Abd Hakim Dot Com When Engineers Talking About Financial & Motivation

Business Capital; from your saving or loan?

1. When u have an intention to make business, capital is a must.

2. Now, there are so many sources of capital out there such as borrow from financial institution, borrow from friends, funded by your parents, funded by politicians, sponsored by government agency, take out from your savings and so on.

3. But, this entry will focus type of capital from two sources, borrow or from your savings.

4. The most important things whether you want to use your saving or borrow is to make a business proposal.

5. Your business proposal should at least consists of 6 items:

i) Business Model - You have to be clear what type of product or services that you are trying to offer to your potential client. The more you focus your product/services the more potential client will be yours. As an example, have you been heard McDonalds selling babies product? No, there are focusing only on fast food. Honda only producing a car and motorcycle, they will never fabricating bullet trains. FOCUS! FOCUS! and FOCUS!

ii) Risk - You should done a research, called Project Risk Assessment. You should predict what is the risk of your business by studying the demand of your product, competitors, how long your business could be sustained, what is the factor that effect the sales, what type of promotion/campaign to promote your product/services, is there any premium(corruption) you have to dump (if any). By brainstorming your risk, you can predict your risk. Risk cannot be removed 100% but you can reduce the risk. Hence, by doing 'calculation' of risk, you could expect whether you want to use your saving or borrow from any sources.

iii) Profit - Dont' tell your grandmother story that you can gain profit 1000% after you launch your product/services within 24 hours. Prior to achieve profits, you have to calculate the period to gain back your capital. As an example, let say you you want to setup car accessories shop, you have to target say, for the first quarter of your business you have a target to gain back capital of 10%, second quarter 40% of the capital, and third quarter the remaining 50% of your capital, and fourth quarter you start to gain profit (make sure this figure keep on increasing). Be realistic. Please do research at Internet, data survey, the demands etc.

iv) Potential Client - Generally, there are 2 types of client. Organization, individual or both. As an example, if you want to open restaurant, your customer consists of individual. Means you have thousand of people that will come to your restaurant. Unlike organization, your client is only one or two. Let say you have a construction company. Your client is only the government. Can you expact any individual willing to fund you to build a roads for 200km stretch from your house going back to your village unless the government will fund the projects. You also can get potential customer by both individual and organization. Let say, you have stationery shop, you can sell your stuff to ordinary students as well as to get a contract from government to supply stationery to the government office.

v) After Sales Service - This is how we could increased percentage of returning customer. Let say, you open a workshop, after one week please make a cold call to the customer, ask them is there any problem arise. This activity can make customer feel apriciated by workshop owner. Hence, 90% he/she will consider to sent their car back to the workshop for next service.

vi) Promotions - There are tonnes of method you can consider to promote your products/services. Make sure the promotions parallel to the types of your business and using updated technology. If you planned to open a handphone shop, don't used flyers anymore. It is not working . People will never read it. As an example, introduce member to get member. Let say if the customer bring his/her friends give rebates 50%.  Automatically, you already outsourced your promotion to existing customer. Another tips, dont forget to capture basic details of every customer you have been deal. Once per year give them an email stated that your shop got an anniversary and offering upto 70% discount for returning customer. In this way, you can attract people to spend more and more at your shop.

7. Wrapped up those information in your proposal and give to the expert or people that have an experienced of that business model. Get additional info from them, after you finalized your proposal than you are leading choices of whether to use your saving or borrowing money.

8. If the business categorized very high risk, like low return, less potential client, very hard to get specialist workers, better used your own savings.

9. If the business categorized very low risk, like high return, less competitors, easy to get workers, then you can consider to lend money from Financial Institutions. And please make sure, you should consider your profit can cover the bank interest. If you plan to lend $100k for 10 years, please make your business profited $500k for 10 years.

10. Of course, this exercise should done in a very good manner, don't cheat yourself, and be realistic. Simple formula, high risk business make high profit, low risk business make low profit. It's up to you how to drive your business.

11. Good luck to your future business!