LESSON 7: THE ENTREPRENEUR FINDING HIS but it's not.
If you report back to them in a
RESOURCES few months that you've finished your
product better or landed a few big
Avenues for Finding Starting Capital customers, they may then decide to invest.
4. Be Sure that Money Hatches Money
Self
- Do not use funds acquired to start up a
- Personal Savings
business to do something else, like buy car,
- Utilizing under utilized assets
take friends out to a party, pay school fees
- Money rounds
etc.
- Maximizing benefits from suppliers
- It is not ethical and will result in economic
constraints like failure to pay up your
Informal sectors
obligations when they fall due.
- Family, Friends and others
5. Pay Yourself a Salary and Use the Profit for
- Business Angels
Reinvestment
- Money Lenders
- Your business and your personal needs are
two separate entities. Cash outflows from
Formal sectors
the business should not be cash inflows to
- Financial Institutions
satisfy your personal needs.
Overdraft facilities
- Include in your operational costs, how much
Leasing
you will take home (salary) and use that to
Venture Capitalists
cater for your personal needs.
Bank Loans
- Any profits from the business must be re-
Mortgages
invested.
Micro-credit institutions
6. Take Feedback
- Government Programs
- If you talk to investors, you'll get feedback
Private Sector Foundation
on your business idea. If you hear the same
Presidential / state initiatives through
thing a few times, take those comments
Savings and Credit Cooperative
seriously.
societies (SACCos)
- Keep Your Eye on the Prize.
Grants
- Don't let looking for money stop you from
Finding Starting Capital: The 6 Principles of pursuing your business idea. If you spend
Action all your time begging for money, you may
not make any progress.
1. Bootstrapping method
- What probable sources do you know of? Other Factors that Influence Finding Starting
- Do not limit your options and be as creative Capital
as you can be when exploring start-up
Educational background
capital sources.
Economic conditions
2. Raise Funds from the Right Sources
Cultural and social norms
- Analyse the cost of capital from different
Novelty of ideas
sources. Use capital budgeting techniques
like Net Present Value and Return on Evaluating Starting Capital Options
Investment to determine if the cost of
capital is commensurate with your desired 1. The Risk / Return Trade-Off
rate of return. - This is the principle that potential return
- Determine credibility of your capital source. rises with an increase in risk.
3. Make Progress While You Wait - Low levels of uncertainty (low risk) are
- Sometimes investors will ask you to stay in associated with low potential returns,
touch and keep them abreast of your whereas high levels of uncertainty (high
progress. This may sounds like a blow-off
risk) are associated with high potential
returns.
- Types of risks
Capital risk Liquidity risk
Inflationary risk Market risk
Interest rate risk Legislative risk
Default risk
2. Capital budgeting
- Defines fixed assets and evaluating their
worth over time.
- Capital budgeting process: This is the
planning process used to determine
whether a firm's long term investment such
as new machinery, replacement machinery,
new plants, new products, and research and
development projects are worth pursuing.
- NPV
- ROI
- Other Methods (e.g. Payback-Period, etc.)
