Use the word organic in any setting and you are likely to get attention. It is normally associated with things that are natural, healthy, pure, untreated and green, from village chickens, farm eggs to renewable energy. Building businesses can also be done organically.
Building a business organically means that you start small, with the little resources that you have, a ‘friendly’ loan from a friend, from a relative, your own savings, from your stokvel or from your savings club. If you are lucky to have inherited a cow, you can use that as your seed capital. Build and sell your product to one person who tells another and another and another, and before you realise it, you have ten customers, twenty and so on. That is the track record funders and investors look for. That is the traction that funders and investors love. Build a track record, apply for a small loan, grow your business, pay back the loan, apply for an even bigger loan and before you know it, you have a bankable track record. An entrepreneur following this ‘green’ startup building approach is going to take out a lot of the risks out of the business. And funders & investors love de-risked investments.
Now, how do you build a business from ground up?
- Build a team that has the right skills set. Find a good partner who shares your passion for the opportunity that you have seen and who complements the skills you have. Technical, marketing and financial management skills are critical. Give your co-founder equity or shares in the business.
- Rope in a mentor. Successful business people in your community are always willing to assist. They will provide you with valuable expertise and connections.
- Raise capital from whatever sources you can. Funders don’t take kindly to giving you capital before you can show that your business works. Pool your savings together with your founding partners, borrow from friends and relatives, sell your idea to business people you know, get a second mortgage on your home, get a personal loan from a bank.
- Accurately define who your customers are going to be. Who are they, where are they, how will you find them.
- Get out of the building and talk to them. Ask them if they have a problem that your product or service solves. If you intend offering nothing different from what is already in the market, go back to the drawing board. Being BEE is not good enough, the product or service must provide better value than existing products in the market.
Build your product and start testing it with your market. This is where rubber hits the road. By actually selling a real product, you will prove if there is customer demand to build a business, you will prove that people see enough value in your product to pay the price that you are asking for and that gives you the profit that you want. Most importantly you will prove that you have the technical knowhow and the business acumen to deliver on your promise. - If the costs of building the product and testing its traction are high, put your idea on paper & start testing it with customers: ‘Does this solve your problem? How much would you pay for it?’ Ask potential customers for letters of intent and offer free trials. This is the kind of evidence that can sway investors, even if your product is only on paper.
Let’s talk again next week when I bring you the 7 things that you need to know to get your business funded.
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Building Bankable Startups 