Nowadays, there seems to be an acronym for everything under the sun. Most of them were coined in order to make students remember concepts or theories. One of the more popular ones is the 4 C’s of lending which helps lenders realise that they must assess the potential borrower on the basis of Character, Capital, Collateral and Capacity.
The investment community has taken these acronyms to a different level with the Coinage of BRICS (Brazil, Russia, India, China, and South Africa) to denote a basket of emerging markets. MINT (Nigeria, Indonesia, Nigeria, and Turkey) was also coined to reflect the growing importance of these frontier markets in world economics. Then PIIGS (Portugal, Ireland, Italy, Greece and Spain) was an acronym to highlight the most fragile economies in Europe at the height of the recent financial crisis. BBC (Banks, Brewers and Cement) is a fairly recent one that helps equity investors gauge direction of markets and economies in Africa especially, using these three sectors.
Well, while we’re all trying to keep up and make sense of these acronyms, I’d like to throw another one in. The 4 C’s of start-ups. As you might have already seen from the header, this stands for Courage, Concept, Connections and Capital…. In that exact order. The reason why I stress the exact order is that budding entrepreneurs often times turn the equation around, and look for capital, for instance, even before designing a concept for their business. Or they try to build networks and connections when they don’t fully believe in themselves and their business.
Courage
Whether you think you can, or you think you can’t, you are right -Henry Ford
Just start! That’s the message to would be entrepreneurs. If you wait for the perfect conditions to act, you’ll never get anything done. Conditions are never going to be perfect. As callous as the statement may seems, but the fact is that the world doesn’t owe you any favours. Often times you’re going to face resistance from friends, family and the likes. You’re going to doubt yourself a number of times, but you have to weigh your desire to start with where you currently are in life. When you hear the story of how the likes of Fed Ex, Linkedin and CNN started. It took the doggedness and self-belief of their respective founders. And the story goes on and on. If you don’t believe in yourself, who will? Well, you might ask, how do I build up courage? It usually doesn’t happen in one day. It comes from either being frustrated with your present position and you’re so desperate to make a change, or there’s a problem you desperately want to fix, or a tragedy happened that drives you to start even in the face of opposition. I think what I’m trying to get to is you need to really be clear why you want to go into business, because this will determine how you face any opposition. I believe this is the first ingredient that propels you make the required sacrifice. As the saying goes, entrepreneurs are missionaries, so you’ve got to decide what your mission is. It might be that you are fed up with the service you currently receive and want to provide an alternative, or you’ve got this passion that just won’t go away no matter how hard you try.
Concept
If the only tool you have is a hammer, every problem looks like a nail -Anonymous
Now after you’re clear why you want to go into business, you’ve got to come up with the concept for your business. OK, so you’ve decided that you want to change the world, improve an industry, or better a process. The next question is how to do this. This moves from the first phase of passion or courage to intelligence. You’ve got to determine the appropriate business model. This is simply coming up with how to deliver value and reach your goal while making enough money in the process. This will involve things like setting an appropriate price for your goods or services, determining who the people that need your product are and finding ways in which you can reach them. Sometimes it might involve testing your model on a small scale. As a start-up, what you need to realise is that you’re probably not the first person that’s doing the business you’re involved in, so you need to be creative, bold and radical. Look at established players in your field, what are their flaws? Ask customers of those established players, what will they like to see from their service provider? This will involve research and study. You have to understand the industry you’re looking to enter and the big players in that industry. Ask yourself, how can I disrupt the industry? As a start-up, one of the advantages you have is the element of surprise and flexibility. You can change your business model easily as opposed to the established players who have to go through a lot of processes. So you have to use this strength. Your mantra has to be “Differentiate or die!”
Connections
Your network equals your net worth -anonymous
Now that you believe in yourself, are convinced about your mission and have an idea of how you’re going to deliver your product or service in a profitable manner, the next step is to find others that believe in you. You want to find people who won’t discourage or dampen your spirit, but people who will help you along the way. Essentially, you’re looking for buy –in to your vision and business model. This could be suppliers, equity partners, mentors, potential management team or board members. You don’t have to pay the team now, but you want to convince them of your idea and get their views and consent to use their names and profiles on your pitch documents. A number of these people might be willing to offer their services for free until you start generating a profit. You’ve got to be creative and offer things like flexible hours and the likes. You also want to get the right team in place. The truth is that the world makes way for the one that knows where he’s going. So you don’t want to have to meet people when you’re not entirely sure what you want to achieve. People like to back someone who’s confident and who has put some thought, research and effort into coming up with a business model. Chances are that you will get people willing to back you up, because you’ve done your homework well and you’re filling an identified need in a profitable manner.
Capital
Capital is not scarce, vision is
-Sam Walton
Capital is very neutral. All it wants is returns, nothing more nothing less. After having gone through the above steps, you should be able to prove that your business idea can generate funds for potential investors. They will be looking to see who will be running the business. So if you’ve done your homework well regarding partnerships, then you’ll have a sound management team or board of advisers. They will be looking to see your business model. Again, if you’ve done your work well on the concept phase you should not have much issues here. You also need to understand the kinds of capital involved here. You don’t want to take too much debt at this stage, because you haven’t yet fully tested your concept and model. If you get debt, let it be soft loans from people you know or from lenders with generous terms. What you need most at the start up phase is patient capital. Note, though that capital doesn’t necessarily have to come in the form of cash. It could be in the form of equipment, a large customer taking a stake in your business, a large supplier having a stake. Again, as a start-up, you’ve got to be creative and radical
If you don’t get the adequate capital for your business, don’t be discouraged; remember why you’re in it in the first place. Your mission! Rehash the steps over again. Ask yourself, how do I achieve my mission in a different way or with a reduced budget?
As a budding entrepreneur the things you need in abundance are actually the intangible things like courage, creativity and the ability to connect and sell your vision to others. These are the things that differentiate you from the next start up and it’s what that will keep you when the economy is going south, when customers are not coming, when sales are down or when there is a crisis. Especially as a start-up, you need them. You’ve got to believe in yourself, you’ve got to be mission focused, you’ve got to convince other people about your mission and you’ve got to be creative about achieving your mission. Capital is neutral and external. But capital looks out for these other things before it decides to take the plunge.
OgucheAgudah is an associate of both the Chartered institute of bankers and stockbrokers Nigeria. He currently works as a special assistant to Nigeria’s minister of Industry, trade and investment with a focus on improving the access of Nigerian businesses to finance.
He can be reached on [email protected]
