I know this is a cliche, and everyone knows what it means, but most of the time we become too familiar with a saying or a statement, and this over-familiarity causes us to underestimate the actual meaning.
I was talking to someone yesterday, and he mentioned his desire to start the business of his dreams. Apparently, he already had the skill set and was running a small business, but it was not making enough money to make him a full-fledged entrepreneur.
He needed funding and felt that this was the final puzzle. He had everything planned out in his head, and he did not mention any potential challenges. It seemed like he would be very wealthy one to two years after starting this business, which worried me a little.
I asked him who his target audience was, and he was not sure. Then I proceeded to tell him about one of my business plans if I had money. I went ahead and told him who my target audience would be and how I planned to make money.
I told him this so he could refer to my target audience and possibly find his own, but there was no specific target audience. We were still talking when someone called his phone and asked him to do a job for him. When I asked him how much he wanted to charge, he said he was not sure if the person wanted to pay.
It occurred to me that the target audience is people who are unwilling to pay for the work he would do for them. My concern stems from the fact that he did not anticipate this as a potential problem. When your target audience is unwilling to pay at least 90% of what you charge, you will have a problem.
A Target Audience That cannot pay is a big problem
This problem prompted me to ask questions such as: what if he got the money he wanted but the business did not work? What if he got into debt and could not continue, especially after quitting his 9-to-5?
Pessimism Or Realism?
I understand that I sound pessimistic, but pessimism is simply the art of being overly realistic. Miracles do happen in business, but what if they don't, and you are back in debt after making a large investment, and the company fails after a year?
However, he was optimistic about his plans, and as a friend, I had no choice but to wish him luck. In fact, as a friend, I would give him money if I could afford it, but as a potential investor, I doubt I will. Investors are not sentimental people; they are realistic, and they want to make back every penny they invest in any business, including profits.
Friend Or Investor?
As a friend, I am inclined to support him even though I am aware of the risks, but I would not do so as an investor because that is where my line is drawn.
Business problems have ruined friendships.
Many of them
There are people who started out as friends and business partners and ended up destroying their friendship because of the problems and challenges that the business faced, which is why business should not be run on sentiment, but rather on figures, facts, and what is possible and impossible.
Raising Money Is hard
Now let me discuss how difficult it is to raise money. So I asked him how much he had saved up, and he said he did not have anything yet. I then asked him how he intended to raise that money, and he said he did not have any.
He earns an average salary, and in order to realize his dreams, he needs to save his salary for two years or so without spending a dime of it.
This is extremely unrealistic because he must feed, clothe, pay rent, electricity, water, transportation, and other expenses. On a monthly basis, these bills consume approximately 70% of his earnings, with the remainder consumed primarily by unexpected expenses.
What's Harder?
Raising funds for a business is difficult, but putting your plans into action is even more challenging. On the surface, money appears to be the most significant barrier, but this is an illusion.
The most significant barrier is the pressure to succeed.
This is why we have big plans even when we do not have any money, but some of these plans start to seem crazy once we have some. Many businesses fail after two to five years not because they were unable to raise funds in the first place, but because they encountered storms they were unable to weather.
I have experienced a lot of failures, and you will be exhausted after you have had your share. It is true that without money, you can not make more, but you can have all the money in the world and still fail.
Interested in some more of my works
Is it Easy To Make Money?
Nigeria: A Unique Business Market & Industry
Virtual Bank Apps In Nigeria: An Experience Of Gamification
How To Find The Next "BIG" Meme Coin
Personal Finance: Achieving Intentional "Saving" Goals
Playing The Survival Game: Human Nature In Introspection
"Un-PAYING" The Debt You Owe
Interested in some more of my works
Is it Easy To Make Money?
Nigeria: A Unique Business Market & Industry
Virtual Bank Apps In Nigeria: An Experience Of Gamification
How To Find The Next "BIG" Meme Coin
Personal Finance: Achieving Intentional "Saving" Goals
Playing The Survival Game: Human Nature In Introspection
"Un-PAYING" The Debt You Owe
Business is tough and I think it's a good thing that you didn't get involved financially. I have seen it break a lot of relationships. It really hurts when you don't have the funds to do what you plan to. It's a part of life and I agree that it's not realistic to save up when you have daily expenses. It might take years given all the cost.
