Starting off a business, small goings.
It’s quite simple, but yet tricky, as to managing a business you have to be “the business “, understand it like the way you understand yourself. I just gave you a clever approach, your first step is to be clever, prepare your business before it even starts. Think hard about different possibilities of losing and winning. Think hard about those two and how you will tackle those because those two are the biggest obstacles you will find according to me.
Starting a startup will not be a million dollar business at the word go. I started with raising funds because definitely you have the idea in your head and probably in your heart. What may be stopping you from starting is capital. Raising funds for your startup has 3 key stages.
The first stage is for you to prove that people are going to buy into your business and with the first batch of small money you get you to buy into your own business. If you’re going into an industry that is already existing, for instance, transport, your first step would be to look for the kind of transportation you want; goods or people. I’ll make an example of goods freight: what you would do is to look for a perfect truck for the job, probably the owner won’t be using it, draft a good contract with the owner to get the truck road worthy and ready for business. Once you have used your money to get that truck ready (make sure the contract is a long term contract, for more than 2 years binding) start looking for jobs for the truck, of course, we start small.
Now the second stage after proving that your business idea is worthy to be considered, start saving the money you get from your contracted truck and start your own fully fleshed business. Register the business and if finances allow getting a board of directors, a minimum of 4 people you included. Why a board of directors? You don’t want to run the business like your backyard tuck shop, you need others to tame you. When choosing the board of directors choose professionals, in the law field, logistics field, finance field, etc. How will we pay the board of directors? We’ve been saving to grow and scale the business isn’t, so the Director’s fees can come from those savings as well as profits being made from the continuing jobs. Be careful not to overspend on directors. Now your business is registered, with a contracted truck that doesn’t belong to the business, a board of directors, and a CEO.
The third and final stage is now using the savings to buy your own truck as a business and has an asset within the business. After buying your own truck, don’t throw out the contracted truck, continue with it also. It will also assist in revenue increase within the business.
Simple steps that require patience and zero investors. We’re avoiding investors in the startup stage because this is the most crucial stage where key performance indicators must be realized. And when investors do come into the business, now the scaling model must be for a huge fleet of trucks, not just one or a couple of few trucks.
Breaking into the market
You break into the market by advertising. You can use many ways to advertise/market. Let me suggest social media, your friends, and your family. All you have to do is to make use of them wisely. As people, we have this tendency of using people close to us unprofitably. You come up with a brilliant idea and you are not so sure about yourself and you try to get compliments from those close to you, if you want compliments they will give you compliments, but if you want the real truth ask for the truth.
But normally people around you don’t understand your ideas and eventually, you think it’s a bad idea and let go of Gold. Familiar faces won’t give you help, learn that truth. And that’s how most people out here lose that good idea of product development and service offers they had. If you are going into business just know that you are digging your own grave, but you can find gold while digging your grave. I hope you getting the message in these statements.
This is where I say the only way for your business to be successful you should be “the business” (when starting off be the business, but later know that as the business grows you should learn to accept what is called a board of directors, here you are no longer the business). Treat your business the way you would treat yourself, say you are starving would you invest in shoes or invest in food?
Exactly, so you realize if you went for shoes you would have starved yourself to death. The same goes for your business. A starting business is hungry and it needs to be fed. So what you do in terms of managing the money flow of the business is to make sure your business always gains more than it loses, feed it first then you after. And make sure it is because it will die because of hunger. If every day your business products and services give you $100, why don’t you take $20 or $30 for yourself at least, the rest give the business.
The business may need things like rent and other problems that may occur along the run. There is a financial management strategy I would like to call the ‘Lesotho finances’, hahaha the name I came up with it because of my friend in Lesotho who gave me this management idea. Of 100% of revenue; use 30% for backup funds, 40% for expenses and future equipment purchases, and lastly 30% for dividends(paying the owners of the business). Exactly, so business owner takes 30% and then 70% you leave out about, 30% as backup money and then 40% you purchase your business equipment and pay your workers’ salaries.
Although I will allude that not all businesses can be managed with this method, know how to construct and deal with an income statement. In your income calculate how many percent of revenue is your working capital, analyze if it fits into 40% of your total revenue. Then why do we pay the business owner only 30%? We are assuming you wish you scale the business and require business savings of another 30%. I’m aware that other may critique that 40% as working capital is too small, but let me say that having more expenditure as a business isn’t the right highway to scaling your business, if working capital exceeds 40% fix the problem and cut down on expenses, you will not go wrong with scaling.
When your business is still fresh out of the water be your own employee don’t be in a hurry to hire. Be your own employee so that you see how money comes in and out and why so that when you have employees you know exactly what happens in the field so they won’t dare to cheat you.
In so being your own employee when your business is new it will help the business to gain more than it loses. Yes exactly, don’t hire yet because you are broke and you lack experience of what you are trying to build and with employing you will be cheated. Below is common management table of your skills team:
How to charge
Charging for your business products and services; take a look at your products and services and material how much they cost, this will give you the right amount of your charges(break even). Remember, never charge less than what you deserve all because you want to gain customers, not everything cheap attracts customers.
