“FACT: Lack Of Capital is one silly – yet deadly – myth that can make you fail even before you start running your own business.” – Tayo K. Solagbade

I already touched on this theme, in a separate article titled “7 Deadly Myths That Can Stop You From Succeeding” but later decided its seriousness made it merit an article of its own.

This article ends by pointing out that worse than lack of capital is the danger posed by “Wolves In Sheep’s Clothing”.

Think LACK OF CAPITAL Can Stop YOUR Business? Think Again!

I grew up hearing different people talk time and time again about “Lack of capital” as the reason why they could not start their own businesses or why they failed when they tried to start one.

Some readily latch on to the perfect excuse (what I believe Americans call a “cop out”) …They say: even the banks will not lend money to them since they lack collateral and could not possibly pay back loans taken at the high interest rates charged by banks!

My submission – with apologies to all those who subscribe to the above excuses – is that these problems are not insurmountable as most people seem to think they are. I make no idle claims here. Believe me – I live in a society where institutional – or any other kind of – support for business startup is VERY FAR from abundant (capitalised emphasis VERY deliberate) compared to most other societies. So in that sense, I can relate to what they say – but only up to a point.

Going by my experiences and what I SEE many people DO daily, I am fully convinced the problem is frequently NOT how or where to get money/capital. THE PROBLEM, MOST TIMES, IS WITH THE PERSON WHO WANTS TO GET IT! I explain, below…

Learning That NOT Being Financially Intelligent Is A Bigger Problem Than NOT Having Capital

There are different dimensions of intelligence. Unfortunately, many “educated” people tend to be uneducated about this subject. Psychological research has proved irrevocably that different people are intelligent in different ways, depending on their predominating natural aptitudes.

For instance a person might not be academically strong (i.e. s/he has low “academic intelligence”) but s/he might be extremely “intelligent” as a football player – what the scientists would call having “Psychomotor Intelligence”. Robert Kiyosaki, in his book “Rich Kid, Smart Kid” described over 10 different geniuses(intelligences), which people can have. (Get a copy of that book and learn more about this subject).

He said his Rich dad often defined intelligence as “being able to make finer distinctions in life”. From reading Kiyosaki’s writings, I have arrived at my own definition of Financial Intelligence as “having an understanding of how to make creative use of money, in a way that ensures its perpetual availability”.

Consider this. Let’s assume you got promoted and earned a huge salary increase, plus allowances and other benefits splashed on you in your workplace (or if you own a business, let’s say you made an impressively huge profit margin on a deal). To buy that brand new big screen TV you’ve always wanted, Robert advises that one spend money in a way that ensures one still holds on to it (i.e. the money) at the end of the day.

Using the ideas from Robert’s books, one way to do it would be as follows: You would delay your “gratification” a little bit and take time to explore possible options of reasonably lucrative and reliable ventures/investments you could put your money into. Then, over a certain period of time, you would harvest the returns from your investment to buy the TV, without touching the invested money. A bit simplistic I admit, but it communicates the message I want to get across.

What is crucially important to note is that, you would have, by doing the above – or something similar – established a new income stream source, acquired new knowledge/skills plus a new “toy”(the big screen TV) – and still HELD ON TO YOUR MONEY! Now THAT would be financial intelligence in action. Like Robert’s rich dad would say, “the rich don’t work hard – they make their money work hard for them”.

So, as an entrepreneur entering into business, you should have this kind of mental disposition towards your monetary expenditures.

I started out in January 2002 with over N590,000.00(Last time I checked $1.00 USD = N130 approx. out here). A few short months later, believe it or not, ALL of that money was GONE! The reason: I lacked requisite understanding of how to handle money in relation to pursuing my business goals. Simply put, I lacked Financial Intelligence of the type described by Robert Kiyosaki.

I made this mistake when I started, and many times afterwards. Old habits really do die hard – It was so hard getting this simple message to SINK into my “thick head” despite the fact that I had read it!

Someone once said “A person who does not know, and does not know that he does not know, is a big fool!” In my case I was a perfect example of the fool and his money that are soon parted! I think my message has been well communicated. I leave you to ruminate on it, and decide how you wish to apply it to your personal situation. I sincerely hope reading this will help others AVOID making the same mistakes I did.

Having said that, I try to take solace in the words of R. Buckminster Fuller who, according to Robert Kiyosaki, once said:

“I know so much because I have made so many mistakes” – R. Buckminster Fuller

To me, that statement re-assures anyone who DOES go ahead to make these or other mistakes, that it would NOT be the end of the world. S/he will STILL be able to succeed in spite of those wrong turns if s/he will only LEARN from them and PERSIST towards the goal.

