Business coach Diana Kolek, lead consultant at Evok Global Enterprise speaks about the building blocks of business [Courtesy]

The building blocks of a business are like three parts of a human being. A business can be compared to a human being. Number one, the business has the brain. The brain is the strategy of the business. You have to start thinking about the strategy of your business in advance before you even think of putting in money somewhere.

The next part is the blood of your business. If you do not have blood as a human being you are dead. That means you constantly have to have clients who are willing to pay for whatever you are selling.

Number three is the bones of the business. That is the business structures and the systems. Your bones continue developing as you grow up.

There are three sources of funds

One, you have to bootstrap. That means that you have to put in your own money first. No one will invest in you if you do not do that. People want to see proof of concept. People want to see if your business makes sense and whether you are making money. After that, you can show them the revenues that you are making and ask them for a loan so that you can continue building the business.

Use your retained earnings from your business. This means that as you make your money, do not start spending. Put the money back into your business and grow it organically. A great book on this topic is Putting Your Dream to the Test by John Maxwell. The second method is loans. You can take loans but you should only do that if you have some sort of track record. The lender needs to see that they are going to get their money back. A bank, for instance, will look at your current monthly revenue to decide if you can pay back what you say you will. You can also get money from the saccos.

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The third source is equity. Equity means that you are bringing someone into your business; you are giving them some equity, say a 10 or 20 per cent share of your business. Unless the person is your close relative, an angel investor will not just come in. They have to see that it is a viable business, and in, say four years, they will get their money back with profit.

Have something to show investors

Evoke Global is in partnership with an organisation from South Africa called Africo Fund. That organisation has a consortium of funders from Europe who are willing to fund female founders.

How does one get attention from such funders?

One, keep records, even if it is just on an excel sheet. Record the amount of money you are starting with, and keep all the records showing what you are spending on the business. Record your income as you get clients.  

For instance, for people who have applied with Evoke Global, the application had a section where they were required to show how much income has come into their business for the last six months. On the other side, they were supposed to write how much they are spending. Most people did not have that information.

For a bank, it is very difficult for you to get a loan if your business is not registered. People fear that the Kenya Revenue Authority (KRA) will go after them, but it is really important to understand what KRA does and work with them.

With Evoke Global, if you have a business permit, you can apply for funding. The funding is from any amount up to Sh3 million. Those are unsecured funds.

 Record the amount of money you are starting with, and keep all the records showing what you are spending on the business [Courtesy]

Know when your business is investor ready

This happens when a business value chain is bigger, and the logistics are increasing.  For instance, you may be getting many more clients, the processes are becoming more complicated, and you need more employees.

For example, you might be in the transport business and you want to buy trucks. You will get to a place you feel that the money you are getting from the business is not enough, so you need to inject more capital into the business.

In a small business, you might be working by yourself or with one more person at your restaurant, and it is doing well, but you realise that you need temporary staff for some extra tasks or you realise that you can start another branch but you don’t have enough money to do so. You want to scale it up and leave a legacy. You may need more money than you have at this point.

Take care of your employees

Employees could be the weakest link in your business. As a small business, you may not have the funds that big corporates have to just pay people. They must bring in something.

You can also give them so much work that they feel that it is not a conducive place to work. Most people working in such small businesses will leave that job for a bigger organisation or the government. You need to treat your employees well and ensure they understand your vision and where you are going with the business. As the business grows, promote them. Do not bring in new people and impose them as managers on someone who started with you from scratch.

Listen to your employees. You might know what they do but as the business grows, there are some things that you will leave for your employees to do. When you hear something, there is a challenge or a problem that you are trying to sort out with the business, hear out the employee first.

The way you treat your employees will reflect on the way they treat your clients. If you treat them badly, they will treat your clients badly. If you treat them well, they will be excited to serve your clients and your business will flourish.