One of the single most contested topics in any entrepreneurial discussion is funding.
- Is there enough?
- Can business owners access it?
- Do you really need external funding to grow?
Raymond Ndlovu, an investment executive at venture capitalist firm Invenfin offers growing businesses three key pieces of advice when it comes to funding a growing business.
Understand when you need funding – and when you don’t
Before you do anything else, evaluate why you think you need funding. Is it to grow? Will the influx of capital allow sustainable growth, or will the growth simply burn more cash than you make.
We often see business owners who bite off more than they can chew in the name of growth. Investing in new products, machinery, staff or office space is all fine and well, as long as the additional income covers the investment. In many cases it doesn’t, and a business that was doing well is suddenly in dangerous territory.
My advice? Stop worrying about where you want to be and focus on where you are.
Allow growth to happen when the business and market conditions are right, not before. Once conditions are right, you can either fund the growth internally, or approach an investor with a clear and sustainable investment opportunity, or safe and sustainable loan application.
Concentrate on making more sales
Find the right customers at the right price point and your profits will naturally increase. Manage your money wisely and you’ll often be able to fund growth internally, without outside funding – or at the very least you’ll be able to merely supplement growth with outside investment. So, how do you concentrate on increasing sales?
Have you been studying your clients and potential clients? Have you evaluated where their potential value leakages are? Approaching a client and saying, “I’ve noticed your business has value leakage in this area, and here’s how we can help you improve your systems,” is a very different conversation to a straight product or service pitch. Your company exists because it adds value to something – you need to show this through the context of their business, not yours.
There is a significant pool of under-utilised, investible capital on corporate balance sheets, and a policy environment that encourages enterprise development and preferential procurement.
If you have the right idea, product or service, and you can present it to big corporates in such a way that it suits their mandates and speaks to their needs, that capital is readily accessible. There is a huge opportunity here, but again, it needs to be viewed from the perspective of the corporate. Always start by understanding their burning need, and then developing a solution that solves that need.
- What are their headaches?
- How can you solve them?
If you switch your thinking from what you need to what they need, opportunities will open, sales will increase, and growth will follow.
- Player: Raymond Ndlovu
- Company: Invenfin
- Expertise: Venture capital funder
- Connect: www.invenfin.com
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Why You Need A Million-Dollar Pitch Before Your Start a Business
You’re not ready to launch your business until you can explain in 20 seconds or less how it helps someone.
I would argue that you should not try to start a business until you can clearly articulate how you help people in a pitch. Pitching is vital to your success so it makes sense that you need to master it before you can launch a business. Why? It forces you to focus on what you can do right now and what problem you solve in the marketplace. It’s the value of your business in just a few words.
You will need to pitch your product, idea, or service to:
- Turn strangers into customers
- Attract investment partners
- Hire new employees
Before anyone is going to do business with you, you have to get attention. A million dollar pitch is a short commercial that will attract attention and make the benefits of your company tangible to a customer. It should be 20 seconds or less and help the person take an immediate interest in what you do. It’s a simple statement with a specific goal.
How much time have you invested perfecting your pitch?
If you’re saying to yourself right now that what you do is “too complicated” to put in a few words, you probably lack clarity about what you’re doing. It might also be a sign you’re only thinking about making money instead of how you can add value to others.
A lot of people cannot articulate their value in a few words.
There are so many distractions out there, so you need a well-crafted pitch to cut through all the noise. People call me all the time on my shows with long-winded explanations about their business. When you’re pitching, no one wants to hear about your company history. I don’t say that to be disrespectful, but because it’s just the truth. You have to give someone a reason to want to ask more about you – that’s what a good pitch does. The other party knows the immediate benefit and whether it’s big enough for them to want to learn more.
What can you do right now?
Have you ever thought “I could do that too” when you hear about someone doing a particular activity to become successful? I always laugh when people tell me stories like this. Let’s agree that you can learn anything. Here’s my question: is your idea something that you could do if you learned it or is it something that you can do right now?
Before you can be successful, you have to base what you do in your reality. Ask yourself what you can do right now, not what you could do in the future. Unless you’re planning a career change, assess your income-producing skills that you currently have and centre your pitch around that.
What problem does this solve?
After you figure out what your skill is, you have to ask what problem it solves. If a lot of people are having the same problem then it could be a great idea for a business. Who is your audience? Who do you already know in the marketplace that already needs your product, that wants your product? Most likely it’s not going to be people around your street corner. Look for a market that already exists and see how what you do can help that market.
Putting it together
Now that you have a business idea based on these two requirements, create a 20 second or less commercial out of it. The shorter the better. Most people just string something together without much thought. It’s your job to create a powerful statement that makes it impossible for someone not to want to learn more about you.
Here’s one of my pitches “My company increases sales by 15 to 20 percent and we’ll do that in less than 14 days.” Look how it’s based on something that I can do right now and that solves a problem for a large group of people. Do you think that my prospective customer would be interested in what I have to say after they hear this pitch? I’ve used it many times so I can answer for you – yes!
Is your pitch effective?
What kind of response are you getting from your pitch? Are you getting people to take action or ask more questions? Aside from creating a compelling pitch, it has to be practiced to be effective. Why do you think I wrote the Closer’s Survival Guide? It’s a training manual for closing – it’s essentially a bunch of pitches with the goal of closing the customer. I wrote them out and train them all the time. That’s what a lot of people miss. They could have killer pitch but are horrible at delivering them. You will only sell someone on your pitch if you train, drill and practice it until it’s second nature.
3 Tips for pitches
Clarify Your Goal: What is the purpose of your pitch? To have a successful pitch, you need to clarify your goal. Do you want the other party to sign a contract, agree to a meeting or sign up for your email list? If your goal is clear, then it’s much easier to create a pitch that serves that purpose.
