Capital is the life
blood of a business. Aspiring entrepreneurs work to amass considerable sums for
future ventures. But is saving really the answer? In business, doing things
smarter means a lot: the formula of “industry, perseverance, and determination”
is passé and useless – unless one adds “brains” in the end. That’s something
successful entrepreneurs deliberately conceal. It’s a secret they hide to be
ahead of their competition. Going back to raising capital, what are other
viable means? What would be better than years of toil, saving up for that
badly-needed “capital”. Consider the following:
- Start small - if one’s savings isn’t enough to start his dream business, he should start from simple ventures. A buy and sell business is ideal for the notion that one can earn big returns from purchased cheap items that are resold. Items bought from Divisoria can be re-sold for twice or thrice the price one got them for. One can temporarily focus in this kind of business to save enough money for his dream business. Besides, the seed money isn’t too big to begin this venture.
Disadvantage –
unless one is skilled in product trends, one’s inventory can end up becoming
the dreaded “sleeping capital”. This is when items become unsold because of
lack of demand for them. Buy and sell vendors fear this, since all their money
is locked in them. This danger is greater for vendors of perishable items, like
food stuffs. Near the end of the day, these vendors are forced to reduce prices
to recoup investment, or worse, dump them and resign to a loss. Buy and sell
vendors also face stiff competition from other vendors, reducing their chances
from making sizeable sales. Unless they’re good at drawing and convincing
customers to buy their wares, they’re better off selling elsewhere or go into
other ventures. Anyone wanting this option is warned to carefully weigh whether
it’s a gamble or a risk.
- Earn capital from marketing your talent or skill – the good thing about this option is that one almost needs no money for it. He can peddle his skills first to family and friends. The word of mouth they provide about it can help him gain a sizeable clientele. Truly skilled practitioners can save a considerable sum, enabling them to pursue other ventures or further professionalize their current venture. They do so by purchasing additional necessary equipment to provide better service.
Disadvantage –
the only bad thing about this option is the necessity to acquire vital
equipment and consumables. In short, one needs money. For those with technical
skills to practice, tools don’t come cheap. Without them, an entrepreneur would
be unable to perform his service well. The necessary training is also
essential, but lacking the essential tools makes it pointless. Both go hand in
hand. Unless one’s skills are at par and has acquired the necessities for a
service business, he’s better off spending time with other options.
- Raise money from family and close friends – probably the easiest and surest way to gain capital. The simplest thing to do is to pitch them the business and ask for dough.
Disadvantage – easy
as it is, it’s not without its downside. Because they financially contributed to
the business, a reserved right to meddle is believed guaranteed. Even drawing
the line on what kin cannot and can do seldom helps. Especially for Filipinos,
doing so can be seen as ingratitude, or worse. The Filipino cultural consciousness
often causes to refute the logic of such delineations. As a close friend or immediate family, it is
right for them to do whatever they please. If one is truly people-oriented, he
is able to deal with these kinds of people in business. Otherwise, less
stressful means to procure capital are available out there.
- Money from usury schemes – usury is defined as a practice of lending money for interest. One common example are the loan sharks, like the notorious “payb-siks Bombay”. The credit card is another easy source. More so if its credit limit is from Php 250,000 and above – the amount being sufficient capital. The cash advances from these don’t need a guarantor, as well as collateral. Some successful entrepreneurs relate their experience of maxing out the cash advances in their credit cards. They used that to fashion their ventures into the ones much praised today.
Disadvantage –
the huge interest. If one is sure that the business can turn in revenue
suitable for BOTH profit and paying debts, there’s no harm in trying. The
deciding factor is the revenue potential. Credit cards usually charge 3.5
percent monthly. Loan sharks demand payment with 10 or 20 percent interest
after an agreed period. As before, one has to be careful whether this option
for him will be a risk or a gamble.
- Borrowing from Venture Capital firms – they lend capital ranging from 1 to 5 million pesos, without collateral. Payment is with 3 percent monthly interest. Aside from lending money, they also can invest in a business and partake in its management.
Disadvantage – unless
the venture’s revenue potential is in the millions range, VCs don’t bother
lending to modest start-ups. Aside from
being notoriously critical, Philippine VC firms are hard to find. One has to do
research to seek them out. But even if one does, they rarely respond to cold
calls. Networking your way to them through friends and acquaintances is the
best option. Mark Zuckerberg’s Facebook venture went full blast after an
associate introduced him to a VC firm that lent him money.
Lastly, banks and
micro-finance companies are other sources to draw upon. But they only lend to
businesses that have operated at least one year. Nevertheless, any determined
aspirant can seek any of the options here. The most crucial factor is that one
should not only know his business but himself. He must also differentiate
between a risk and a gamble. A risk is a loss that one can recover from – his
resources are not that too depleted so as to consider acceptable losses. On the
other hand, a gamble earns a loss that leads to a deluge of problems that can
go out of control. A gamble has too many considerations that confound the
venture along the way when errors occur. Furthermore, if problems are
encountered in a gamble, it turns hard to walk away – or worse.
Hence, the worst thing that one can do is
pick an option that he’s not able enough to handle.
