RAISING CAPITAL FOR YOUR START-UP VENTURE (4)

By Ayo Emakhiomhe.
http://www.coinboxbusinessservi
 

We continue our discourse on raising finance for your business at start-up.

We will be discussing on using credit lines to support your business.

Please note that all your comments are very welcome.

1.     Credit lines

This is very common in retail businesses. This is about establishing a line of credit with your suppliers/bankers.

What you do is agree a period of payment for goods supplied to you with your supplier. It might be for 5 days, 15 days, or even as much as 180days. What it means is that for the defined period, you do not need to pay for goods supplied to you but you can sell the goods and put good use to the money to generate further income before paying for the goods and getting more supplies. This eases the need to pay cash for goods bought and helps you run such aspect of your business without using your cash.

To achieve this, you must have had a good credit history and you must be highly disciplined and focused so as not to misuse your supplier’s funds.

You can also negotiate a temporary overdraft with your banker to assist you with short term funding of your business needs. This allows you access to more cash to run your business activities.

To employ any of the methods outline above, you must have already done your research/feasibility study and prepared a business plan. If you have not, please prepare that first before deciding which method or combination of methods will best suit your business plan and needs. If you do not have a business plan, you are like a blind man that wants to run a marathon with lots of dangerous obstacle courses and your competitors are fully sighted while you have not the slightest idea of the track.

Also, always Endeavor to start small; Even if you have all the capital to hit the high market with your product or service. Always start with just a small test first. Do a Test run of your venture before slowly releasing funds to grow it to size. By doing this you will see any small problems that otherwise would have been hidden by large outlays and your mistakes and losses will be small. Also, backing out if necessary will be at minimal loss/damage.

The author can be reached at coinboxlimited@gmail.com or 2348023526682

www.coinboxng.com

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RAISING CAPITAL FOR YOUR START-UP VENTURE (3)

by Ayo Emakhiomhe

We continue our discourse on raising finance for your business at start-up.

We will be discussing on using contracts/exchange Avenue to support your business.

Please note that all your comments are very welcome.

1.     Contract/Exchange

You can also engage in simple exchange. This is simply exchanging what you have for what you need.

This method is on the basis that there is someone out there that needs what you have and has what you need.

For example, you may be a company that deals in keeping of company accounts and needs to advertise. You can negotiate a deal with an advert company or go directly to a newspaper/magazine company and negotiate an exchange deal- your service for theirs and both of you get what you need. The main challenge will be pricing for which an amicable agreement can easily be reached.

You need to be flexible in your negotiations to secure a good deal.

Exchange will work well for both goods and service needs.

When you have a contract as a start up for which you cannot execute all on your own either due to funding or expertise, what stops you from subcontracting all or part of the job to another person/company you know is equally competent.

Doing this will only reduce your profit margin but what is usually most important is that you don’t make a loss at start-up.

Depending on the arrangement, you might need to seek your client’s permission to do this.

To employ any of the methods outline above, you must have already done your research/feasibility study and prepared a business plan. If you have not, please prepare that first before deciding which method or combination of methods will best suit your business plan and needs. If you do not have a business plan, you are like a blind man that wants to run a marathon with lots of dangerous obstacle courses and your competitors are fully sighted while you have not the slightest idea of the track.

Also, always Endeavor to start small; Even if you have all the capital to hit the high market with your product or service. Always start with just a small test first. Do a Test run of your venture before slowly releasing funds to grow it to size. By doing this you will see any small problems that otherwise would have been hidden by large outlays and your mistakes and losses will be small. Also, backing out if necessary will be at minimal loss/damage.

The author can be reached at coinboxlimited@gmail.com or 2348023526682

Please don't forget to click on the 'join this site icon' on blog page to get the posts directly in your mailbox. Thank you

RAISING CAPITAL FOR YOUR START-UP VENTURE (2) By Ayo Emakhiomhe.

We continue our discourse on raising finance for your business at start-up which we started last week.

We will be discussing on cooperative societies and using lease/rent as the fund raising avenue to support your business.

Please note that all your comments are very welcome.

1.       Co-operative Societies

A cooperative society can simply be said to be the voluntary coming together of a group of persons to meet common economic, social, financial, and cultural goals through democratic enterprise.

Cooperatives societies are based on the cooperative values of "self-help, self-responsibility, democracy and equality, equity and solidarity among members.

A cooperative society has no limit to the number of members and can be set up to meet various needs. Joining a cooperative society will provide easy access to loans, asset financing, share of information, mutual business support. Every member of cooperative has equal voting rights.

As a member of a cooperative society, one can take advantage of discounts in bulk purchases and share in micro quantities among members.

Cooperatives are easy to form and the funds raised and profits are not taxed. International aid organizations are always disposed to providing grants to well established cooperatives.

A cooperative society is usually run by selected executives/trustees who are elected by the cooperative members.

The cooperative society is usually guided by a constitution set out by the members.

Another advantage of a cooperative structure is that it encourages a saving culture amongst members and such funds are invested as agreed by members.

2.       Lease/rent

When large capital outlay is required to acquire assets for a business venture, one can lease/rent such assets instead of buying outright. This provides cash for the business while still having full ownership of the asset.

This is common in manufacturing/distributorships. Instead of putting down such large volumes of unavailable capital to acquire assets/warehouses, you can simply lease/rent such assets and have cash available to meet your other business needs.

The advantage in this arrangement is the time value of money and effective management of cash flow.

A transport company for example can lease all the vehicles required to start and pay for the vehicles over their useful lives from the income generated by the venture thereby greatly reducing the cash required to start such venture.

