Who wins? - By Strive Masiyiwa


Control or growth? (Part 2)

The first question you must answer is this: What “kind” of money are you looking for? Is it debt or equity? I always let the business decide!

First of all, let me show you the process which allows you to decide. Remember, in my world the business is a separate “persona” (legal entity) and it has the capacity to “tell” me exactly the “kind” of money it needs: I don’t just wake up and say “I need a loan from a bank," or "I need investors.”

It’s the business that “tells” me the “kind” (type) of money it needs.

Let the business “talk”?! Yes, let the business tell you what it needs.

So let’s ask: “Hey, my Business what kind of money do you need?”

Answer (from the Business): “Owner, what does the business plan say?”

This is why we develop a business plan! When done properly, it tells you exactly how much money you need, as the business grows, and it tells you the “kind” of money you need.

__It is the business plan that should tell you whether you need debt or equity.

Debt vs equity financing is one of the most important decisions you will make in your business. (Please take note: I am not going to tell you which choice to make in this Control vs Growth series. I am just going to share my own experiences. You must make your own decisions).

For example, debt allows you to keep control, but it's not always good for the business itself. Can you tell me some of the pros and cons, advantages and disadvantages, of financing your business with debt?

Do you understand, for instance, how interest rates work? How about "compounding"? If you're in the Senior Class, I am sure you do, but if you don't... beware. "Crunch" (analyse) these numbers with care! (You can be sure the bankers and investors are!)

Being turned down by a bank can actually be a blessing in disguise because you could end up bankrupt, or worse, if you get a loan (debt) that you should never have taken in the first place!

__Understanding what “kind” of money you need, debt or equity, is the first thing a serious entrepreneur tries to establish very quickly using the business plan.

Never, ever, outsource the development of a business plan! Yes, so many people think preparing a business plan is something done by an accountant friend to help you apply for a bank loan!

No sir (ma’am)!

Now if the business (through the business plan) has “told” you it will not grow using bank loans or money borrowed from friends, what are you going to do?

Business to Owner: “I want equity capital!”

Time to go to Shark Tank?

Ouch!!

To be continued. . .



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User's Comments:

Strive masiyiwa

Afterthought: The other day I was watching one of my favorite tv shows: Bloomberg’s David Rubinstein Show “Peer to Peer”. I love this show and I try my best not to miss it. You can get it on Kwese TV. What caught my attention was the interview of the founder of Nike, Phil Knight. He started by selling Japanese imported running shoes from the boot of his car. This is despite having a degree from Stanford University! The humility of this extraordinary man who has built a $100bn company was out of this world. As I thought of him selling shoes on the streets I saw thousands of young Africans who are doing the same and wondered to myself!!! It’s not about where you start, just get started. Don’t sit at home simply because you cannot get a job...

Jan. 1, 2018, 2:46 p.m. Reply
Sylvester sandifolo

Taking the first step marks the beginning of winning. Determination, passion and perseverance completes the winning process. All conglomerates started as small businesses one day so can we start futures ones.

Jan. 1, 2018, 2:47 p.m.
Ann nwangwu arinze

I have learnt so much from you sir. Since i started following you, my business has taken a positive turn. I get more innovated. I'm writing a business plan for a new business ( unfortunately I can't disclose much about it now). God bless you sir. Hope to see you someday, hopefully when the world's greatest entrepreneurs would be meeting, i would be sitting just beside you.

Jan. 1, 2018, 2:48 p.m.
Esther njonde

I wanted to take good good care of my first born when he came in to the world. So I set up a business (this was the most scary thing I have ever done) that I would freelance and be a present mom to our boy. He is hitting one year in a month and the business, despite Kenya's looooong electioneering period, is picking up. I am proud of Raph Media Productions of (named after our son Raphael) and most importantly I am a proud mom.

Jan. 1, 2018, 2:49 p.m.
Strive masiyiwa

Afterthought: One of the things I observed in that Phil Knight interview was the importance of passion, and humility: Phil Knight was a college athlete. He loved running, and he wanted to improve running shoes. If you want to know what business to go into, ask yourself: “What is my passion?” There is a $100bn business you can unlock from your passion. Don’t despise or look down on the guy selling you stuff at a street corner. Smile and say to yourself: “One of these guys could be a Phil Knight”!

Jan. 1, 2018, 2:51 p.m. Reply
Afra vanessa kunda

I've read that most people running empires are running them because of the passion they have towards that service or product..I think it easier to work up and fight for something you love even if you're not being paid for it. Also it comes down to finding one self, our spirituality our assignment on earth..we were born equipped and ready for that business, problem is we don't bother with what's inside is..we are busy tryna be everyone else

Jan. 1, 2018, 2:52 p.m.
Prosperous joseph

Thank you sir for this wonderful opportunity to be bless by you. I started asking myself this question when the desire to further my education was challenge. I applied for a Higher National Diploma(HND) in Mechanical engineering in Lagos State Polytechnic with the National Diploma in Marine Engineering from Maritime Academy of Nigeria. I want to have a degree before going into business.You advice us to study very well before venturing to business,that it increases our chances. After clearance,i paid my fee and starting receiving lecture for month. The school said NBTE(Nigeria Board Of Technical Education) ask them to stop accepting student with ND in Marine engineering for HND Mechanical. I am confuse considering time and money spent.i do not know where to start from. The school has frustrated my plans. Sir please advice me?

Jan. 1, 2018, 2:54 p.m.
Strive masiyiwa

Afterthought: In 1991 I visited San Francisco to see for myself measures that local and state authorities were taking to promote entrepreneurship. Based on what I saw at the time, it did not surprise me when companies like Google, Facebook, Uber, Twitter, and many others began to emerge within a decade. In 2008, I spent a month in China studying what they were doing to develop entrepreneurship. It reminded me of what I had seen in California. I was totally stunned! Today China boasts some of the fastest growing global companies, and is the only serious competitor to the US when it comes to building global companies. #Policy does matter: There is a lot African governments can do to use entrepreneurship as a driver for jobs and wealth creation. “What do you “see”?” Merry ChristX [He is the reason for the season, and so I say “peace and goodwill to all men”].

Jan. 1, 2018, 2:57 p.m. Reply
Sylvester sandifolo

Its not all gloom but our Governments are kinda of myopic. I see corruption taking a heavy hand than the few good people we have in Africa. The Chinese are now the most dominant force in Africa. I cry for a day when we realise that African solutions are the only way out of our problems.

Jan. 1, 2018, 2:58 p.m.
Ak kipkip

Absolutely...policy matters, its the "IN THING, THE SOUL THING" until African governments priorities well intentional policy making, we will be making large long curves than short quick curves in delivering transformation. Sir Strive, is it possible for African governments to empower the AU business board to spearhead this kind of policy making and adopt such resolutions, they can keep to themselves the competitive politics but free African entrepreneurs to be all they can be. This is will quicken transformational change - POLICY MATTERS...If African goverments can just empower the AU businessboard to spearhead such policy making and governments adopt them, the war is half won - PROGRESS LEANS ON POLICY PERIOD!

Jan. 1, 2018, 2:59 p.m.

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