Let’s set the record straight – you must invest money in order to succeed. Your choice of business and entrepreneurial acumen will determine your profitability and future success.
Every business has its own shortcomings and limitations. You must do homework to ascertain the impediments to your business. Is it capital or markets? Assuming you had Ugx. 5m in your bank account, which business would you invest in?
There are many businesses you might consider investing in– stocks, treasury bills, real estate, mobile money agency, eatery, consulting outfit or farming. Your choice must be influenced by your availability, capital requirements and the initial marketing involved.
With Ugx. 5 million, you must invest in a business that requires low capital. Businesses requiring your personal involvement and skills are usually low capital. Businesses like motivational speaking, cleaning, computer repairs and consultancy are ideal. The challenge is that to get business you must first create credibility in the eyes of your target market. It may require you to undertake aggressive marketing or even providing the service for free in return of recommendations and references so that you gain some level of trust.
Business that require small capital to start are usually highly competitive. The entrepreneur must therefore invest in aggressive marketing at the start which makes it expensive in the long-run especially if the business fails to take off.
If you chose to invest in computer repair business, you’ll need to allocate about Ugx. 1.5 million in six months rent, Ugx. 2 million in the tools and the balance in working capital (marketing and aggressive promotion). You must be the repair man yourself; else you may not sustain the business. If you recruit an expert, s/he will be too expensive to keep and you also risk losing your clients to him as most people will cross you and follow up your clients later.
Don’t invest your little savings in businesses that might take long to bring in money. Investments like land tend to tie up money, yet you need liquidity to trade. In our scenario above, you would not have made the right decision to invest in land, as this will tie your capital and take a long period for you to realize cash from it. Your other best bet in such a case would be to identify a market vendor or vendors in town and recapitalize their business for a small share of the profit. This gives you more time to do other business while working with some experienced partner. In the corporate world, that is called investment in stocks. To you a street savvy, that is partnership.
If you have a full time job, you may consider business that does not need your total involvement. Buying stocks or investing in real estate could be the one for you. That is why it is nonsense for those in retirement to invest in real estate. Where is your advantage? If you have time for your business, put it in businesses with high turnover potential. Importing fruits from the village to selected corporate clients could sound more profitable than you ever imagined if you did it right.
Initial marketing efforts
The biggest challenge to the success of small businesses is lack of market and not capital as we’ve been made to believe. If I provide motivational speaking services, all I need is an audience to speak to and get my cheques. But such audience does not come easily. You must be connected, referenced and well networked. This requires money.
That is why publishing a book or writing articles in popular magazines and newspapers that carry bylines is a must for those engaged in the consulting or speaking business. Well established firms like the big four don’t have to go through such credibility seeking exercise as they already have reputation for quality work.
So which business will you invest in?
Mustapha B Mugisa, MBA 2014. All rights reserved.