Dangers in taking a loan for you start-up idea
This note is to some small businesses and start-ups who go about looking for someone to invest in their business or give them a loan. While there is so much benefits attached to having enough capital to pump into a business which can even turn the business around like a magic wand under some cases, it is also important to note that there are possible dangers in taking a loan for your start-up idea.
What are the dangers involved?
Absence of a sustainable market base
If you’re a start-up or small business who cannot boast of a sustainable customer base or hungry market, getting an investor or a bank loan will only end you in frustration. You see, pumping money into products, man-power, or packaging without a sure-fire strategy of getting a market to buy what you do will only lead you into serious debts. Before looking for an investment or loan, test your idea.
It always becomes a serious issue when you have a solution on ground and you are now looking for the problem it will solve. This is how a lot of start-ups operate. They have just manufactured a solution and NOW, they are looking for people who have the problem. No loan or investment will profit you in such a case.
Lack of predictability and consistency in your figures
The second factor to consider is your numbers & predictability. Are your figures predictable? Considering the past few months, how much have you been making on a 30-day basis? Is it stable, growing or declining? Do you have a strategy on ground that keeps your figures stable or rising as the case may be? If you don’t have this on ground, you are simply not investor-ready. As a matter of fact, you’re a risk to say the least.
Growing your idea organically
You need to understand that every business has lessons to teach you at INFANCY. You cannot learn these lessons if you jump up. There are important lessons you will learn when your business is just worth 40k. If you don’t learn those lessons then, YOU WILL FAIL even if someone invests 200k into it. My business mentor always says, “if you have a 3 million idea, start with a 3000 naira version of it. Your mistakes and lessons at that level won’t be expensive.”
Whatever it is you just started, don’t always think of huge capital with it. Allow yourself to grow. Make the mistakes while they are still cheap. Test your products gradually and allow your brand to grow organically.
Branding is not lying or doing beyond your what your capacity can carry. Branding is accentuating your truths in the minds of your audience! In your branding, pay attention to steady growth. You can only sustain what you grow into, not what you jump into. Capacity matters a lot. As a matter of fact, your money blueprint is also something you need to grow alongside your business.
Your money blue-print & profitability
Your business can never be more profitable than your money blueprint (thermostat). Getting a loan or grant or “bet” money that your money blueprint cannot sustain will only make you miserable in the end. As I always say, don’t jump up. You will come down as matter of necessity. GROW up and you will stay up.
I remain your clarity coach and your clarity remains my priority.