My “Mistakes” Had Little To Do With The Presence Or Absence Of A Business Plan

One must LEARN to understand and deal with the realities extant in his/her own environment in order to stand any chance of succeeding. The way things work out here in my country, most business plans in truth tend to be limited in their usefulness, beyond being used to make a formal statement of intention.(The situation in your country may of course differ). Here are 3 instances that illustrate what I mean:

(a). There are issues relating to ethical business practices – or more accurately, their widespread ABSCENCE. I don’t have to say more here – the front pages of national dailies do a better job – reporting cases of multinational corporations complaining about this BIG problem. It’s the reality – at least for now, though efforts at influencing change continue. You can gain some insight by reading my article titled “There Is Nothing Wrong With A Humble Beginning: Achieve YOUR Success With Honour & Integrity”.

(b). Then you have the prevailing economic climate/government policies etc(. E.g. Sudden upward reviews of petrol/diesel prices coupled with poor availability of both items PLUS perpetually erratic power supply which makes necessary the use of generators run with petrol/diesel (that’s changing prices and NOT even readily available!) make using a business plan to reliably manage a business out here, in most cases a practical waste of time.

Of course, some people would disagree with what I have said, but the best way to judge in my opinion is to LOOK around at how businesses(that manage to survive) – even the big ones – operate out here. It won’t take long to SEE that there is major truth in what I have said.

(c). There is also the issue of how much of a market EXISTS for the product(s)/service(s) a business is offering. I throw more light on this in an article titled “Do You Need A Business Plan If Your Idea Is New, Untested, or Unproven?”.

Incidentally, I did have a business plan (for my Integrated Fish Farm) startup that I took weeks to painstakingly prepare, going out to research various aspects, and getting guidelines from banks towards securing equity investment under the Small Medium Enterprises Investment Scheme(SMEIS). My experiences over a two year period in this regard, convince me of the accuracy of the opinions I have expressed above. Visit http://www.selfhelpcd.spontaneousdevelopment.com to learn more about the business plan I wrote for my Integrated Fish Farm.

Your Integrity Is The Best Collateral You Can Have – Nurture It!

So if I “squandered” all my money that quickly, how did I survive? Well, I began by thinking – HARD! It did not take me long to realize I had no choice than to ask for HELP*. The question then was who to ask. My mind immediately went for the name(s) of person(s) I knew who would not doubt my motives for starting a business PLUS who knew me well enough to trust that I would not request money under false pretences. Over a period of about nine months consequently, one particular person, a close friend, former colleague and confidant would bail me out to the tune of almost half of the total amount I had already spent – mostly at short notice.

*Note: Some people let their egos get in the way at this point, feeling they would look “weak” if they had to “stoop” so low as to ask for help from others. I would say if you have any viable alternative to ASKING for help, then go for it and achieve your purpose. If not, PLEASE swallow your pride and ASK – nicely too! – for HELP or forget your dreams!

Napoleon Hill said your magnificent obsession will at a point take you over and you become one and the same with it. At that point you will think, drink, sleep and eat that vision you are working to achieve – sparing little or no thought for anything else. THAT state of mind, according to him, is what will make people and things that will help you achieve your objective come together at the right time and in the right place. He adds that this is what the uninitiated see happening to REAL entrepreneurs and other great achievers, which they call “luck”.

More than five years on, I can look back and confirm that Hill’s submission to a great extent, especially going by my experiences, explains how I managed to survive perpetual scarcity of CASH – and other resources – that afflicted me prior to EACH breakthrough that took me to a higher level of success in my work. I have always emerged WISER and MORE competent. You will hopefully be able to draw some consolation from knowing this up front if/when you pass through a similar experience.

But INTEGRITY was a key factor: Luck has been defined as “that which occurs when preparation meets opportunity”. Entrepreneurs who benefit financially or otherwise from others, many times have paid their dues, and EARNED the trust, confidence, respect and empathy of those who extend such assistance to them.

At this point some persons who are the typical complaining type, who never want to sit down and THINK of how they can apply/adapt what they read to their own personal situations, will probably say “But Tayo, you had the advantage of someone who could give you such money when you needed it – I don’t!”.

My answer to that is this: I have learnt that life dishes out challenges to us according to our circumstances and capabilities in order that we might grow to the next level of strength/achievement. It is left to each person to decide how s/he will respond, which will in turn be determined by the strength of his/her desire for success.

