4th May, 2017
Setting up a business is awfully easy. It actually doesn’t take much to start; it may be that you have identified a niche that remains unexploited, or an ambitious project you have always harbored and think can make you some money. It could even be a hobby which you finally convert into an income earner. Find an appropriate name, register it, perhaps get an office (or work from home), get a website and voila, you are in business!
Well, that’s the easy part. The hard part has just begun. Starting a business is one thing, nurturing it to growth and maturity is another.
Sitting on the Lions’ Den – KCB Bank’s reality TV show – gave me a glimpse into the Kenyan psyche never before seen in my business life. In Season I, there were hotshot ideas; those that every Lion wanted to invest in, those that we haggled on and agreed to partner in and then those that no one was interested in. Need I add that there was a handful that offered some comic relief?. We saw it all.
There was something that underlined the whole show – and every presentation, a hunger and desire for enterprise, to make some money. But just what makes a business idea tug at the mind of an investor?
What does the investor you’re trying to talk into financing or buying your idea look for? The answer is in responding to a need.
Take M-PESA for example; why did it become a roaring success? It was answering a need. Why did KCB-MPESA become an overnight success? It was answering a need.
Investors are always looking for a good idea and more importantly, a great executor. But it is critical that the idea you’re selling to an investor provide an answer to a problem. A great thinker of our time Myles Munroe, himself a successful entrepreneur said that any time you see a problem in society, it points you towards a business idea. Businesses solve problems – period.
An investor is looking for both an idea and the capacity to execute it. After agreeing to a deal on the Lion’s Den, we later sought face-to-face interviews for clarity and to determine the capability of the said entrepreneur to execute the idea presented. It’s interesting that people use friends and family to pre-test an idea because they believe in you sentimentally. If you are, say, into fabric design, it does no harm to make the first design for your auntie or cousin. Make them your first critic or fan for that matter.
It is crucial to develop a certain level of emotional intelligence. Are you prepared to take ‘No’ without allowing it to kill your dream? Are you capable of following your critics by following through on the validity of the idea or what will make it better? Are you open to trying it out a different way? And then take off from this new platform?
A requisite element of any business is business valuation, especially when courting an investor. Which I must admit was an area in urgent need of skilling. See, many people value their business from an emotional perspective, they love their business ideas so much that they attach an imaginary value to it, but in essence the impact of the business in society then determines its value. Always think about it this way, if I close my business? How many people will realize that am no longer in operation? And in turn? How many people will be affected in turn?
In reality, there is no standard way of valuing a start-up but financially, multiples of the firm’s revenue and profitability to arrive at this. Although this may not be easy for start-ups being without a track- record in prior operations, but with some groundwork and proof of concept, it’s possible to see where the business is going.
So you have the idea, what next? It is advisable to secure intellectual property rights to safeguard the future. And Kenya Intellectual Property Institute (KIPI) would help determine whether the idea is patentable. A lawyer would also be of great help in addition to some basic online research to establish the patentability of an idea.
You might have a business that looks good today but with little or no lifeline in the future, Look at the opportunity in the future, low barriers of entry and high competition; the faster you are to market determines whether you end up with a good market share or any share of the enterprise pie at all.
Article first appeared in the Standard Newspaper
