Every time I am interviewed about small businesses in Nigeria, I am asked how business owners or aspiring business owners can raise capital to start or grow their business. I usually say start with looking inward and re-investing. Then the famous Fs – Friends, Family and Fans. When the concept has been proven, you can then consider financial institutions and investors.
In reality, some of our clients are currently actively seeking additional funding to scale their businesses and it seems like a constant struggle with financial institutions being unwilling (or unable) to provide long term funding.
Whilst we grapple with the absence of long-term or patient capital, I have noticed another challenge with small business owners. This is a lack of clarity.
A couple of weeks ago, I spoke on one of the panels at the Connect Nigeria E-business conference and the brilliant moderator; Shade Ladipo put up an impromptu pitch challenge with the promise to give one participant capital for their business.
This pitch once again brought to the fore that a lot of SMEs hide under the guise of capital, as a reason why they are stuck in business. None of the participants who pitched could clearly articulate their business plan and how they were going to pay back the money she wanted to invest.
Your business will likely grow faster if you are clear about things like your business model, your market viability, your target market and your route to market strategy.
Another importance of clarity is that investors will have more confidence to invest in you when you can show them clearly what you will use the required funds for and how you will guarantee that they would not lose their money.
Which bring me to my final ‘C’.
We have heard it said so often that your network is your net worth and the real value of this is because of something called Social capital. Social capital is your ability to build a network of authentic personal and professional relationships that you can leverage on.
The importance of having such relationships is that they give you access to information and connection.
I spoke to 3 different business owners who are currently raising capital to scale their business in the past few weeks. One of them expressed his frustration about how hard capital was to come by.
The other two shared stories with me about how their connections had connected them with private investors who had invested in their business. This is the proverbial; it is not what you know, but who you know coming to play.
The first person might have worked hard, done the correct market study and proven his business model, but because he did not have the right connection, it left him struggling to raise capital.
As you work to grow your business, you have to ensure you are clear about your business strategy (this is usually what we do at Tale Alimi Global helping business owners develop and clarify their Business strategy) and you deliberately build authentic professional and personal connections.
One of the ways to build connections is to be part of a community. Our Business Leaders Circle is a community of progressive business owners who we work with and they also support each other to scale their business.
If you are in Lagos and want to know more about the community, you can attend our free taster session on the 17th of March. See details HERE.