Lack Of Capital Can Actually Be More Of A Blessing Than(If At All) A Curse

So it was that even though I started off with what many would have considered reasonable capitalization for my business, I ended up within a few months looking as if I never had any capital in the first place! That was my own “portion” if you will.

But the result was that I had to think of other creative ways to carry on with my work. There was no point complaining. You will find that where you have one thing to your advantage, another person lacks that same thing. So, as I said in my article titled “7 Deadly Myths That Can Stop You From Succeeding”, you must learn to take what you are given, and use it to get that which you want.

Francis Bacon once reportedly said “A wise person makes more opportunities than he finds”.

As has been revealed through studies of the lives and achievements of many successful entrepreneurs, the period of greatest learning, and fastest growth, are often those periods of LACK and WANT. It was when I found myself in that extremely excruciating condition of lack of money that I really began to learn the skills I needed to survive.

I want to assure you here, that had I not experienced EACH of those periods of hardship, I am FULLY convinced that I would not have the level of clarity and depth of insight that I now do, and with which I have been able to subsequently progress my work.

Today, I have detailed, handwritten records of daily expenses I have made since April 2002 till date – one of the new things I learned to do at the time, in order to keep my spending “sensible” and track it against my budget. This was something I had read about so many times while in paid employment, but never really allowed to “sink home” into my consciousness because of the bad spending habits I had formed then.

Like I stated in another article titled “Practical Guiding Philosophies For Entrepreneurial Success”, If you plan to(or have already) entered into entrepreneuring from a similar background to mine, this is the first thing you have to watch out for – your spending habits. With very few exceptions, most people who go into business after having being in paid employment – especially where the pay was relatively comfortable – often lack the “discipline” needed to preserve the “lifeblood” (i.e. cash) of their new businesses.

Sourcing Capital For Your Business (“Priming” Yourself To Do It Right)

Now, I am not here to claim that I am the world’s expert on raising capital or anything of the sort. Rather, I want to share with you my perspective which I believe is probably one of the most realistic ways to look at the problem– if you want to successfully tackle it.

My position is that anything will be a problem for you if you believe it can be a problem for you. For as long as you think – or allow yourself to believe – that “seeming” lack of capital sources can stop you from succeeding in your business, then the chances of that happening will be high.

1. Start by having the unshakeable belief that you can find the money you need to startup your business. You need to be convinced that you can if you are ever going to be able to do the next thing I will tell you. So, erase any doubts arising in your mind. Block your ears to the “advice” of ANY sage realist friends/relatives you have who may ask you “Where are you going to get someone to give you that kind of money?”.

“Spare me the grim litany of the realist. Give me the unrealistic aspirations of the optimist any day!” – Gen. Collin Powell

2. Next, decide within yourself that whatever plans you come up with, you will NEVER allow yourself to be discouraged if it appears that they are not working the way you intended – and the capital you seek seems not to be forthcoming. Again, you have to convince yourself that it will be better to persist in implementing your capital-sourcing plans(or modifications of them) till you do get the capital than for you to give up.

3. Take a pen and paper and begin identifying the various individuals, groups or organisations/institutions that can help you. Once you have a comprehensive listing you will then draw up a plan to approach and present your proposal to them for possible funding by them.

To do this effectively, you will of course have to research specific potential sources of funding, and this varies from one society to another – as I have found from trying to follow ideas for sourcing funding obtained from reading articles by persons in the US, out here in Nigeria! You know your society better and will be able to judge – reasonably – what kinds of funding ideas are likely to resonate best with people/organisations you are likely to approach.

Let me add here that I believe there is NO one correct way of raising cash. In my case(following the advice in James Cook’s “Startup Entrepreneur” book that “if you have to borrow to keep going, do so…but turn your back on handouts”), I have sourced it at different stages of my entrepreneurial adventure by giving up percentage ownership of my start-up company.

Today more than five individuals (friends/relatives have combined ownership of over 45% of my little company). I feel good about this because looking at the profile gives me the motivation to WORK HARDER to deliver on the promises I made to those who chose to buy into my idea.

At other times I have also bartered my services in exchange for a badly needed resource(s). An example was when I lost access to a laptop computer I was using to implement a web design project for one client and an Excel VB project for another. In order to finish both projects, I negotiated with one of the clients, who ran a IT company specialised in building and installations of computers and telecoms utilities, to build me a new desktop computer system unit which I paid for by letting him pay me a sum LESS the charge for THAT service. As a result, I did not have to shell out cash from my own pocket.

