potential and has to be uniquely qualified to deliver. You need to match your plan with credible likelihood to execute. According to Alan Brody, the best (fundable) idea and entrepreneurs are “in the moment” of the idea – the idea looks right, the entrepreneur looks right and the timing looks right.

The steps outlined here should be used as a baseline for any entrepreneur working to develop their idea or concept into a fundable business proposition and moving it to the next level with potential investors.

Validate your idea
You shouldn’t try to create a business that has not yet been defined. The biggest mistake most entrepreneurs make is starting to work on a business idea before confirming that there is market demand. If your startup aims to sell a product the world has never seen, make sure the world, in fact, needs your product. Perhaps it doesn’t exist yet because no one needs it. If it is needed, then make sure the world is willing to pay for it. Don’t work on the business until you’ve validated the idea, make sure there’s a market, make sure it’s what the customer wants. Sometimes the entrepreneur’s vision doesn’t align properly with what customers want.

Create a solid business plan, pitch-deck and financial model that you understand
Half the business idea pitches I hear don’t have any plan at all, even though some have great potential. Creating a business plan requires you to do research and really think about your product or service, identify your prospective customers, and to analyze your competition in that specific channel or marketplace. It will help get you thinking about marketing and overhead costs. As you go through this process, your idea may begin to change, to grow, and to mature into a well thought out and developed concept. This is what investors will be interested in.

Build the right team
Investors bet on the team, just as they bet on a business plan. Your business model may be very attractive, but if you are new to this, you may not be fundable. If you can find a partner who has deep domain knowledge and a track record of building businesses, I can assure you that your luck will improve.

Have a thorough structure
Governance of a company, even a young one, can tell an investor a lot about the capabilities of the promoters. Ensure that you can accurately portray your current company structure, and that you have the clerical backing for it. All registration documents and resolutions need to be obtainable and compliance with all industry bodies and laws need to be in place.

Have a clear go-to-market strategy and competitive advantage
You need to show how your product or service will be embodied in a solution that satisfies people’s need, what channels will be used for sales and what business model maximizes return. You also need to have a long-term sustainable competitive advantage in the market, an idea or concept that changes the basis of competition within the targeted market of interest.

Your business must be scalable
Your business plan may eliminate world hunger, but hungry people don’t have much money. Some business may make sense for now, but scaling and profitability is limited. How much realistic growth potential does your business have? Is there a way to double or triple your revenues within a year or two? What will it take to make it happen? If you can demonstrate the scalability of your company, you’ll find more investors willing to talk to you.

Have an early track record of sales
If you have a functional product, have you begun to sell it? If you can show investors you have a product that is already seeing some sales, they will be more likely to take your idea seriously. If you have not yet logged any sales, you should at least get feedback from neutral consumers in your target market and present it to investors. In short, you will need to prove that consumers are willing to pay for your product.

Be aware, respond to feedback and refine your business model
Recently, an entrepreneur shared his business plan with me. First-mover advantage was basically his selling point, but my quick research on the business led me to 5 big players already in the industry. It was later I discovered he had this business plan written in 2014 and has done nothing to it since then. It is necessary to constantly think with the lines of your business, you have always got to be thinking about how you can tweak things to make the business even better. You have to be acutely aware of what the market is telling you and what you are able to learn about either your competitive landscape or the market you’re trying to serve or the problems you’re trying to solve, it’s a continuous process.

Always try to look at your business, and business plan, through the eyes of an investor, do not get caught up with your business idea that you lose sight of how others see it. Investors are constantly looking to invest; your job is to be properly prepared when opportunity strikes.

Even if you are not searching for funding, it will be worth your while to navigate your business into a category that is both viable and fundable. The odds of finding funding generally correlate highly to your odds of business success, and your personal risk is even more critical than outside investor risk. Minimise both.

See why anyone with a retirement plan should have an RSA Will:

Dele sat in the sitting room where his father had taught him almost everything he knew about life. Only that this time, his father was not seated in his favourite chair opposite the TV, his pile of newspapers had gathered dust from lack of touch and his glasses case lay there dusty and unbothered. His father was gone, three months now and he still couldn’t believe it. But the truth settled in as his eyes darted around the room. He saw his siblings- all home for the burial, his mother-completely draped in black yet managing to look stunning. There were also uncles, three of them and the one aunt nobody really liked. Everyone sat there quietly, listening to ‘baba agba’- the family head.

Baba agba managed to avoid everyone’s gaze, intent on his task of dividing Chief Akinlabi’s property among the members of the family since the deceased had not left a Will.  After about fifteen minutes of decrying the lack of cooperation demonstrated by Dele’s mother in providing documents to her late husband’s properties, he proceeded to reel out names and their bequest. The concerned people struggled not to smile. You cannot display your happiness at getting a three-storey building in Ketu when your younger brother just died.  Dele was beginning to imagine he had been forgotten when baba agba called his name, allocating the rundown plastic factory at Sagamu to him. No one could control the laughter that filled the room. Dele’s siblings could also not hide their anger at the shoddy distribution of assets. However, the look on their mother’s face seemed assured, she had a plan.

Two hours later, the meeting had dispersed leaving just Dele and his siblings, patiently awaiting their mother. She soon emerged from the room holding a folder. Admonishing them to disregard the selfish actions of baba-agba and his people, she encouraged them to maximize the little they had gotten. Lastly, she informed them of their father’s Pension funds which had run into about 16 million Naira. Dele being the first child was given the task of accessing the funds on everyone’s behalf. The plan was that Dele would access the money and mother and children would divide it among themselves.

Many months later, animosity was brewing. Dele’s siblings somehow could not believe that accessing the funds had taken so long. Even his mother was beginning to speculate that Dele had diverted the funds for his personal use. What they all didn’t know was accessing the Pension was not a walk in the park. Their father had not left an RSA Will. Hence, the PFA did not have the legal rights to transfer the funds to him.

Claiming his ‘inheritance’ had been an ordeal, beginning with visits to the court in the quest to obtain letter of administration and other documents. With each document he got, he was required to get another- costing him not only time and stress, but also money.

Finally, all obstacles were cleared and his reputation with his family repaired. Thinking of the turmoil he had endured in his bid to access the funds, Dele knew he could not make the same mistake his father made. He needed to get a Will.

It just makes sense, if you take years to build your Pension, you should do everything it takes to protect it with an RSA Will.