FINANCE AT YOUR FINGERTIPS by Moses Ayiku, Jr. MBA OP/ED
Last week we focused on the importance of writing a business plan and the options available for doing so. Over the years, there has been an increase in the number of people that deny the relevance of a business plan. While we can simply say that it is a matter of different strokes for different folks, the reality is that a business plan is simply a basic business tool. One is better off with it than without.
After all, before taking a risk with your time and money, wouldn’t you want to have an idea of how much you could be making, the risks involved in that industry, the key marketing strategies used in that industry, pricing trends, customer characteristics what works and what doesn’t?
We are all aware that raising money for investments is not easy. It makes sense therefore, to ensure that you have as much information as possible about the business that you are about to enter. A key part of the business plan is the planning aspect. With a good business plan, you would have a step-by-step strategy for getting the business off the ground and ensuring success. As the old saying goes, failing to plan is the same as planning to fail.
We also touched on raising funds for a proposed business. This is definitely one of the most challenging parts about setting up a business. It is not easy and what complicates it even more is the fact that everyone has a different financing profile. We however noted the dominance of self-financing as well as financing through friends and families as a core driver of many new businesses. They have worked in the past and will continue to work in the future. To get your business started having a great business plan to guide your operations as well as funding are crucial to your success. However, the battle is far from over just because you have financing and a business plan.
The next stage is implementation or the setting up of the business. This must be done well to bring the project to successful fruition. There are several things one has to take care of. One of them is successfully setting up the business so that it starts generating revenue. Equipment, location, personnel, management, banking needs are amongst some of the key set-up issues that need to be resolved.
Years ago, I was approached by a businessman to assist in him relocating his food factory from the U.S. to Ghana. The businessman wanted to take advantage of the Ghana Investment Code, which provided various incentives for businesses to be set up in Ghana. Some of the incentives included reduced or no duty for shipping equipment and other major production inputs.
My client had me write his business plan and I signed a contract making me the financial representative of the client. This meant handling all requests for information from the banks that my client was trying to raise money from to start the business. We encountered very savvy bankers who asked tons of questions. They basically wanted to know whether we had a grip on the business. Through our meetings and business plan, we were able to answer most of their questions. Any questions we couldn’t answer were areas we then delved further into to obtain further information. After all, it would only benefit us further to know more about the business.
Suffice it to say we were able to raise about $1 million in financing. Then we turned our attention to setting up the factory. Indeed, that is where we faced a major challenge that could have derailed the project. The equipment was shipped and when it arrived, we immediately hired engineers upon recommendation, to install them. After a while, the engineers informed us that the equipment was not compatible and would need to be replaced. This was a real downer for us! Buying new equipment and shipping it would not only raise the cost of the investment, but it would also derail the timeline for when production could start.
We did not want all this. The businessman spent time and money to determine the challenges in installing the new equipment. Eventually, he was able to find a solution where the engineers had said it was impossible. The equipment was installed successfully under his guidance and production was able to commence.
In the process of setting up your business, do not expect everything to go smoothly. Take all challenges that you face seriously and look for simple and effective techniques to overcome them. Your overall success would be dependent on all of these.
In the next part we will continue with information about starting a new business. Please feel free to share with me your questions and experiences on starting a new business. I will do my best to respond, and, in some cases, I will write on some of these questions.
Your questions and comments can be sent to localtalknews@gmail.com.
