Most entrepreneurs sit and wait for an investor to come in and save the day. They spend a lot of time and resources hounding potential investors without even considering alternative ways to come up with the capital they need to make their dreams come true.
Other businesspeople would like to start their businesses without the hassle of involving investors but are afraid of the alternative
Here are two alternative ways to finance your vision and a list of pros and cons to make your decision easier.
As the name suggest, bootstrapping is the Kiswahili equivalent of kujifungakibwebwe. You are going to be your own sponsor. This requires that you save money by yourself. You find extra jobs, you save every cent you have to spare; you sell valuables or whatever else you need to do.
- When you work with investors and even sometimes banks, you relinquish a level of control of your business. They want to be involved to make sure they did not waste their money. A huge investor may be very controlling. When your ideas or way of doing things collide, often the power lies with the person offering the fattest check.
- You do not owe anyone any money. Every profit the business makes is yours for the taking. You will earn back your initial capital faster if every cent is not shared with the bank or investors.
- The business is not crippled by debt. Money earned can be used to grow the business instead of paying off loans. Thus the business grows at a faster rate.
- It is the best model for small business or risky ventures where finding an investor is impossible or will take too much time, effort and compromises.
- If the business tanks, you bear the entire financial loss. Your savings die. When you use an investor, it is their money that is lost.
- It may take you a very long time to save up enough to start.
- If you can only get a little amount and start anyway, the business may fail due to lack of adequate capital i.e. it cannot sustain itself anymore
The business model will determine if bootstrapping is the most feasible option for you. However, if the venture is small or you can do it, I highly recommend it. You can always start small and grow your business. Most investors require a proof of concept before diving head first into a business. Small well managed beginnings are the way to provide that. It is easier to sell an investor on a small business operating from your garage and making small profits than it is to sell her the world’s brightest business plan in theory.
They say that if you want to go fast go alone, but if you want to go far, go together. The same is true for business. Steve Jobs and Wozniak, the Paul Brothers, the Neistat brothers, Warner brothers, Anjawalla and Khana. Partnerships are not just a great way to finance a business but also to bring ideas together.
A disclaimer is that the partner you choose is crucial. The easiest and worst way to pick a partner is find who has the most money to bring to the table. The better way is to build relationships in whatever field it is you want to venture into long before you actually do. Relationships allow you to know if your ideas are compatible, if you have a financial vibe, a business chemistry. These things will be essential when it comes to handling differences of opinions. A business partnership requires also high levels of maturity and some sort of code.
- Two is better than one, even in saving money. If you can save one thousand alone, together you can save two thousand.
- Silent partners are those who just bring money to the table but let you run the business. They leave you with enough autonomy and control of the business.
- Active partners bring with them more than just money, they bring their expertise and experiences as well. It is a small price to pay for complete control over your business. Additionally, the extra labour is not bad at all.
- When partners are not on the same page, things simply stall or worse still, they fall apart. Partnerships are like bands, most of them will make a lot of money then break up at their peak because of personal issues. Even then, this is not a fatal eventuality, a partner can always buy out the other or others and in the case of a firm, they can amicably split. I hear the Beetles are still friends.
- Unless one of the partners already has the capital needed, it will take partnerships half or a third the time it takes a sole proprietor to come up with the capital needed, but still a lot more time than it would take an investor.
So if you’re thinking about starting a business, there is no reason not to. Bootstrap, find a partner or find one of the myriad other ways available to you. With enough research and a little creativity, anything is possible.