We usually have debates in my entrepreneurship class. One of these is whether money is all you require to start a business. This is never an easy debate.
There’s an entrenched view that money is ALL you need, or rather without having ALL the money beforehand, you cannot successfully start and run a business.
This is not a lie, it is just a half-truth and in fact, is one major reason why very many potential entrepreneurs will never actualize the wonderful business ideas stuck in their brains.
The biggest factor that counts in determining the success of a business is, as a friend of mine puts it, ‘guts’. The ‘gutsy’ person tries and commits to the success of the new business.
This is because the challenge new businesses face is that high-risk level at the point of inception. This gradually reduces as the business grows.
The reasons for this is that at the point of introduction, the business idea has not been proven as workable; the cash flow is still composed of cash outflows with minimal revenue inflows.
At that point, the business is also weak and cannot weather strong waves of competition and risks hence it is likely to collapse. If the business does not have many competitors, the risk still lies in whether it will be workable and sustainable and report profit.
The team that is running the business is still ‘young’ and has not gelled properly; and the leader has only began building his team, testing ideas and responding to market conditions.
This heightened level of risk at the point of setting up explains why lending institutions are hesitant to extend credit facilities to start-ups. This threat is what is also termed as entrepreneurship risk.
Many potential investors are not ready to take up entrepreneurship risks. This explains why lots of cash is stashed in bank accounts earning insignificant returns.
But I am not advocating recklessness. The ‘chutzpah’ to take on entrepreneurship risk must be backed by knowledge. Know your customer, know your team, know your product, and know your business environment, presently and the trends therein.
The approach to your idea must be dynamic and responsive to effectively incorporate ‘feedback’ that the market gives you. In fact, I see in the East African region; to do business effectively in any of the five countries, you must think regional.
In my reckoning, the most important things to consider are the business idea, the business opportunity, the people and the money in that order. The business idea is supreme. It is the one thing that determines all else.
It prepares you to identify and take advantage of the business opportunity and determines how you will profitably utilize that opportunity and what resources you will put in place, among them people (partnerships, human resources, etc.) and how much money you will need, where you will get it from and how you will allocate and pay it back.
But the most important thing to remember is the Swahili saying; ‘ukitaka kujua uhondo wa ngoma icheze’ if you want to appreciate the music, dance.
The idea is as good as its implementation. To know if the business idea works you must put it to practice.
Sam Kebongo consults in skills development and is a Business Advisor. He also teaches entrepreneurship at Rwanda Tourism University College.