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Make your business attractive to investors

“If you have ideas, you have the main asset you need and there isn’t any limit to what you can do with your business and your life. Ideas are any man’s greatest asset.” — Harvey S Firestone.

Report by Phillip Chichoni

Last week I attended a seminar hosted by the Singapore Business Federation (SBF)’s Business Mission to Zimbabwe. It was an eye-opening experience, considering the parallels between the two countries.

The World Bank Global Ease of Doing Business Index ranks Singapore right near the top, while Zimbabwe lies very near the bottom. We have a lot to learn from the best in the world.

During lunch, I overhead a certain group talking about whether this event was really meant to benefit Zimbabweans. Someone said the visitors were all there to sell their own products and not to assist Zimbabwean businesses.

When I spoke to one of the Singaporean delegates, he said the purpose of the SBF, which is their apex business chamber, was to champion the interests of the business community in trade, investment and business relations.

They formed the Africa Business Group as a platform to facilitate exchanges between the Singapore business community and their African counterparts. This would help Singapore businesses find markets in Africa while providing opportunities for African businesses to not only find markets in Asia, but to also find opportunities for partnerships that would allow for development of the region.

Unlike Zimbabwe, Singaporean companies have access to huge amounts of finance, therefore presenting opportunities for capital investment for our cash-strapped businesses.

We cannot grow on our own
When starting business, many people do not think as far as to what end the business will reach. We call it the exit strategy.
A good exit strategy will allow the business owner to cash in and retire wealthy, instead of going down with nothing to show for all the years of hard work.

Most owners cite the lack of long-term and affordable loans as the main hindrance to achieving growth. But the reality is that loans are not the main ingredient for growing a business.

Finance is just one of the many entrepreneurial problems to be solved and a key characteristic of true entrepreneurs is that of innovative problem solving.

There is one fact that we have to accept when it comes to raising funds; there is simply not enough money in Zimbabwe. We need to look outside our borders.

With the low demand due to the financial crisis in the eurozone and the depressed economies of America and Asia, investment returns in much of the world are very low. With the potential for rapid growth in Africa, investors are searching in this region for good opportunities to build value.

Some business owners are reluctant to court foreign investors because they don’t want to lose total control of the business. This is being small-minded. All companies that made significant growth have had to cede equity to investors along their growth curve.

In our case, this may be the only option because there are no other sources of significant amounts of funding locally.

Is your business attractive to an investor?
Although investors understand that all businesses carry some risk, they will not blindly pour money into your business. They will need some assurance that their investment will not only come back, but will grow significantly.

Here are some things that will make your business attractive to investors:

Good customer value proposition
You must be supplying goods or services that customers want or need and are willing and able to pay for. This is usually proven by a history of growing customers and sales.

Can your business be duplicated and still maintain the same quality and service level in different areas and regions? Without being scalable, a business’ growth potential will be very limited.

Good management
It is the people who make or break a business, not buildings, computers or machinery. Your top team must be motivated, qualified and experienced to help you carry through your vision. Any potential investor will want to see your top team’s CVs.

Good financial management
Proof of a business’ performance lies in financial reports. Your business needs to have good record-keeping systems, with sound internal controls. Most investors will want to see your audited financial statements while performing due diligence on your firm.

If you are thinking of wooing investors for your business and you have taken care of the above, you may want to follow up on the many business initiatives, such as the Singaporean business mission being undertaken by the Industry and Commerce and Investment Promotion ministry. Or you can email me for linkage.

Phillip Chichoni is a strategic business planning consultant who works with entrepreneurs and growing businesses. You can contact him by email on chichonip@smebusinesslink.com, or visit http://smebusinesslink.com

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