Small businesses need capital to acquire production machinery and equipment to meet production targets on time. Fashion designers need modern industrial machines and fabric. Mechanics need the right tools, equipment and spares. Welders need good welding machines and welding rods. Capital is also required to brand the business so that it stands out and is able to attract customers. Without capital, these small businesses struggle to grow.
The first mistake that keep entrepreneurs from accessing capital is failing to bank the money they make. All funders want to see if a business is making money and the only way they are able to see this is by looking at your business bank statement. Money that is not banked will not show in the statement. And if it does not show, it means the business is not generating any cash. Without cash flow, funders cannot give you their money because they don’t know how you will pay it back.
Correct this by opening a business bank account. Bank all cash received daily. You can easily deposit cash into an ATM after work. Whenever you need to spend money, use speed point instead of cash. Keep petty cash in the business to take care of small payments.
The second mistake that keeps entrepreneurs from getting funding is failing to keep records. You need records to tell you how much sales you are making, who is buying your products, who owes you money, how much they owe you and where the money is going to. This way, you are able to see where your business needs improvement. Funders also need these records to see how the business is performing and to decide whether or not to give you credit.
To help you get started on keeping records, buy a receipt and invoice book. Invoice your clients and issue receipts for all monies received. Retail business can use cash registers to capture sales. Buy a spike file & keep all tax invoices that they give you when you buy stuff. For a small fee, you can get a bookkeeping service to capture all the information from your receipt and invoice books and to make sense of all the information.
The mother of all mistakes is failing to show demand for your product or service. You truly cannot go to a funder when you have not sold a single product. Startups make the mistake of thinking that a business idea that is captured in a business plan is a sure formula to get funded. No, it doesn’t work like that. You need to do the spade work to test your business concept with customers. Make a prototype or sample of your product & take it to your customers to see if they will like it. If they don’t like it, engage them to find out what it is they want. Use that information to improve your product or service. Take it back to customers & get their reaction. Until people are able to see value in what you are selling, you have to carry on with this to and fro process. When eventually you are able to get customers to buy and in large numbers, then you have arrived. You are now ready to build a business plan that shows how you will use the opportunity to grow the business and to get your product into the hands of the bigger market. Funders will love you and give you all the money you ever wanted.
Till next time, keep well.
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