In reality, finding capital especially when the more obvious channels fail to turn up anything useful(and that happens in my society quite a lot!) will often be about YOU being WILLING to think creatively. Read my article titled “Use Strategic Partnerships To Start-Up Faster, And Joint Venture Marketing To Make More Sales!” for more IDEAS about how teaming up with strategic partners can help you overcome a lack of adequate financing while taking your ideas from conception to market place FASTER and with greater chances of success using your partner’s experience, expertise and networks/contacts.

FINAL WORDS: Worse Than Lack Of Capital Is The Danger Posed By “Wolves In Sheep’s Clothing”

To survive in the real business world, anywhere, you will need to develop your sixth sense – specifically the ability to “detect” any signs of INSINCERITY in people you relate with especially in business. This is one of the hard lessons I learnt. And in my opinion a lack of this kind of “Street Wisdom” should give ANY startup MORE cause to worry than even a lack of valuable capital.

Why? Because it could make you LOSE all you have, capital inclusive, to crafty/dishonest business persons you may unknowingly choose to work/relate with – and possibly depend on for guidance etc.
I have seen certain cunning individuals readily take advantage of “green” inexperienced persons, that come to them looking for guidance and support. They do this by exploiting the latters’ business naivety – and then letting them down, often deliberately, when it matters most. To put it simply, they USE and DUMP newbie entrepreneurs.

In fact, I once read a startup guide e-book chapter on Business Networking produced by a company called “Virtual Teknocrats” which described these “wolves in sheep’s clothing” as “Pro” networkers – one of four main types of networkers. The “Pro” is one who is selfishly motivated and typically notorious for “sucking the life” out of “Newbie” networkers i.e. using and dumping inexperienced others.

Does not matter what part of the world you’re in – they’re everywhere. So, be careful who you go to for help! Networking is meant to be a mutually beneficial – symbiotic – relationship. Check those you do it with. If it looks like they only seem to take, and never give at all, or if you find you always get the distinct feeling you’re being short changed, I say TRUST YOUR INSTINCTS and get out – FAST.
In relation to this last point, I’ll leave you with these words of TRUE wisdom from Burt Dubin ([http://www.speakingsuccess.com]):

“Demand integrity from all associates. Would you go sailing in a leaky boat? Would you drive on a tire that would not hold air? Then, steel yourself: In cold blood dump unworthy others.” – Burt Dubin

Preamble

What I have said above is daily being dramatised in the lives of many people who are joining the craze of catfish farming for instance. Most simply hear that people are making “money” from catfish farming. They then decide to attend one of the many one day seminars offered by a myriad of “experts'(some don’t even bother going through this step!).

Subsequently, depending on the very sketchy – mostly introductory level – information given them, they startup their own entreprises, and discover to their shock MANY issues arise which they were never warned about by their “teacher”. If they are lucky when they ask, s/he(i.e. the “teacher”) may offer support or assistance. If they are NOT, they find themselves left high and dry.

One aspect of catfish production business out here that the scenario painted above readily applies to, is that of finding a continually READY and RELIABLE market outlet for the fingerlings and/or table size catfish you produce. Note that I refer here to an “outlet” or “outlets” that ensure(s) you can continually sell at competitive prices which guarantee you enough margins to not only stay in business, but also gradually build capacity to expand your operations.

I have seen people who went ahead and produced 5,000 or more fingerlings within the normal for 4 to 5 weeks required, only to struggle to find buyers for weeks AFTERWARDS – while having to continue FEEDING the fingerlings(incurring MORE expenses which translate to lower profit margins) long overdue for sale. This would have happened possibly because they relied on promises made by few friends and associates who claimed they would buy, as they were in need of a ready source for fingerlings to startup THEIR own farms or to “feed” existing ones they owned or had access to.

Below, I now discuss fourteen (14) important questions/issues you may need to consider so you can be better prepared to choose(& successfully startup) the right farm business.

1. What type of farm business to run: will it be livestock or crop – or a mix of both?

Are you suited for the type you want to embark on? Would you enjoy doing it daily, even when it becomes challenging?

You will need to be honest with yourself here; else you may find yourself regretting the decision to start the business when you have already pumped your hard earned money into it.

2. What farm size to operate: Will it be small, medium or large?

What specific dimensions (e.g. 100m x 100m) will be suitable for your farm enterprise – especially with consideration for future growth and expansion?

