It’s every entrepreneur’s dream to generate a lot of wealth as quickly as possible and for South Africans this dream never sees day, ‘95%’ of the time.
The South African Financial Industry has very low or no appetite at all for risk. Any startup business despite its viability is seen as a big risk and as a result of our financial institutions always want to share that risk with the owner. Sharing the risk means the owner must contribute a certain percentage to the capital required and this ranges from 10% up to 50% if it is a franchise. More often than not this contribution must not be a loan from another source as it technical means you are getting a 100% loan, it has to be saved or come from an investor.
The challenge for most start-ups is that they have big dreams / business ideas but they do not have the owner contribution that matches the size of the idea, this results in many business ideas being parked or entrepreneurs looking for business models that will not require them to raise capital. This then disadvantages the economy as opportunities to create employment and grow our GDP as many viable business ideas get shelved away.
In some instances the idea requires only 100k and raising 10k (10%) is still a challenge for most black entrepreneurs and it gets worse when your idea requires 1m it then means at the least you need to raise 100k.
To make matters worse, the government funding is also not adequate, as a result, it does not reach ‘1%’ of the entrepreneurs that are seeking funding.
As entrepreneurs, we need to find ways of emancipating ourselves as there is no-one who is going to bail you out unless if ‘o na le sa gago’.
I would recommend that we join forces when forming businesses and desist from having too many businesses that are not properly funded. We can still get to the many different goals that we want to get to but we have to start off by building one business at a time.
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If several of us connected together to work on one business idea, we will reduce / delay the salaries bill in the beginning thereby reducing the cash flow requirements on the business.
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We will avail more than one quality resource for the business compared to when we are alone. A lot of businesses succeed because they employ a lot of qualified and experienced resources who work on the business every day while you sit alone and think you can compete with an organization that has massive intellectual resources. Having many quality resources will also help you to brainstorm different ways you can use to fund your business or to navigate the funding landscape in terms of implementing the business idea in a way that you avoid requiring funding at the start-up level.
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Raising 10% of the required contribution can also become easier as you can share the burden. If there is 5 of us and we require to raise 100k to get a loan of 1m, the burden is 20k and that can change our lives forever. I know we all like owning 100% of nothing compared to 20% of R1m its R200k of probability and when that business declares R10m profit one day we will have R2m of an asset which we can then use to fund our other business ideas
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One other thing when we are many the businesses can earn the respect of our target markets thereby making it easier for us to penetrate the markets. Clients want to know what resources we have both financial and HR, we have to have something.
About the Author
Gibbs Mchasisi Nare is a seasoned entrepreneur who is self-employed since 2002. He owns a marketing agency and a business consultancy. He is a strategist of note, and has consulted for various small to large businesses including Fnb, Edge Growth, Black Umbrellas and Transnet.