Lease finance is available through various leasing companies, banks and finance houses all across the country.

Even some of the companies that sell/produce this heavy-duty/expensive machinery now personally provide leases for their equipment which includes service contracts that will ensure maximum performance of such machinery over their useful lifespan.

Why do you need to buy a building when you can rent one at start up?

The author can be reached at coinboxlimited@gmail.com or 2348023526682

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RAISING FINANCE FOR YOUR START-UP BUSINESS (1) by Ayo Emakhiomhe

Very often, we have great business ideas, set-up great award winning plans and then kill that dream instantly because we feel we do not have the finance to give life to the dream. What I have found out is that more often than not, we do not even need money to run that dream, no matter how big it is or how expensive it seems to be. All it takes is careful and articulate planning and patience and strong passion for the venture coupled with serious discipline and high morals. But this does not rule out the fact that some money no matter how small should be available to start and run the business from day one.

Even if you do not have this money for day one, you can still achieve your dream without it becoming a still birth.

Below are 12 ways you can still go about raising money to start and run your dream venture.

a.       Personal savings

b.      Family and friends

c.       Partnerships

d.      Esusu/Ajo (contributory scheme)

e.      Co-operative societies

f.        Lease/rent

g.       Contract/exchange

h.      Credit lines

i.         Credit card

j.        Business angels

k.       Venture capital funds

l.         Clients/customers

m.    Personal guarantees

n.      Insurance

o.      Private placements

p.      Bank loans

1.       Personal savings

This is the key source. Your personal savings stand as a major primary source to raising finance for your new venture. A new venture is considered as a very risky adventure and so a lot of financiers and supporters always shy away from going into this. But most times, if a form of commitment can be made by you in form of putting down your hard earned savings, people will be more comfortable diving in with you. With your savings too you can start and people will support your efforts (buy in), which is what will produce fruits. But if you had no savings to start the venture with, no one will even consider you serious.

It also will help you in getting leverage as banks and ventures that support start-ups and small businesses will always require an equity contribution[1] from you and your savings will make this a plus towards your goal of giving life to your business.

Personal savings can be in form of setting aside a certain percentage of your earned income as it comes. Your earned income will be in form of your net salary, profits from an ongoing venture, dividend received, profits on sale of an asset, etc.

To save successfully to start your business, you must set a realistic target amount and a date to have achieved this sum based on the current income stream you have. Also, you will need to be disciplined and watch your lifestyle, separate necessities from luxuries. If for example you change your car every 2 years even if there is nothing wrong with it. This is time to keep that car for a year or 2 longer to cut those additional costs and add to your business saving funds.

2.       Family and friends

This is another good source of funding your venture at start up. You can go to family and friends to solicit for contributions to your venture either in cash or kind. They might have a small office space to borrow you for a little while till your business gets a strong footing, they might have equipment you need for your venture they can give you as contribution to your venture. They could even simply be there to mentor you as people already in that line of business to ensure you succeed. Or simply they could loan you the cash to start your business for you to pay back when the company starts to make profits or at some other stipulated time or you could simply get the cash as their contribution to your venture.

You must have a plan and target amount on hand before you go to them. If you don’t have a plan or an idea of how much you need to start that venture, you will sound very unserious and no good friend/relative will invest[2] in such a venture with you.

3.       Partnerships

This in simple business terms is where 2 or more people (called partners) agree to come together to engage in a business venture. It is usually guided by a partnership deed. It can be formal or informal and the duration is as agreed by the partners.

As they say ‘2 heads are better than 1’. This arrangement is run on that setting. People come together to run a business especially in the service industry to synergise, to share the risks of the business, for technical competencies, to reduce the individual work burden. A partnership is usually easy to form and easily dissolved. Partnerships are usually formed by people after a common goal in the venture they are into; they share the same vision and passion for that line of enterprise.

When starting your venture, you might have the technical competence but no cash or equipment, or you have equipment and you want to use in another available product line, or you are a business angel[3] looking for where or who to invest your funds. All you need to do is find a person or company that has the cash and/or the equipment to partner with you and you are in business.

There are many individuals and organisations with equipment, products or cash looking for whom to partner with to run a venture. Many are online or you can even find them when you join the COINBOX ENTREPRENEUR NETWORK. This is one of the reasons why the network was set up by COINBOX LIMITED in the first place. Send an email to coinboxlimited@gmail.com for more details.

4.       Esusu/Ajo (contributory scheme)

This is one of the oldest known informal modes of raising funds for various purposes and events and even savings in Nigeria. It is a scheme in which a group of people come together and agree to contribute a defined sum on a periodic (mainly monthly) monthly basis. All or most part of this sum is then given to a member of the group for that month. This continues every month until everyone has collected his equal share of the amount. It is usually based on mutual trust and integrity as there is no regulation or written mode for conducting this practice. The name Esusu or Ajo is gotten from the Yoruba speaking part of Nigeria, the Igbo’s call it Isusu or Utu, the Edo people call it Osusu and the Hausas call it Adashi.

You can get your friends or colleagues to join you and start an Esusu system and use that as a way of raising the funds you need and automatically pay back over the period of the contribution. Note that it is interest free.

To be continued……………………………..

More information on raising finance by next post.
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[1] Equity contribution is your contribution to the amount needed as capital to start the business. Some corporations require as low as 10% while others ask for as high as 30%-40%.

[2] Their contributions in form of cash, loans, time, referrals or assets are investments in your venture.

[3] This is usually an investor who has a lot of cash to spare and would look for an idea or business to invest some of the cash in.