3. What methods of production and/or operation will you adopt?

This can be a function of the size of land or space available. You could choose to operate “intensive” or “extensive” for instance.

4. How much automation will you need to use – or should you use?

For catfish farming, will a recirculating system be ideal, given your resources and budget? Or will an earthen pond system suffice? Maybe you could start from the latter and graduate to the former, after gaining some experience? Same logic applies to crop farming.

5. Will you use family labour or paid labour?

Or will you use both – in different areas of your operation e.g. family members could function more in supervisory or administrative roles. Regardless of your choice of their area of operation, you must reflect wage rate for family labour whenever you use it, to avoid underestimating your expenses.

6. What will be your Credit/Capital Source?

This issue is not as straight forward as most people tend to think. Your source will often impact the way you operate the enterprise, including what you do with most of the money you make. And sometimes, you may not be too happy with what you are compelled to do with that money at some point, by those who gave you the capital or credit.

7. What is your capital profile?

This will show how much is required at each stage of production, and will often help you determine when to borrow and when not to.

8. What is your loan profile?

The problem here is often that money given as loan is NOT released as and when the farmer requires it due to administrative or bureaucratic bottlenecks on the loan giver’s side. The result is that when the farmer gets it late s/he uses it for consumption, and is consequently unable to repay.

There are therefore two dimensions to the loan issue, making it necessary to have (a) Production Loan (b) Consumption Loan.

If the farmer is to survive, and succeed in using the loan given to achieve the intended business objective, the loan giver MUST do needed adjustments to add a Consumption Loan to the Production Loan.

If this is not done, the farmer may end up spending his/her production loan. The Consumption Loan will typically be used by the farmer to take care of things like children’s school fees, books purchases etc.

When you plan to apply for a loan, put the above into consideration as it applies to you, and make a case for the Consumption Loan if appropriate.

LEARN HOW TO BORROW SMARTLY!

But how do you even know if taking a loan with the interest rate to be charged by the loan provider will be worthwhile? Is there a way to calculate up front and determine reasonably accurately, whether the business you intend to apply the loan to CAN yield enough returns to match the interest rate you have to pay, leaving enough for you to profit on?

9. What is the proper time to produce?

This is quite important for agricultural enterprises. In fact, I would say it is the number ONE (1) issue you MUST consider! Without establishing a reliable marketing/sales outlet (s) for your intended produce, you stand a great risk of ending up with harvested or matured products without ANY buyers being available.

If you are too early or too late in starting production, you could lose out completely – depending the kind of venture you are engaged in. For instance, taking advantage of early rains could be crucial to getting a good maize harvest.

10. What is the proper time to market and WHERE?

One of the keys to business success has been given as speculating correctly about when to market, and where. Most people in broiler production for instance, time their marketing towards the holidays (Christmas etc), because outside such festive periods, broilers tend to command less market value.

The farmer who is most tuned in to market trends, knows where to find buyers, and when/where the prices are lowest, highest etc.

Like I mentioned elsewhere, it has been stated that the educated farmer is one who knows the difference between January and June, as it pertains to making income from sales of his/her products.

11. How will you get the land you will use?

This is important because how you get it will determine how you can use it, or what you can do with it. For instance, if you do NOT own the land, you may not be able to start a tree crop plantation, such as cocoa or rubber on it – for obvious reasons: the owner may have other plans, and may not like the idea of having his/her land tied down for decades in that manner.

12. How will you deal with entry of competition?

Just like you are considering starting this farm business, someone else may just be thinking the same thing. One or more of such “others” may in future, after you have started yours, decide to do the same thing. What will you have in place to ensure you maintain a competitive edge over those who come in to get a piece of your market share?

13. What type of building, water system (e.g. dam, borehole, and well) etc will you use on the farm?

This will influence the type of farm enterprise you can successfully run. For instance, when rearing delicate livestock like catfish fingerlings, the water quality/integrity must be constantly reliable. This makes use of a borehole, possibly with some intermediate treatment unit essential.

14. You will have to take/bear responsibility for your actions, and decision making.

No matter how many people you consult and get ideas from about producing or marketing/selling your farm produce, YOU alone will ultimately have to deal with the outcome of your farm decision making.

As the top decision maker, the buck WILL ALWAYS rest on your table.

This is why you must do a lot of thinking about the above outlined issues well ahead of your farm business start up, so that you can better prepare yourself to take the decisions that will position your farm business to succeed in the long term.