“Seventy percent of business ventures will fail in the first five years!†says Kenneth Thompson, CEO of Dalex Financial Services Limited.
Speaking at the recent Servled Friday gathering on the subject matter “Financing your business with other people's money -- friends, family and foolsâ€Â, he said for many this is largely due to the complexity of finding funds to start or expand a business.
Servled Friday is a free event held every Friday that brings an accomplished entrepreneur or business leader to speak to up and coming entrepreneurs. It is open to young entrepreneurs who desire to build sustainable African businesses.
As a Chartered Accountant (Institute of Chartered Accountants in England and Wales) and a former employee of Woolwich Plc (now Barclays UK), Mr. Thompson has been able to grow the Dalex home-based business to a company providing employment to over 1,000 employees --including 120 professional staff with 20 sales offices all over the country.
As a seasoned fund manager and investor, Mr. Thompson has been on the receiving end of many a request for funds. He advised that when seeking funding, the 3f’s -- friends, family and fools -- should be any entrepreneurs’ first point of reference.
Amongst many reasons, it is because they provide strategic credibility, quicker funds and are less bureaucratic, even though they will have certain expectations.
He noted with some humour that entrepreneurs often overlook one major factor when they seek funding, which is themselves. According to him, contrary to popular thinking, investors invest in people before they invest in ideas or products.
“The first integrity check on you as a person is whether your friends and family believe in you strongly enough to give you seed-money for your new idea.†He explained that people who have not had any family or friends show interest in their ideas are less likely to be considered by outsiders for seed-funding.
Secondly, investors want to know you are passionate about your idea or business; that you have researched it thoroughly and you can demonstrate having “skin in the gameâ€Â.
In other words, how much personal sacrifice have you made? Investors want to know that you are worth the investment risk.
Mr. Thompson advised that when going for money, entrepreneurs should ask for the minimum, set themselves milestones and ask for more when they have reached them, and be prepared to spend time with their ‘potential investors.
He cautioned the entrepreneurs to “...communicate the risks, and write down an agreementâ€Â. Whilst friends and family are willing to help, they should be able to know what's at stake, by having an agreement that should include any payment terms.
This should be communicated and agreed upon. He added that it is a privilege, not a right, for anyone to fund a business, and cautioned against taking money from people who cannot afford to lose the money they have invested.
He shared the humble beginnings of Dalex Finance with the audience and encouraged them to work hard if they want to reap results. He credits the success of Dalex, which includes ranking number 16 on the Ghana Club 100 (2013), to having a strong team. The Dalex success story has not been a solitary journey. His job is to “...create a winning team and teams always winâ€Â.
Most start-ups will fail because the right tools to propel it forward aren’t in place. Kenneth Thompson believes that success in business is 95% perspiration, 5% inspiration. However, with careful planning and a good team it is possible to be successful.
For more on Kenneth Thompson’s talk and other speakers who have graced the platform, visit served.com. Email [email protected] and also get an invitation to future events.
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