We normally operate on a ITO format. To start business raise capital build the infrastructure, to build the product to offer the customer
Thus we put up the money build the building and later on look for customer to generate revenue. And more often not the strategy fails.
So early on in MBA subject entrepreneurship, we have the serendipity walk: walk into a street crowded with business and look for other potential business that can be set up. Cherches le craneu. Look for hole in what appears to be a saturated market. Do the cusotmer first approach. Go find a problem - what pisses you off, look for the solution, make or build the solution (MVP minimal viable product). You will find out that some successful ventures (as gathered from entrepreneur guests) that Toby peanuts started from a P3,000 initial seed capital, Splash from a drumful of acetenone funded by P10,000 wedding cash gift. So what can be the menu:
1. Follow the Richard Branson of Virgin example. Fund your business from deposits of dp of potential customer. So this is what contractors printers do. Programmers. Ask for 50% dp to start the project Dont use your own money OPM.
2. Forget the ITO model ie of raising equity borrowing from bank or bombay, or going to a VC. If you do this right you dont have to go to vc.
For example a fresh graduate from MBA was planning to put up a logistics solutions company and contacted the billionaire for initial funding. So he said, think of how you start your company without my help or VC. or going to a bank. So he had to think hard. He wrote 100 logistics company (gmail of course) offering solutions to a particular problem (he all ready has a solution)
His offer was if I solve your year long problem by Friday, you pay me $5,000. Somebody accepted his offer and the problem was solved and he got his $5,000. So he kept the $2,500 paid a programmer to have a working website/solution.
He wrote again other prospects and offered $2,000 monthly lease subscription by using his software /solutions. He got 6 subscribers. Thats $12,000 x 6 = $72,000
He met again the billionaire and was asked if he still needed help/financing. Naw. That was easy
So you have to train your mind to think out of seemingly helpless situation.
For a batch of trainees, the challenge was how to raise $100,000 in a month if you dont have a job. And they did come out with fine surprising solutions/plan. However the thought of having security from P16,000 monthly salary lulls them into complancency and that of dependency.
3. "What is essential is invisible to the naked eye"
The real cash generator are not those that are visible to the naked eye. This is the primary idea behind the free Its a bait to get the people get their foot in the door. Once inside the door, the real money can be made on higher margin products.
1. Free coffee - to get people to come in buy snacks sandwhiches which have higher margins
2. Free haircut at Landers to buy their P700.00 membership card so that you will be a repeat customer from whom you get sales and gp
3. Amazon Prime - losing logistics membership thru which you get free delivery. Now the same
is offering livestreaming competing with Netflix.
4. Buying a losing firm to get the talent to put up a system/sales platform - like Jet Com bought
by Walmart to get them on e commerce plat
Its really a great deal and a blessing that we have people like Peter Thiel who writes about Zero to One. Creating one from Zero. That is the blessing from entrepreneurs. Entrepreneurs create wealth and help build the nation.
Let us count our blessings, thank the Lord for that, and so that we may continue and be a blessing to less fortunate ones.
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