It’s either funded or found dead
Time and again, concerns have been raised by certain individuals who are disgruntled and rant over their inability to access funds for their alluring ideas or projects. Many of these entrepreneurs sometimes have a good business plan. What is the essence of an idea or a business plan that only shines on paper? In other words, the glory of every beautiful idea is in its actualization or call it implementation. Otherwise, the owner will soon join the teeming owners of castles in the air.
What then are some of the factors investors consider before they put their money in a venture?
- Product acceptability – For ethical reasons, some ideas, no matter how beautiful and promising they seem, may not see the light of day due to some social and factors. Entrepreneurs know exactly what they are creating. Consumers know exactly what they want. Investors know what is acceptable and what is not. Both the creator and the consumer decide emotionally, but investors make informed social and economic decisions before they get involved financially. An exception is the case of J.P. Morgan (investor) and Thomas Edison (inventor). In the movie series “The men who built America”, J.P. Morgan took a big risk by diversifying from his banking enterprise and diverting his resources on Edison’s invention – the direct current (DC) system. Electricity was not yet a ‘future-proof’ invention as America and the world at large were just evolving with every stage of the industrial revolutions. Here came Nikola Tesla, Edison’s apprentice who worked closely with the legendary inventor. Moving to the United States, Tesla found himself working under the legendary Thomas Edison. In his book titled “My Inventions”, he describes their initial collaboration, where he helped perfect the direct current (DC) system, but also the growing friction as his own ideas for alternating current (AC) system clashed with Edison’s vision. This clash made Edison to convince both his investor and probably potential investors of the potential dangers and hazards in Tesla’s AC. His assertion was confirmed and established when it was proposed that alternating current be used to execute a prisoner. Woah! It did electrocute! This sent fears to all Americans and everyone who had initially welcomed the invention of the ‘safe’ DC system and it’s ‘consumption’ began to judge electricity as ‘unripe’, untimely and unsafe invention for the people to harness. Potential and ‘kinetic’ investors took to their heels. (What would you do if you were in their shoes?).
Tesla later found an investor when he changed and modified his invention’s narrative from domestic use to industrial use. His unwavering belief in AC eventually led him to develop the polyphase AC system, revolutionizing how electricity was generated and transmitted. He details the struggles and triumphs of bringing this technology to the world, eventually winning the “War of the Currents” and setting the foundation for modern power grids. Also, for Edison, the orientation of Americans was later ‘re-shaped’ to align with Edison’s initial vision of electricity through the leadership and vision of the legendary investor , J.P. Morgan. General electric was birthed. The rest, as they say, is history (his story).
- Accessibility of raw materials – It is one thing to have a product, it is another to have unhindered access to the raw materials used in making the products. If for instance you are into furniture making and the government comes up with a policy to ban deforestation, resulting in the paucity of your primary raw material(s), you will have to either improvise or source for them elsewhere. This may affect your business and plan and may ultimately discourage investors, since production cost may be affected and distribution channels distorted. Well, this may not be a serious challenge for high margin businesses like the extractive industries, where return on investment outweighs production cost. Mineral resources and oil are in demand globally and industry experts are constantly exploring alternative means of getting their trade going. The shale oil system discovered in the United States is an example of the doggedness of the global economies who will stop at nothing to develop and boost their economy by constantly innovating and producing finished products. “The reasonable man adapts himself to the world. The unreasonable man strives to adapt the world to himself. Therefore all progress rests on the unreasonable man”.
- Business profitability – Nobody wants to experiment with their resources. No investor is willing to implement an idea that doesn’t guarantee a return on investment. Every would-be investor wants to know the profit potential of what they are investing in. If an investor is not convinced enough about what he stands to gain, he will never stake his resources. An investor wants to know how much problems your idea can solve and its ‹product economy› (Does it have the potential to birth multiple products?). For instance, imagine if when oil was discovered, its utility did not go beyond the Premium Motor Spirit (PMS). A mono-economy is no economy. If you sell cars, also sell car accessories. If you have a school, don›t limit it to the sciences. If you are music producer, you can as well direct movies. Real investors want to see the necessity of your product as well as its diversity. Variety is the soul of business. One brand, multiple products confers profitability and attracts investment opportunity. What consumers buy and even pay a premium for is called. VALUE. Money will always flow in the direction of value. Once your business idea is value oriented and problem-solving, getting the right investor for funding will be a walk-over.
- Business stability – The stability of a business is not guaranteed in any clime. For instance, government policies may sometimes be inimical to businesses, ultimately affecting growth trajectory. This is a critical challenge for entrepreneurs, but not a tragedy. The tragedy actually lies in not being able to set a formidable structure for your enterprise. Vision precedes structure, while structure precedes system. Business stability is at the mercy of the level of organization an enterprise is able to wield. The more organized you are, the more you›re ‹patronized›. No matter how beautiful a chair is, if a part of it is broken, it becomes unsuitable for use. No matter how expensive a car is, without car seat, no one is comfortable driving it. The same is true for a business or an enterprise, no matter how lofty your goals are, without a structure (Plans A to Z), investors may not be willing to come close. Profitability or profit stability is not the same as business stability. Structuring a business is not a one-off activity, it is daily planning. Plans are worthless, planning is everything. A business may be making profit perpetually while gradually dying. Watch it! System and not profit sustains an enterprise.
- Sustainability plan – This is an offshoot of long term strategic business planning. It is everything about laying a foundation for an enterprise that will not only stand the test of time, but also proof to be socially, environmentally and economically impactful. These three factors are the components of sustainable development. «Sustainable development is exploiting present deeds without compromising future needs.
The recent explosion that rocked some parts of the city of Ibadan in Nigeria allegedly due to the activities of some illegal miners is a testament to the sustainability failure of the enterprise. Many lives were brutally and abruptly cut short as a result of the anthropogenic disaster. Gas flaring continues to degrade our environment. Reckless deforestation without planting back trees is not only unsustainable, but also unacceptable. An entrepreneur must understand that a business› primary objective is «people before profit». Sadly, the ruthlessness in the business world to make profit by all means is what makes some enterprises thrive, thereby giving rise to the «building and pulling down» syndrome which is counterproductive to nation building. It is worthy of note that the mantra – «If you see something, say something» is not only a security measure, it is also to ensure that we all get involved in practices that are not only economically sound, but also socially acceptable and environmentally friendly.
Contrib-author: Oluwabusayo Omoju
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