A few weeks ago, I wanted to get some feedback from my email subscribers. Because I’m committed to not just blogging but to doing my best to help every aspiring entrepreneur in Nigeria, old and young, I wanted to know what their most difficult challenges were.
So I sent out a survey to my subscribers asking them to tell me their pressing challenges so I could know how to address them. Of all the responses I got, over 65% said their major difficulty was raising capital to start or expand their business. 25% had problems developing profitable business ideas and the rest had infrastructure and other problems.
Of all the challenges entrepreneurs face especially in Nigeria, lack of capital is the most pressing.
Many people have said, and rightfully so, that lack of capital is not a strong enough reason to stop any serious entrepreneur but the sad truth is, every business needs money to grow. You can run lean, you can run on a shoestring budget, but you still need money, no matter how little, to run a profitable business.
I have shared several articles on how startups can raise money to start their business and even how to locate and approach investors for business expansion. There is also something about how to get available government loans and grants. If you have tried all these and failed, in this post I will tell you 3 things you are probably doing wrong.
So here are 3 reasons you find it difficult to attract willing investors to your business
1. You don’t have a business yet
I will start with this because it is the most common mistake I see beginners make when they think of starting a business. They come up with an idea and they start looking for where to find investors to buy the idea.
It would be nice if we could all find investors for our various ideas but the reality is, investors invest in businesses not ideas. An idea, no matter how genius, is still what it is – an idea. I tell people all the time, there is no good idea or bad idea. You only have good results and bad results.
Now, for investors to pick interest in your business idea, they have to see, at the very least, the results showing that such idea is practical. The only way to show such results is to turn your idea into a business. You need to register the business and get it running even on a small scale.
This will not only show your seriousness and determination to succeed, which in itself is a big plus, it will also show you all the loopholes in your idea and allow you get valuable experience in running the business so that when you get investors’ money, you will know what to do with it.
True, some ideas are so brilliant that an investor could choose to run with them from day one but these are not just off-the-block business ideas you hear every now and then. They are seriously, potentially huge ideas. This is the reason only one in maybe 50 business ideas ever get investors’ attention. See 5 things investors look for in business ideas.
2. Lack of a solid business feasibility plan
Again, this is a serious error.
Many of the business plans most business starters write are just conjectures and speculations without real facts and numbers. This is because most of them have no real experience running the business, because they have not started the business in the first place.
Investors are not angels, they are business people who want their money back with some profit. Any business person can take one look at your business plan data and know if you have any experience in the business or not.
I have seen many business plans and I can tell you, the difference between a business plan written by a starter and one written by an experienced business owner is like the difference between night and day. You cannot fake or copy experience.
Where am I going with this?
To have a solid business, you must have some experience in the industry you are about to enter. If you have no experience, turn the idea into a business, start and run it for a while. Use any means available to you to test-run the business before you ask an investor to come take a look.
3. You are showing the wrong business to the wrong investors
The first step in finding an investor is knowing who to approach, after you have worked on your business idea and such. You need to know which kind of person might be interested in what kind of business.
A few months ago I had Freddie Achom as our Featured Entrepreneur. Mr Achom is a millionaire Nigerian investor living in the UK. In the interview, he expressed his willingness to invest in Nigerian startups. But he also stated categorically what type of startups he was looking for.
I look for start-ups with a vision and business strategy to disrupt the market they intend to go into. But most importantly I look at the entrepreneur behind it; you can have the best business idea in the world, but you need the right person to execute it (full interview here)
So if you want to start a poultry farm, for example, Freddie is not the person you should be talking to. But if you have an innovative technology that could potentially change the way poultry farming works in Africa, even the world, then you should talk to him. You see the difference?
Before you meet anyone, do your homework and see if that person could be interested in your idea.
Investors are not the only people you can approach to raise money for your business. You still have the best option of all, starting with your own savings no matter how little. If you don’t have any money at all to commit to your own business, I don’t see why anybody should bother giving you their own money. You need to show some commitment.
Then again, you can work on a joint venture or partnership. If you want to start a cassava farm, for example, you need a piece of land. So you enter a joint venture with a land owner where he provides the land, you do the work and you both split profits. It works really.
These are some risk-free ways to start a business. The only risk is losing your own money/sweat which, frankly, is much better than having a rich investor banging down on your door. Nobody wants that now, do they?
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