Business Series 8: C for Capital

“Ideas are capital

The rest is just plain money”

German Bank

The Nigerian situation is a unique scenario; the marketplace has never been so threatened. I maintain that the average business man is a threatened species but the opportunities are still immense. In that light, the above statement is worth taking to heart as the worst of times are often the best of times.

What really is capital?

First, money is not real; it is a unit of measuring “economic value”. If you should obtain an executive MBA from Lagos business school, chances are that the “economic value” of your time would increase and hence your “take home”. Thus economic value could be “current” and “accumulated”.

My point is that if you are looking for “capital”, the first thing is to evaluate your current “economic value”. What is the current economic value of your time and your idea? It is not always exciting to see individuals of “near negative economic value” looking for capital!

You may not have a dime in your pocket but if you and your ideas have much “economic value” then leverage on that and you will find start-up finance. (I will do an article on leveraging on your economic value).

Your current “economic value” which is a summation of the worth of your idea, skills and time (by current market price!) is of more value than your weighted economic value (cash at hand).

There are 3 types of capital and 3 major questions

Faith Capital: you alone can bring this to the table

Human Capital: The summation of your experience

Money capital: what my friend Boma wants me to talk about!

a.       Can your faith carry it?

b.      If it can, can you?

c.       If both of you can, How?

THE” HOW” OF THE MATTER

1.       From where you are: we often underestimate/overestimate how much we need, sit down and calculate how much you really need. Write a business plan and see if you can observe the first rule of business “think big but start small”. Start from where you are: what you have!

2.       My capital: what and what can I sell? My money first, how can I leverage the resources within my control, can I back track the idea 3 steps backwards and start with the bigger picture in mind.

A home office, cyber office?, word of mouth advert, fbook?

3.       If I must borrow, let it be official: terms and conditions apply. Avoid assumptions, business is a serious matter. Family and friends are your best bet. Plan to repay.

4.       Equity: Can other people buy into my business? Do I need other people?  I always prefer a corporation with others with you than a partnership. Maintain at least 51% ownership. If other people can buy in, what are they offering? If you are taking people just for the money then take people who can invest more in the future, you could get better loan conditions in the future that way.

If you are a young man: an older, wealthier advisor could be a bonus when prayerfully chosen.

5.       Reinvest profits, no partying until you survive the first 3 years!

6.       Bank loans: not a good idea for a start up except when your “current economic value” is the collateral and expected profits far exceeds interest. If you’re idea is a very big one, mere preparing for a bank loan would help you shape up!

7.       As you start, let all your cash pass through a particular bank account. That way you have evidence of business that banks understand.

8.       As a rule, take a loan only when you must.

9.       In a corporation it is better to own 51% of the business and a CEO job than wait till you have 100%, you may never.

10.   Your greatest asset is God’s words in your heart. It is the blessing; He makes rich, He adds no sorrow with it. Sow seeds and please pay your tithe.

 Thanks

Okwonna Nelson

nnamdiokwonna@yahoo.com