It's truly not realistic to save up when you have living expenses. It's probably wrong to go into a business partnership when you're not certain the friend has a solid way to make profit from their business.
Business is indeed tough and the uncertainty can be overwhelming though.
I once approached a good friend of mine for a bussiness loan, a real investor, very wealthy man but two questions he asked me, I couldn't answer it to his satisfaction and that was it ..I couldn't get the money. He sent me back to go and re-strategize and come up with tangible plan otherwise I should forget it.
I totally agree with you that sometimes it's not all about money but good plans to succeed in a business...that's where the pressure lies and should be given a close attention if not, debt is calling
That's how rich people are. I think some of them wants to make profit from whatever venture they go in. I think the person didn't want to lend you money as a friend, they probably looked at you as an investor. If they saw your approach in a POV of friendship they might just lend the money..
It's life though. Life is unfair, and we just have to work harder and make better decisions, so that others might see prospect in us.
Money is a precious commodity as an investor, and you have to be careful. But without enough capital most businesses will fail, it's one of the biggest mistakes people make starting a business is having insufficient capital. I like helping my friends when I can and have done so many times in the past. I had one friend that did well and I still get a yearly check for my initial investment, but usually things don't work out that well. Caution with friends is smart as an investor, I agree!
I like helping too. Infact most times lol I wish I can help without going into any form of partnership. However the way it's going for me at the moment, I need smart business partnership. However I hope I can be in that situation where I can easily help friends who don't have the funds.
I think you're right. The Hallmark of an intentional business person is to have enough capital. It's why I've avoided a lot of ventures: no capital.
I can relate to everything you just said; someone spoke to me about the business he wants to start by March, and the business is capital intensive. After asking him several questions, I realized that the money he has won't be enough. When I asked him how he plans on funding the business when he gets stranded along the way, he said that's where I come in.
A lot of people venture into different businesses with just how to make money in mind without doing their due diligence, and that's sad.
Was the person going to put you in as the investor of their business? Well as a friend if you have money you can lend them, but if you're going in as an investor then you should be cautious. People can lose friendship by entering into business with their friends.
He wants me to go in as a friend, and neither going in as a friend or investor because he didn't do his research well. He only heard there's money in the business a decided to go in.
That's saddening. I think as a friend, the business relationship is flawed because you're probably going to be sentimentally invested, especially since you're not sure how solid the business is, which might cause issues in the future.
Unwillingly paying customers is a difficult business to build, and they could go as far as making you do their work for them in advance before they pay you, sometimes, they never pay, and keep cooking up stories on why.
I think viewing money as fuel could work here too. We might have enough fuel but if we can't drive the vehicle to our desired destination, then the fuel isn't really the problem here.
That's the problem of some businesses/services.
For example the price of an artistic work of art can be determined by the buyer. This is bad on the artiste who is bringing the service. Unwilling customers spells doom for a business or business person.
That's why most businesses of this kind are inherently unsustainable. Unless a platform of sorts is created but that too, makes the skill more or less commodity and price fluctuates depending on demand and supply
I have this business plan which I was about to pitch to a possible investor but seeing this seems like "a stitch in time". I have time to re-strategize and research on my target audience and a few other critical aspects that I didn't pay attention to.
Great. I think everyone who doesn't have money at this point has a business plan, money is just the problem.
Ok josediccus, that's a very important point but this is not happening with everyone because I have seen many people who are doing jobs and they spend almost 90% to 95% of their total salary xD.
What I am saying is job is not only the solution here. BTW valuable information.
We're saying the same thing. Unless you spent less than 30% of your salary on a monthly basis, it'll difficult to save..
Business orientation!
He could start with a little fund, work according to the plan mapped out if they're well calculated...with regards to how sustainable it's gonna be.
Just like you said, most times it's not about the availability of large funds but careful planning and management
Exactly my kinda logic, you need to spend money in other to make money