Here is some money for your business….

…..This is often the most wonderful news one hopes to hear from a funder…..But before you get too excited, if I asked to borrow Ksh 1,000 from you right this minute, you will most likely ask me:

  • WHEN will I pay it back?(Tenure)
  • The INTEREST I will pay it back with? (Return On Investment)
  • WHAT it is for? (Use of funds)
  • Based on how I answer, you will then decide whether to give me the money or not right? Similarly, if you cannot answer these 3 critical questions in your fund raising pitch, then your efforts will not bear any results.
  • Now you understand why funders will ask for use of funds, tenure, return on investment, breakeven point, CRB and Tax compliance certificates
  • Back to the Shs 1,000 i am attempting to borrow from you …..Now,if  I had borrowed money from you previously and I didn’t pay you back, you won’t even bother to ask me all these questions- it will be an instant, NO – I do not have, I am so broke, si ukipata unigawie, I will check and let you know, I am expecting a payment from a client, I will call you back, I am in a meeting and other kawaida Kenyan long stories 🙂  (Our peculiar habits…Please insert your answer here when you do not plan to give someone money)
  • We are terribly good at receiving money but terribly bad at repaying…Just ask Tala, Branch, Fuliza, Mshwari, KCB Mpesa, Equitel and other lenders….
  • A lot of funders do not have successful exits in this market – an EXIT is when a funder has invested the funds in your business, has successfully made a profit and exited your business.
  • If you borrow Kshs 1,000,000 for 12 months from a bank that is charging you a 14% interest per year, you will be paying Kshs 89,797 per month. The total you will have paid back is Kshs 1,000,000 (the  principal) and an additional Shs 107,487 as interest.
  • To comfortably be repaying back Kshs 90,000 every month means that your MONTHLY SALES should be at the very least between Kshs 300,000 to Kshs 500,000. This will enable you to cater to the loan repayment, your monthly expenses and working capital for the month.
  • We can safely approximate that to borrow Kshs 500,000 your repayment will be approximately Kshs 45,000 per month, Kshs 2 million will be Kshs 180,000 per month and so forth.
  • Keep in mind that most funders provide patient capital and the interest rates will be lower than the bank. However, if your monthly sales cannot sustain the monthly repayment then it would be advisable not to seek funding until your sales revenue  improve.

Once you have done this calculation and your sales revenues can allow you to submit your funding application, the funder will also want to know:

  • which problem your product/service is addressing
  • what your product/service actually does
  • if there is a real market opportunity
  • if you have identified and quantified your target market
  • your present client base and how you plan to increase your clients
  • if you know your competition, their pricing and how they can affect or influence your business
  • your uniqueness compared to those offering the same thing in the market, why anyone would pay for your service/product
  • your team and how you make money (business model)
  • your ten year vision for your business
  • your present financial status and 5 to 10 year financial projections for the business

Your present sales may not be sufficient to fundraise but you can always set the right foundation by preparing adequately.

On our open day on June 8th 2019, we will provide you with a tool for financial management as well as the 10 qualities of a good pitch.

Change is the only thing that remains constant. If you are ready to make critical change to the way you run your business, do register for the next workshop which starts on June 15th 2019

Registration for the workshop is through this link: https://docs.google.com/forms/d/e/1FAIpQLSdzJPnHoYhvVyddFfBsliHL_vdm-F23-iYg8kTb6qq9tuAEUQ/viewform

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