At the beginning of a startup, many founders will have a long list about how they will spend any fund that comes into their business in the first couple of years. For the most part, they are not thinking about how to make money, except, of course, their big idea. With so much emphasis on expenditure and less on revenue, many businesses will get choked in their first year. This is probably one of the reasons statistics say 60 percent of businesses fail in their first year.
From my earlier article on zero-funding, you probably understand by now that I am not a fan of heavy spending at the start of a business. Leave out those things that could gulp funds first and focus on using the free resources available to get some cash flow. For instance, why would you want to spend $1000 on building a robust website in your first month of operation when you know that you will make a lot of changes over the first year? Why not start with having robust and professionally done social media handles? At least, you will not spend $1000 to create a Facebook, Instagram, or LinkedIn profile for your business?
Stop thinking about the ways you will spend the money (whether you have it or you are still expecting it) and start thinking about how to make the money come. Get your cash flow running.
Tekedia Mini-MBA edition 14 (June 3 – Sept 2, 2024) begins registrations; get massive discounts with early registration here.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
In my first year in business, I put out a tricycle on hire and used the weekly returns to keep operations running till I got my first client. Hiring out a tricycle certainly had nothing to do with the services my business was rendering, but it was a little something that gave me some cash flow.
Forget that thought that says you need money to make money. You do not need money to make money. You need to work. You need to get out there and start talking to people, offering your service, selling your solution. You need time and effort to make money. And for as long as possible, I would say that you don’t start investing money until you are making some money, however little the revenue might be.
Some people have an idea and the next thing is that they are on the search for investors’ funds to build a prototype. How do you expect an investor to put his funds into something when you have not invested any fund of yours? How is the investor sure that your big idea is not just another overhyped solution that crashes as soon as it hits the markets.
You do not need investors’ money to get a prototype. You can start with using your money, or offer some products or services to some clients and use the money to build your prototype. You are most likely to build the prototype right the first time when you are using your own funds, then when you are using investors’ funds.
Well, not everyone might agree with that statement but it is mostly true. My point is that you should get creative in thinking up possible revenue streams while your business gets on its feet. Like in my case, it could be something totally unrelated to the business. It can also be something in line with the business, but it should be something that will generate some revenue on a regular basis starting immediately. It should also be something tested. Something sure.