Ask for Attention: You’ll have to get the full attention of the person before they will listen to your pitch. Never start your pitch before you ask them if you can share what you do. The best way to do this is to simply ask them. If you’re in an elevator ask, “can you give me your attention for the next 20 floors?”
Make It Memorable: A pitch is not an explanation of how your business operates or your company history – it’s a well-constructed value statement and it has to be BIG. You need to wow the customer and you’re not going to do that if your pitch is dull. It has to hit hard using a big claim. If you use my pitch as an example, it has a quantifiable result for the customer. That’s a good strategy to use. Show exactly how you can help that person. I always say show me don’t tell me.
Building a business one person at a time
Remember that strangers have everything that you want. Using a well-crafted pitch is the best way to introduce yourself to someone because you created it to get attention. It’s your job to make them interested in you. You must network and make your contacts grow so you can grow your business.
Promote and market yourself using your pitch 24/7. The better it is, the more attention you’ll get. Don’t be like everyone else and “start a business” before you have created a million-dollar pitch. I can tell you from experience that if you follow these simple steps, you’ll have a better business and will be able to sell more people on your ideas. Let me know how this strategy works for your business.
This article was originally posted here on Entrepreneur.com.
Financing That Backs Entrepreneurs
The SME landscape is fast and flexible. It requires financing that understands how entrepreneurial businesses operate. Through its unique processes and assessments, Spartan’s finance solutions are geared to do just that.
It takes an entrepreneur to know entrepreneurs, which is why Kumaran Padayachee and his team at Spartan are dedicated to financially backing an often-underserviced sector: SMEs.
“We’re fast, we’re flexible, and we’re understanding,” says Kumaran. “Every single person who works here is SME-centric. We hire for fit, looking for empathy and alignment in every position. All of our processes and assessments are done with empathy and understanding towards SMEs.”
Becoming funding ready
Thanks to these systems, processes and the team’s unique way of assessing SMEs, Spartan typically grants finance within seven days, although the fastest approval has been six hours, with the longest 15 days.
“How quickly we can approve finance is determined by how prepared the business owner is,” explains Kumaran.
“Do they have all their basic documentation ready? These include financials, management accounts, debtors age analysis and creditors age analysis. From a working capital context, this information makes it easy to assess the health of the business. Every business owner and financial director should be on top of these figures.”
Finding a funding fit
Not every business needs funding. Some can grow organically and draw on their own cash reserves. Others choose an equity route.
Spartan is a debt funder. However, even as a debt funder, the team’s aim is to back entrepreneurs and help them grow their businesses. They evaluate what the finance will be used for, and if the return is greater than the repayments.
“There are numerous ways that finance can be applied incorrectly by SMEs,” says Kumaran. “One of the first flags we look for is debtors age. If the industry norm is payment in 30 days, but a business is typically paid by its clients in 60 or 120 days, then we know there is something wrong with their internal processes. Either the company is too shy to be assertive with clients, or it lacks the capacity or capability to invoice clients and collect cash efficiently. Either way, the result is a shortage of cash.
“Business owners in this situation apply for a loan in order to be able to pay the bills, when they should be reviewing their own business, pulling one or two levers, and improving their cash flows.
“A customer project or contract is an example of an expansionary and positive need for finance. These cases are ideally suited to bridging finance. The problem is that there’s a lead time gap. You need to start the project, spend cash to hire people or purchase equipment, build internal capacity, deliver on the project and then the customer only pays you. Working capital and bridging finance allows the entrepreneur to do just that, and the company grows as a result.”
Bridging finance, in particular, is high risk and requires a large amount of flexibility, which is why more traditional funding institutions shy away from it. Spartan, on the other hand, offers revolving bridging loans to customers the team has worked with. “We understand this space, and our aim is to support the entrepreneurs within it,” Kumaran concludes.
Alternative finance solutions
Spartan is a 36-year-old Non-Bank Finance Company — that specialises in financing Small and Mid-sized businesses by providing:
- Growth Finance [structured finance for expansion]
- Specialised Asset Finance [equipment/machinery/technology/software/office fit-outs/energy/etc.]
- Working Capital Finance [bridging finance & medium term loans].
Bridging Finance is available for one to three month terms and is ideal for contract or project-based businesses. It is a solution that assists businesses with solving cash flow issues due to growth related challenges in their business and is either for a once-off need or for revolving business use.
Spartan is an Authorised Financial Services Provider 47631 and Registered Credit Provider NCRCP8669.
Is Venture Capital Right For You?
Take this online test to find out if venture capital is what your business needs.
It’s important to know the ins and outs of venture capital before applying for backing as it may not necessarily be the right solution for all entrepreneurs, or for the particular stage your business is at.
To help prospective businesses determine if they are suitable candidates for venture capital funding, Mark Shuttleworth’s local venture capital company, Here Be Dragons (HBD), has compiled a venture capital readiness test. To check your readiness – visit the South African version of the site – Knife Capital below.
Take the VC Test
The HBD test is quick and practical, designed to educate and prepare potential applicants for what they can expect from venture capital.
The test guides applicants through an umber of important decisions and points they will have to consider carefully should they wish to embark on a partnership with a venture capitalist. Consisting of three deal breakers and another 15 questions, it looks at the components of a venture capital investment.
Questions such as: “Will your revenue grow by at least 30% each year?” and“Are you prepared to part with a significant ownership stake in your business which may result in the loss of control?” are tough choices that need to be made ahead of time. Your answers will determine whether you are on the right track for venture capital.
Take the test at Knife Capital.
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