Young entrepreneurs have been encouraged to not be deterred by challenges they encounter when starting their business ventures. This is because most businesses initially face difficulties.
Young entrepreneurs have been encouraged to not be deterred by challenges they encounter when starting their business ventures. This is because most businesses initially face difficulties.
The Chief Executive Officer of Dalex Financial Services Limited, Mr Kenneth Thompson, made the statement when he spoke at ‘Servled Friday’, an event held every Friday (free of charge) in Accra at which accomplished entrepreneurs and business leaders counsel young entrepreneurs. He noted that about 70 per cent of businesses fail in the first five years largely due to the complexity of obtaining money either to sustain or expand them.
The forum, organised by African Entrepreneurs Hub (AEH), is open to young entrepreneurs who are desirous of building sustainable businesses of African origin.
Financing business
Speaking on the topic, “Financing your business with other people's money – friends, family and fools”, Mr Thompson said most start-ups failed because the right tools to propel them were not in place.
Nonetheless, he said, with careful planning and a good team and strategy, it was possible to become successful.
He advised young entrepreneurs to look out for the 3fs when seeking funding, that is friends, family and fools. He said these should be any entrepreneur’s first point of reference.
He said, among many reasons, the three groups were considered because they provided strategic credibility, quicker funds and were less bureaucratic even though they would harbour uncertainties.
“The first integrity check is whether your friends and family believe in you strongly enough to give you seed money for your new idea,” he said.
He explained that people who had not had any of their family or friends show interest in their ideas were less likely to be considered by outsiders for seed funding.
Secondly, he said, investors would want to know if the entrepreneur was worth the investment risk, was passionate about the business and whether he or she had researched thoroughly on the path he or she wants to follow. Additionally, investors would want to find out if the entrepreneur had made any personal sacrifices along the way.
The Chief Executive Officer further advised that when going for money, entrepreneurs should ask for the minimum amounts, set themselves milestones and ask for more when they had achieved them. He said they should also be prepared to spend time with ‘potential investors’.
He advised up and coming entrepreneurs to communicate risks involved in the business and also endeavour to document agreements.
”Even though friends and family may be willing to help, they should be made to know what's at stake, by having in place agreements which should include payment terms.”
Mr Thompson said it was a privilege but not a right for anyone to fund a business and cautioned against taking money from people who cannot afford to lose the money they have invested.
