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A new model for entrepreneurship 2

 

Traditionally, if we had a great business idea, we've been told set up a business plan, then try and get funding for that business, and thereafter get started and watch how our dream comes to pass.

For most of us who try and take that root, realise that the #businessideatobusinessplantofundingtosuccess model is at best very optimistic and at worst a pipe dream.  For me, the frustrating thing is that most people in charge of that system, from the bankers to the government employees responsible for Entrepreneurship services and funding to the academics and accountants who assist with policy decisions; have not been business owners and entrepreneurs themselves.   Also, venture capitalists, angel investors and other investors tend not to back your business plan or business idea unless it's a working model already showing profit and you need expansion funding.  If they do, they will tend to want around 51 % share of your business; with you contributing a significant chunk of what's needed.  Crowd funding is possibly the most realistic way of generating funding for your business idea.  That is e.g. Getting 100 of your friends and family to each invest    R1 000 in your business or using one of the crowd funding websites available in your country.  Alternatively self fund the business by taking an additional bond.  However, if you are a gentleman that is married, you will find a natural strong resistance to that plan from your spouse.

So, what is a possible solution when you have this great business idea, but no one to fund it. 

Well, what worked for us is to start multiple businesses with one infrastructure.  Solomon, according to the bible, the richest and wisest man to ever live suggests that you sow at least 2 seeds.  One in the morning and one in the evening:                                                             

Sow your seed in the morning, and at evening let your hands not be idle, for you do not know which will succeed, whether this or that, or whether both will do equally well.

 In another statement he says that you have to you need to divide your time in up to 8 ventures:

Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land. 

So, we had 5 businesses running simultaneously, with one infrastructure (one physical location, 3 office staff, 2 entrepreneurs). Having multiple businesses means that you have multiple sources of income; but not necessarily multiple streams of expenses. 

The more businesses which can provide steady, scaleable and recurring revenue are the types of businesses which succeed.  Look at the gyms, insurance companies, food companies, cell phone companies, security companies and recycling companies.  What do they have in common?  They have regular monthly incomes, that are recurring.  In our case we had a tuition business and a training company which helped sustain the other businesses as they grew.

PROs

Multiple sources of income -  One or two business doing well can carry  other businesses while they are in their infancy.

You can self fund existing and new businesses. As mentioned above it is difficult, if not impossible to get funding for business ideas.

Synergy - You have immediate synergy between businesses and the 1+ 1 = 3 formula comes into play.

Time - You have time to grow businesses organically if you are hitting the break even point with the income of e.g. 2 of the 5 businesses you are running.

Shared Resources - You could have one person doing all the Invoicing and Accounting processes for all the businesses; or one person doing all the marketing.

Flexibility - When one of the businesses explode, you then are able to focus on that business and decide what to do with the others. 

CONs

Focus - you might not be able to focus on all the businesses simultaneously.  One can overcome this by using Raymond Ackerman's model of the 4 legs of the table; ensuring that all 4 legs received attention for all the business on a daily basis.

Time - you only have 24 hours in every day. It means that you might not be able to get to all the businesses for a day.  However, in the following lesson I've learnt; means that you have to delegate and work on the businesses and not in the businesses. You have to move from being an employee of the businesses (even though that's where you may have to start) to being the boss.

Lack of focus - Not knowing where to focus your attention on or divide your time.  A solution is to use Steven Covey's 7 habits of highly effective people as a model to assist you to do so. 

Feeling Overwhelmed - It's not unnatural to feel overwhelmed when you have multiple businesses running at the same time.  The key is to build the right team of men and women to run those businesses with you and eventually for you.

Lesson 3 coming soon....

Check out our website on www.sedi.co.za for more exciting courses we offer online or email me at john This email address is being protected from spambots. You need JavaScript enabled to view it.

Blog Post by John Volkwyn

SEDI Software and Training Specialists (Pty) Ltd.

 

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