Chapter 5 Will Your Business Concept Soar? – The Rainmaker

CHAPTER 5

Will Your Business Concept Soar?

I have watched numerous entrepreneurs lose valuable opportunities because they thought the cost of the capital was too high. They spent too much time haggling over the cost of funds while their window of opportunity moved to someone else. Obviously, you always try to attain a good deal, but important factors like the cost of capital should have been discussed prior to investor meetings and investment priorities discussed and agreed to.

Simply, if it costs you one dollar to make two dollars, are you winning or losing?

Bookstores and online e-commerce gateways are full of financial self-help books, from pure academic to highly personalized trading books. These books will assist you to understand corporate structures, financing methods, strategy, and business planning. While The Rainmaker will allude to such issues, the focus is on what structures are most conducive to making a success of your business, followed by techniques to keep the business healthy and prepared for future growth.

The following are some of the pertinent issues The Rainmaker questions:

How prepared are you and your business? For leadership, growth, accessing capital, and the rigorous and tough daily decisions you will have to face and make?

How have you structured your business? Did you take into consideration corporate guidelines and government-to-local legislation?

Do you have a documented and workable strategy and business plan? Can you adapt this to a powerful presentation to capital providers?

Do you have a strong presentation for directors, key managers, staff, and capital providers?

This book is designed to be practical, while taking theory into consideration. Global statistics show that between 75 percent and 90 percent of all new businesses fail within 2 years of being launched. I believe that there is a direct link between failure and the lack of establishing a workable strategy and to carry out that strategy in a coordinated manner. The solution seems so simple: Take the opportunity to carefully plan your future to raise the chances of profit and ultimately success.

My involvement in funding businesses accelerated in 2010, when I helped raise $20 million and $150 million in two extremely different projects. The first project was to acquire a mine in Kenya, and the second was to acquire and launch a new aviation charter company in South Africa. It took less than 8 minutes to raise the funds for the purchase of the mine. The entrepreneur started his presentation, but the funder simply raised his hand and said, “I have read the business plan and supporting documents. Based on these, we agree to the proposed deal.”

The second project presentation, this time to a Chinese consortium, took place in Bangkok. That presentation took three 1-hour sessions over 3 days. On the fourth day, photographers were at the meeting to document the deal. Hands were shaken, and the transfer of funds was carried out as discussed.

These two projects did, however, give me a skewed perception of how really difficult funding truly is. The next dozen projects were not so easy, with entrepreneurs fumbling presentations, shortcuts taken by researchers, and the financials proving to be padded to increase bottom-line growth.

Many projects were not funded, and I had to take a step back to reassess my methodology. Over the following years, I developed a system that included research to support forecasts on audited financials and corporate structures that met the latest legislative guidelines and regulations.

The system worked well until 2015, when I had to reassess and develop new methodologies, as outlined here:

Two Contradictory Methods

Formal Analysis

There is nothing worse than being asked a question by an investor that you don’t know the answer to. So to reduce the failure of not attaining capital raising, the following three essential nonnegotiable phases to successful rainmaking may be considered:

1. Due Diligence. In other words, take the company apart. Conduct due diligence on every aspect of the firm, including checking the basics, such as whether the company is registered, has and owns patents and trademarks, owns factories or warehouses, and so on. You must view these assets yourself. An investor once asked me whether I had visited the production plant, which was in another country, and, given the time frame to complete the documentation, I had not visited the company’s premises.

a. Essentially, the following must be assessed:

i. Financials: Ensure that the financials are up to date. Then conduct analysis and forecasts, formulate a valuation, and undertake ratio analysis.

ii. Corporate structure: (including the board of directors) and whether they meet international corporate governance and transparency criteria.

iii. Ensure that your feasibility study is clear and concise. If the report is lengthy, draft a four-page executive summary.

2. Research and feasibility. This enables you to find out whether the company meets international best-practice trends and whether forecasts are within industry ranges.

a. This includes PESTEL analysis, Porter’s Five Forces, SWOT analysis, and legislation related to funding, listing, and government-specific legislation.

2. Strategy workshops. To ensure that all the preceding requirements have been assessed and understood, a series of workshops should be conducted with the entrepreneurs. It is at this stage that corporate structure can be corrected and financials adjusted to meet International Financial Reporting Standards (IFRS) compliance regulations.

a. Make sure that there is consensus in a direct and clear decision to proposed changes.

b. Appoint a team, preferably a driven and reliable one, to ensure that an action list is carried out.

c. The appointed team should monitor changes with effective communication structures and report back schedules to update management as to the progress of the project.

Next, it is time to write the relevant documents. This may include a business plan (ensure that this meets the exchange listing requirements), a prospectus, and a strategy for the group. The latter document is different from the business plan as it contains specific tasks and goals for directors and key staff.

The Creative Approach

Some economists say that this method is not really in opposition to the more formal analytical method of analysis of your company. In fact, it is often the lack of creativity that leads companies into the financial abyss. The Rainmaker usually starts here, looking at how you conduct your business before assessing the more factual statistics. Indeed, everyone has those facts, but not all entrepreneurs have the ability to run a company and solve issues that could impede new paths of profitability with creative thinking.

Defining Creativity

This implies the ability of an entrepreneur to generate new ideas and approaches to company strategy and management. Stated from an economic perspective, this involves the ability to identify opportunities based on these new ideas and approaches and to turn them into economically viable products and services.

Environmental aspects that may influence creativity can be broken down into four factors, namely, economics, business, politics, and technology, including the availability of resources such as capital, people, expertise, skills, competition, Socio-economic conditions, and government and business regulations and guidelines.

It is interesting to note that even when creative flair is present, there is no guarantee that creativity will occur. So whichever method you deem perfect for you, the true entrepreneur leaves no stone unturned to turn vision into action. In combining the two methods, creativity becomes an analytical process whereby the current task is strategized to achieve a path to your desired financial outcome.

It must also be noted that many companies see a creative process solely as an expense.

Starter Questions

Before we delve into the necessary basics, I have a short list of questions that you should regard with brutal honesty. This chapter has asked whether your concept has what it takes to fly and succeed. Actually, the question should be whether you have the ability to steer the company to success. The following list requires a simple yes or no answer. If you get more no than yes answers, it’s time to look at some harsh realities. Maybe you don’t have what it takes to start and run your own business.

Every new entrepreneur should consider the following 10 questions:

Question

YES

NO

  1. Are you calm when all hell breaks loose around you?

 

 

  2. Do you take responsibility for your decisions and actions?

 

 

  3. Are you a natural leader?

 

 

  4. How well do you handle pressure?

 

 

  5. How well do you communicate?

 

 

  6. Are you a fair and just person?

 

 

  7. Are you able to admit when you need help and then employ required skills?

 

 

  8. Do you have the endurance needed to be successful?

 

 

  9. Are you able to make tough decisions?

 

 

10. Do you inspire people to follow you?

 

 

Rainmaker Observation: The role of The Rainmaker is to help you make things happen, from structuring your business to being profitable to raising capital. There is a dire need worldwide for SMEs to succeed; thus, writing this book should make the process of achieving your financial goals easier, while assisting in employment creation.