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Starts-ups: Why idea is more important than capital

Since I started this column on June 16, 2017 to be precise, my heart-cry has been to change the mentality of our youths from job-seekers to job-creators. Thank God, the message seems to be making impact; from the feedback I get, many young people are asking me: “How do I start my business when I have no capital?” That’s just about the summary of all the posers I often get from readers.

Consequently, I decided to address the obstacles you face when starting a new business. Let us understand that while capital, cash capital especially, is of the utmost importance at any stage of any business or project, idea is more important.

Before I make my submission on why the idea should be the first consideration in any business concern, let me assure you that nothing guarantees success in any venture, be it business, marriage, political contest, sporting engagement, or any of life’s diverse endeavours, but the grace of God. This conclusion may seem too religious, but it is true.

We have seen many businesses or projects that looked destined for success from the start, fail abysmally to the shock of stake holders. A case in point is the failure of the Concorde supersonic airplane project; a joint venture between French and British manufacturers. That commercial aircraft took off amidst fanfare and, for a while, it looked like a breakthrough in aviation technology because it achieved the goal of extraordinary, unprecedented speed of closing the gap of air travel distance.

However, why the Concorde project failed is a subject for another day. After studying the evolution of enterprises, my research showed that, at the end of the day, after the grace factor, it is the ability of any venture to pass the “test of balance” that accounts for enduring or landmark success. Watch out for a new series on start-ups in which the processes of business ventures are addressed. You can’t afford to miss any of the three-part series in this column, because they answer many questions arising from the challenges new business ventures face. And how to overcome them.

Now, back to the point. Which comes first in start-up decisions? The idea or the capital? It is the idea because that is what defines the venture; it is what determines the capital you need to launch out. There are so many questions surrounding the idea that you have to settle before you even think about the funding.

The first factor to consider is this: Is the project idea viable? Since we are dealing with business ventures here, you have to settle that question before you can proceed. Your feasibility and business plan, the second important factors, should resolve the question of viability, and project cost which, invariably throws up the third factor, which is capital. Thus; you have the idea, feasibility/business plan and, finally capital as the three critical factors involved in any start-up.

If you worry about capital first, you may run into trouble because you have not resolved the two other key issues of idea and feasibility/business plan. Get this clear in your mind; you hit on a bright idea, say, the setting up of a school. Then, you subject this idea to a test of viability called feasibility study along with a business plan. The study would tell you whether the project is viable or not, before you commit your capital to it.

The feasibility report would give you detailed information about many things like location of the business, size, personnel, sources of raw material, cash flow projections etc. These, you need to know before you embark on the project. This valuable foreknowledge is absolutely fundamental if you are to succeed with the venture. Sometimes, most feasibility studies include market research, another key source of information on business behavior.

After you have generated a sound idea and you have subjected its integrity to the test of viability called feasibility study, then you begin to look at the capital that the feasibility report has suggested.

The fact that you have more than enough capital, which in its broader definition could be cash, fixed assests and goodwill, does not mean that you could embark on a venture without first subjecting its integrity on paper, to the stiff test of viability. Many businesses look good in the head but in reality are not viable at all. Remember, not all that glitters is gold.

A lot of business people invest in projects they “like” or that seem to be profitable not what is commercially viable. If you don’t have a feasibility study it would be difficult to ascertain the true financial worth, return on investment (Rol), and therefore, viability of a commercial venture. The accurate information on the capital outlay could be elusive if you don’t have feasibility. You may likely lose your money if you don’t have a good idea of what you want to invest in. Idea, feasibility and capital, in that order constitute what I call the Holy Trinity of business success.

Finally, the most important thing is to have a dream or idea. You need a good idea to succeed in business. Every other thing would fall in place.

WEEKEND SPICE: We have got to have a dream if we are going to make a dream come through-Dennis Waitley

Folks, again, thank God it’s Friday. Stay motivated till next week.                                                                                   

               

Ladi Ayodeji is an Author, Conference Speaker/Pastor and life coach. He can be reached at [email protected] and 09059243004 (sms only).

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