Ideas don’t run businesses. Okay, maybe they do, but bringing your ideas to life is what drives business success. Funding in this regard is synonymous with execution. Due respect to anything we (society) already know about Finance, Capital, Asset Acquisition and all forms of project execution tools, but the corporate world plays out differently now. Getting updated on the various means of defying funding odds are in the little things you’ll find here. It’s not a complete guide to business financial freedom; but we could call them little secret steps that can help your business overcome funding challenges.
Getting a warehouse, hiring employees, buying expensive machines and financing the right marketing strategy all need the right funding style and basics of funding. However, all of that would mean nothing without dogged determination and knowledge on how to adapt to your business environment. Growth in different firms is only as good as the economy they operate in. For businesses in Nigeria, it’s even harder to survive the 5-year business threshold.
The tag team of the country’s economy well matched with the security situation has pinned entrepreneurs in unhealthy positions, while successfully hampering their business growth. Hence, this focus on funding starter packs for business owners, challenges faced by business, and finally, steps to overcome them.
Wow! Now that we’ve gotten the introduction out of the way, please, let’s dive right into it.
Funding Starter Packs For Business Owners
There are tools money can’t buy. What’s the need of putting together a business plan or looking for funds when you little to no knowledge about your business idea? Investors are looking for business ideas with the right model, plan, and of course the right founder. So, it is strongly advised that before an entrepreneur decides that the problem is funding, they need to have these starter packs.
a) A Business Plan
Can we ever stop talking about business plans? Well, I know it’s often made to look like a billboard on most business articles, but it’s hard not to. It’s hard to leave out detailed step-by-step information about a business. From executive summary to cash flow to market assessment, this is the business’ blueprint. And the business owner should spend a reasonable amount of time on the drawing board to sort this out. There is a reason why this is first on a business starter pack list. That’s because an entrepreneur trying to fund a business is expected to have analyzed as many possibilities that can come with starting that business. Especially before money goes in.
b) Ultimate Business Model
An online vendor that imports clothes from the UK may import based only on order, just so she is sure she hardly loses money. This in its clearest terms is a business model. A business model is a well-organized process of business activity that cuts cost to its barest minimum and doubles profit accordingly. It is simply deciding to produce only sachet palm oil to reap largely from that sort of red oil-market segmentation. Whatever structure a business uses that works for it, is its ultimate business model.
Investors are looking to pump money into projects that possess the ability to increase profits without equal or higher increase in cost. This is why the right business model needs to be put in place. The corporate world knows, nothing comes without an agreement. For angel investors it is a case of return of equity and for venture capitalists it is mostly returns on investment. This is why a scalable business model is needed. This goes with picking a business model that is exclusive to your business, something that has been tested and worked over time.
I apologize if you are wondering why this is even here, however, many businesses crash due to lack of knowledge. What does hurt a business is an owner who doesn’t know about his business. Not all businesses kick-off through hard funding styles like Venture Capitalists, Angels, or banks. Some businesses were family sponsored, and so starter packs were never a thing for owners of those businesses. If it were, it would be advised to learn enough about your business before starting.
Starter packs and challenges may not be secrets but they go a long way to ensure a good start.
Funding Challenges Faced By Businesses In Nigeria
Every business around the world needs funds at different stages of the business. While all businesses face this, small business respond slowly to certain issues, some challenges are peculiar to businesses carried out in this part of the world.
Power supply isn’t constant in the country causing companies to spend huge amounts of money on other means of getting electricity. Solar power, Inverters, and the use of generators, have largely compensated Nigeria’s turbine mode of supply. The cost of these alternatives puts them on the expense list of every business operated here.
ii) Managerial Skills
Even if businesses need to be understood before operating, some tasks may require external sourcing. Although, all is in order if the business owner is knowledgeable in the field of business, otherwise employ someone who can save you more than you know. Doing everything to make the business run is nobody’s mistake and should be encouraged even if it means budgeting extra money for the firm’s survival.
iii) Strong Competition
The Nigerian business environment has both internal and external challenges. Competition isn’t infrastructure, or funding but it also needs an equal level of attention. As earlier stated, businesses due to certain reasons respond differently to regular business challenges. So while some businesses are down, others are up and running. And competition is a direct threat to business survival. This challenge is the reason businesses need money for competitive advantage.
Secret Steps To Overcome Funding Challenges
Now you have a business model, a business plan and know about the business. While also being aware of the challenges businesses face every day, providing solutions actually require certain small steps.
1) Organise and Spend Wisely
Bootstrapping requires using limited savings/funds to run your business until help arrives. First stages of using funds should be geared towards importance and necessity. For example, my dad had a pure water factory and once we kicked off the company, he employed more staff than was required to get the job done. As a result, the business’ payroll fed directly from my Dad’s pocket. A pure water factory at that time, needed other things like a steady supply of raw materials and machine maintenance. Even when the business owner has all the funds needed but doesn’t spend wisely, he would soon be out of business.
2) Cash flow
These are predictions based on business operations of how payment moves from one stipulated time to another. Cash flows help determine rate of returns, business liquidity, and speculative measure of business profits. A business owner, thus, needs to have a good idea of the company’s cash flow. Assuming the entrepreneur doesn’t have a multi million naira business, knowing when the business returns profit and being aware of the company’s liquidity puts the owner in a good position for business deals and negotiations. Certainly, this helps the owner avoid debts by knowing the situation of the business at anytime. Needing and using money comes with understanding how money works.
3) Crisis Management
Businesses must always value transparency, especially for small businesses that are still building a company culture. A business owner needs to always be plain to customers, employees, and investors. For instance, a small business that has only run for 6 months has run out of money to pay a total staff strength of 2 employees. It is advised to let employees in on the rough days, rather than keeping them in the dark,. You never know how far they are willing to go to realise the dream of the business. Under these circumstances, communication is key.
4) Re-organise and Adjust
Re-organise and adjust when necessary. Let’s say an entrepreneur starts a business and lost all he had saved and ploughed in. Failing is an entrepreneurial possibility. And so, on a second attempt, the entrepreneur should analyse every move made financially and make changes where necessary. It may have been the funding style, or business model. Whatever didn’t work financially when corrected, could be spot on the second time.
Secrets steps to overcoming funding challenges in business, when applied properly, can change the direction and increase the chances of business survival. The funding styles, business model, and plan all vary for different businesses. But these secret steps to overcome funding challenges relate to all.