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GFA Opinion: Reasons Why Investors Will Not Invest In Your Start-up (For The African Entrepreneur) Part 1

GFA Opinion Discussion with Efe and Nichole

Inexperienced Team- Members 

There’s a lot you can do solo as a start-up founder, especially in your venture’s earliest stages. First, in the earliest stages, your team is the most valuable asset in your start-up. If you’re approaching an angel or seed investor with just an idea, a prototype, and a vision with no validation or customers, they will want to make sure your team is equipped with the necessary experience, expertise, and passion to successfully execute on your plan and turn it into the expected outcome. Fundraising is a big reason why starting with a team is important. 

A start-up needs a leader, builder, and marketer. The leader identifies opportunities, sets a plan, builds a team, and executes. The builder is the creator of the solution, while the marketer brings it to life and boosts sales. Each one of these three roles has a unique skill set and input that shapes the overall venture. 

Lack Of A Business Model Or An Un-properly Written Business Plan 

Small businesses often overlook the importance of effective business planning prior to opening their doors. A sound business plan should include, at a minimum: 

  • A clear description of the business 
  • Current and future employee and management needs 
  • Opportunities and threats within the broader market 
  • Capital needs, including projected cash flow and various budgets 
  • Marketing initiatives 
  • Competitor analysis 

Business owners who fail to address the needs of the business through a well-laid-out plan before operations begin are setting up their companies for serious challenges. Similarly, a business that does not regularly review an initial business plan—or one that is not prepared to adapt to changes in the market or industry—will encounter potentially insurmountable obstacles throughout the course of its lifetime. 

To avoid the pitfalls associated with business plans, entrepreneurs should have a solid understanding of their industry and competition before starting a company. A company’s specific business model and infrastructure should be established long before products or services are offered to customers, and potential revenue streams should be realistically projected well in advance. Creating and maintaining a business plan is key to running a successful company for the long term. 

Your Company Is Not The First To Enter The Market Or Lacks Uniqueness. 

Business ideas are the first business elements with the business potential energy of your new business. But there is one important question you need to answer: how does my business become unique? The uniqueness of your business is one of the most important competitive advantages for you. So, a unique business usually starts with a unique idea. Below are four different metrics that you can use to measure the potential of business ideas:  

  • The importance of the problems that business ideas will solve 
  • Use your entrepreneurial skills to start that business idea. 
  • Size of the Market and; 
  • Competition 

The Founder Or CEO Is Un-Coachable. 

Whether we look at others or ourselves, whether we coach or look for coaching, there are commonalities when someone is un-coachable. Here are a few traits to look for:  

  • The founder is in desperate need of coaching but insists that they don’t need it. 
  • The founder is arrogant and, at the same time, underwhelming in their performance.  
  • The founder is a know-it-all. With that, there is nothing left to examine.  
  • The founder is quick to talk back or insist they know exactly what they’re doing. 
  • The founder feels entitled; they take what they have for granted.  
  • The founder never fails, never takes responsibility, and always blames others for any imperfection.  
  • The founder always has a convenient excuse for all of their shortcomings. 
  • The founder quickly becomes defensive, and as such, becomes impervious to feedback.  
  • The founder is too hard-headed to listen, let alone absorb any of the advice given.  

Inadequate Management 

A Another common reason small businesses fail is a lack of business acumen on the part of the management team or business owner. In some instances, a business owner is the only senior-level person within a company, especially when a business is in its first year or two of operation.  

While the owner may have the skills necessary to create and sell a viable product or service, they often lack the attributes of a strong manager and don’t have the time to successfully oversee other employees. Without a dedicated management team, a business owner has a greater potential to mismanage certain aspects of the business, whether it be finances, hiring, or marketing. 

Smart business owners outsource the activities they do not perform well or have little time to successfully carry through. A strong management team is one of the first additions a small business needs to continue operations well into the future. It is important for business owners to feel comfortable with the level of understanding each manager has regarding the business’s operations, current and future employees, and products or services. 

You lack a marketing strategy. 

Business owners often fail to prepare for the marketing needs of a company in terms of capital required, prospect reach, and accurate conversion-ratio projections. When companies underestimate the total cost of early marketing campaigns, it can be difficult to secure financing or redirect capital from other business departments to make up for the shortfall. Because marketing is a crucial aspect of any early-stage business, it is necessary for companies to ensure that they have established realistic budgets for current and future marketing needs. 

Similarly, having realistic projections in terms of target audience reach and sales conversion ratios is critical to marketing campaign success. Businesses that do not understand these aspects of sound marketing strategies are more likely to fail than companies that take the time to create and implement cost-effective, successful campaigns. 

Nichole Manhire

Is the media and brand manager at GFA News. She works very closely with editors and podcasters that contribute to telling the African business success story. For marketing and advertising send Nichole an email: nichole@getfundedafrica.com

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