By Ikenna Okechukwu
Many intend to be in business but very few are doing it. The major obstacle budding entrepreneurs complain about for not starting their own business is the absence of business capital. What I noticed is that these entrepreneurs usually excuse themselves from business and kill their dreams because they think they lack capital. In reality, everyone has capital but many don’t know. If we understand the concept of capital, then we will know that we always have enough to begin from where we are in life. Let’s define what business capital really means.
Definitions are very important in life. Definitions actually put a boundary on your output. My business mentor will always tell me, “It is not your efforts but your definitions that determine your result”. At first, it doesn’t sound right but you will see right now that the challenge is not the lack of capital but the definition of capital by entrepreneurs. The word “Capital” as it has to do with business according to Miriam Webster Dictionary refers to “Chief, Prominent, of first-rate quality”.
Capital in general refers to the “head”. The head of capital is the most important thing in any enterprise. Unfortunately, many have equated capital to mean money. This thinking is the source of their frustration and the high cost of entry into the business. What does his definition mean for the businessman? Business capital doesn’t mean money but money could be part of it. Business capital refers to the head, chief thing, and prominent asset required to make your business work. Literally, your number one business capital is you. If you use your head, you will be ahead in business. For better understanding, business capital can further be subdivided into spiritual, Innovation, human, social, and financial capital. Let’s explore them one after the other;
A. Spiritual Capital:
Man is essentially a spirit being. This understanding of our spiritual aspects is what leads to the awakening of an individual. The entrepreneur who understands his human spirit is the source of life can approach any obstacle or business endeavor with peace and confidence. Inspiration and creativity flow from the human spirit. These virtues can create money. It is from the spirit that ideas come. Ideas are money. Some people have made money just by selling their ideas.
A well of ideas is a well of money. Ideas can get you key partnerships that in turn will bring you money that you actually require to execute. The currency in the spiritual domain is faith. No entrepreneur can survive without faith. Entrepreneurs are people who believe in something bigger than themselves even without evidence. I have noticed that each time one exercise such faith; the universe is usually at his service.
That is how the creator made this earth. A businessman must learn to step out in faith to go make sales, to employ persons without money on the ground hoping he will definitely make a profit. An entrepreneur with enough spiritual capital will write down his ideas and visualize them so well that it becomes so real to him to go market just the idea believing investors and customers will eventually show up even before the product or service is created. This is spiritual capital. Many multimillion-dollar businesses were never birthed because the entrepreneur killed them at this stage due to bankruptcy of spiritual capital.
B. Human Capital:
The team is more important than money. The entrepreneur who will succeed must have assembled a team of passionate and competent folks like him before even launching the business. The story of Mark Zuckerberg reveals how he called a meeting of his close friends when he was about to start Facebook. Only a few showed up. That few ended up as billionaires today.
When you see a powerful business enterprise, most times it’s neither the brilliance of the idea nor the stash of the vault that made it so but the passion of the team running it. An author wrote a book titled, “Companies Don’t Succeed, people do” and I agree with him. Before you start complaining about lack of money, do you have competent persons with the same fire as you for the idea surrounding you? These persons will give you access to places or people that will ordinarily bankroll or jumpstart the idea when the time comes.
C. Social Capital:
This is different from human capital. Social capital talks about your goodwill as a person. What is your reputation like? Can it be monetized or converted into tangible assets for your business enterprise? Your relationships and networks are the first part of your social capital. What networks have you built that could support you in business. These people don’t have to be on your team or directly involved in the business but they can put in words or recommendations for you. They could be your first client. They will patronize you not really because they need your product and service but mostly because they like you, and what you represent, and are willing to support you.
In Nigeria today, social capital is among the first capital needed to succeed in business even for people with too much money. Trust is another component of social capital. People like to deal with trustworthy people. Trust is a very hard currency in the business world. If you are trustworthy as a person in your little space or job, it’s easy to earn the trust of others when your want to start your business. Some people can pay you upfront without worrying if they trust you. With trust, you transact volumes of business with other people’s money. It really pays to be honest and sincere in dealing with people. Bad loans are bad businesses. Just like anyone, investors avoid this like a plague. Our character and the way we are relating with people are writing our personal history and shaping our reputation. They will all matter someday. People with poor social capital will always find it difficult to start and succeed in business.
D. Financial Capital:
This is the last in the chain of business capital unfortunately that is where many entrepreneurs usually commence. Financial capital refers to all the financial requirements to commence a business. It is money or anything only money can buy. Budding Entrepreneurs usually think if they have plenty of financial capital, they will do very well in business but it is not true. That is a myth. The richest companies on earth today were not the best funded.
They grew bit by bit, phase by phase, and stage by stage. You must break down your big idea into what is called, “MVP” – minimum variable product. Start from here and grow deliberately. There is always a small place to start with your idea which easily connects to your available resources. Resources are definitely needed but must not be the object of focus. Once one can pass through the previous three capitals, this one will follow gradually. Sources of financial capital include;
- Savings: Sometimes we don’t just start our business immediately after we receive the idea; we go through the route of working for others to earn some money that we can eventually invest in our own idea. Apart from the money, you gain valuable experience and discipline working for another person. Now that is some capital. If we see it this way, then we won’t cut corners at work or approach work with laxity because we wouldn’t like your workers to treat you the same way when you finally start your company. An entrepreneur that saves is one that will go far. Be the first funder of your business idea. Saving is a good place to start from.
- Investments: while you save, invest for greater returns. Inflation is bad for business people, therefore don’t just save your money, invest them. Find opportunities in other people’s businesses and invest for returns. This is how you grow your financial capital.
- Angel Investors/Venture capitalists: These categories of investors exist but are not common in our country. Some organizations usually help with grants and subsidies for start-ups. Business clubs and communities like Bedrock Initiative help their members gain access to such funding. It is important to be part of such organizations that help start-ups.
- Loans: Loans are a good source of funding but one can easily lose their peace because of loans. I encourage entrepreneurs to grow gradually and not use loans as a quick way out. Go for loans when you have mastered your business no matter how small it is. Let the loan be used for expansion purposes. Beware of expanding quickly. If loans are not used well, they could stifle your business. Seek counsel before you access a loan for your business.
Good post.
great note.