Sugar’s solutions to 3 of the most overlooked problems in startup financing


With entrepreneurship as the main thing in the country now, several people are coming up with solid business ideas that they believe can translate into successful business if properly backed. AS soon as most entrepreneurs have these ideas, the next step they take is to look for funding to back the execution of their ideas.

However, Brad Sugars, founder and chairman of Action COACH, a company with over 1,000 offices in 34 countries, believes that there are several other problems inherent in the fund-raising quest that could negatively impact on the business later on. Sugars should know a lot about this as he has owned and operated more than two dozen companies. These are his solutions to 3 of such problems.

Having an idea not a business plan

Most entrepreneurs sell ideas nowadays, instead of selling businesses. They often go into fund raising meetings with potential investors with just abstract concepts of how they believe the idea should work out and make money. There are no considerations to the management aspects of the business such as how to make money, loan repayment plans or the possible exit strategy for a venture capitalist. The danger is that in most cases, these entrepreneurs leave such meetings with their tails between their legs and not an extra kobo in their account. If somehow, they are able to wriggle out cash from the investors, their inability to implement and properly monitor their business growth will be quickly evident.

Sugar’s Solution: Put the required time and energy into writing a full-blown business plan complete with elements, such as a cogent business description, financial projections and a competitive market analysis. In addition, recruit a top-notch salesperson, a skilled marketer, an accountant with startup experience, other key personnel, and even outside experts like an attorney or business coach who can supply professional guidance. This way, you’ll be more likely to get your funding and spend it properly.

Not asking for enough money

A rapidly growing problem noticed in startups requesting funding is that more and more are asking for less money. Many are beginning to think that the greatest entrepreneurship story is that who made most from the least capital. For others, they are too optimistic about how soon they will begin to fill their cash pipeline and how fast the money will flow. While this attitude is good, the truth simply is without enough funding, your business will not last. As many as 79% of small business failures have been attributed to starting out with too little money.

Sugar’s solution: Calculate your borrowing needs based on your worst-case scenario instead of your best-case forecast. Have a cushion to tide you over in the event of slow initial sales or unexpected market conditions. Never be scared to ask for exactly what you have calculated. If your idea and plan is sound, you will get your cash.

Too many investors

The saying “Too many cooks spoil the broth” is also applicable to startup funding. Unfortunately, though, in a quest to get required money, entrepreneurs may have to deal with more than one investor or lender. More investors mean more people to satisfy, managing too many relationships and expectations and in some cases conflicting issues to address. As soon as they invest, no matter how small the investment is, everyone believes they have a say on how the business should be run. All of these require time that could be better spent on growing the business.

Sugars solution: The trap here may be seeking small amounts from several sources rather than looking for then few big guns that can back your business. Whatever you do though, ensure that you source your funds from as few investors as possible.

 

Chacha Wabara

Chacha Wabara is a legal practitioner, blogger and fitness coach. She has over 5 years experience in blogging and freelance writing. She has written several articles and research work over the years as a freelance contributor. She joins Nairametrics as Our News and Analysis Lead.

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