But for a starting business to win the Market. Don’t start off by being too expensive, (I know a lot of us become impatient because we want to be where you dream to be immediately. But this part here requires you to be patient like super patient), charge so that your business gains enough to grow so that your market grows by your service deliverance.
Then when your product has grown then you can start having your increases, but not too much. Take it step by step. Charge enough to get back your capital back as the time goes
Like sometimes offer discounts? Exactly!!!
Discount is another form of winning customers on daily bases, but don’t offer too much. Offer enough for a customer to find it worth it to buy it. About 5% or so according to how many times the customer is always around buying your products and services, this will encourage them to come back again and again.
Be friends with your customer, like treat them like friends like family make them understand you. This will give your business a beautiful platform in the community and they will come running. A good Startup first builds the community and makes the community shine. But don’t be too friendly because some of them will take advantage of it.
Be friendly but be observant. Discount for people who buy frequently and those who buy in huge bulks 5% is enough.
When you have a Vision don’t wait for someone to tell you it’s a brilliant idea. When you feel it in you that it’s going to be a hit, when you are totally sure about it go for It, like go down straight for it no matter what go for it chase it until your legs can’t anymore.
Fundings are tricky because this one requires your communication skills. By communication I mean writing and speaking to present your idea.
Trust me it’s not easy because the vision you see you have to put it in someone’s head so that they can see it too. If you fail to do that trust me you won’t be getting any response. Harsh isn’t it?
Plus again to get funds you have to have some capital as well, let’s say you write me a project proposal asking for funds of 90%, I’m going to expect to see you with at least 10% of the money so that I know where my money is going if it’s going to serve a good purpose and that my money will come back to me with its interest(this is where it’s complicated).
When you ask for funds…
If you completely flat broke but have a brilliant idea that your completely sure that it will blow. Offer your investor shares as bribery, but make sure you take most shares than the investor this way if he offers you funds, the you owe him nothing you don’t have. To pay him back his money with its interest it’s much like a loan from the bank. You take a loan you pay it back together with interest same with fund raisers. But of course they can still decide what they want. “I’ll fund you the money and you pay me back quarterly or monthly with its 10% increase depending on what you offer”.
So basically it’s sweet talking funders?
Yes, exactly much like proposing to a girl you just want to sleep with, you first have to convince her you love her even though you don’t.
It’s a crazy example ain’t it? It makes learning fun! Doesn’t it? Plus it’s hard to forget.
If I’m employed can I ever acquire assets and soon make money from my assets? Yes it’s possible; by turning debt to income(debt buys you an asset, and assets bring you income).
This story was authored to fit the Zimbabwean situation of a fresh graduate earning an equivalent of US$500 monthly.
Tawanda is a 24 year old young man who after finishing his studies in a Science degree in Pure Chemistry at the National University of Science and Technology got a job at the Solusi High School. Tawanda had a friend who was an entrepreneur and running businesses all around Zimbabwe, Prince. Prince promised to assist Tawanda with financial literacy knowledge of how to make the most out of his earnings and he kept the promise.
Tawanda on his first year of working applied for a bank loan at 25% interest rate over 12months of US$1,000, which ment he would pay approximately US$105 per month to cover the loan. Tawanda consulted a chair manufacturing company in South Africa if he could order a batch of 100 chairs(Wimbledon chairs) and the company agreed to pay for the delivery of the chairs to the Zimbabwean border. With the help of Prince, Tawanda went to collect and pay for the chairs. At first, his parents saw it as stupidity why he would waste money on chairs.
Tawanda used part of his income(US$105) to pay for the first month of the loan, during that month he was creating brochures and social media flyers to alert individuals in Bulawayo that his chairs were now available for hire.
How did he determine how much to charge per chair? Good question. To answer that is a simple mathematical calculation which you can always use to determine the value worth of your asset (cost of asset x 5% x 13 x 80% = monthly revenue target ), with the use of this formula you can determine your daily target by dividing the monthly revenue target by 30. In this instance, if he is to hire all of them out, per day he has to charge US$17.30, rounded off to US$17 per day excluding transportation costs.
Tawanda bought 100 chairs worth US$1,000, directly implying that each chair cost him US$10. Using the calculation above; (10×5%x13x80%=US$5.20÷30=US$0.17 per chair per day) he would hire out each chair at US$0.17/day. Even if Tawanda loses his job to staff indiscipline, hahaha he still has income to keep him going through.
I am saying buy Wimbledon chairs and hire them out? No. All this story is portraying is that the little we have if carefully planned and fully utilized can increase our personal networth and network. Tawanda could have applied for a US$3,000 loan and bought himself a Honda Fit Jazz so to catch the eye of some attractive female students hahahaha, but income must come first before liabilities.
By: Mbonisi Siziba