Control or growth? (Part 2)

__Who wins? 

The first question you must answer is this: What “kind” of money are you looking for? Is it debt or equity? I always let the business decide!

First of all, let me show you the process which allows you to decide. Remember, in my world the business is a separate “persona” (legal entity) and it has the capacity to “tell” me exactly the “kind” of money it needs: I don’t just wake up and say “I need a loan from a bank,” or “I need investors.”

It’s the business that “tells” me the “kind” (type) of money it needs.

Let the business “talk”?! Yes, let the business tell you what it needs.

So let’s ask: “Hey, my Business what kind of money do you need?”

Answer (from the Business): “Owner, what does the business plan say?”

This is why we develop a business plan! When done properly, it tells you exactly how much money you need, as the business grows, and it tells you the “kind” of money you need.

__It is the business plan that should tell you whether you need debt or equity.

Debt vs equity financing is one of the most important decisions you will make in your business. (Please take note: I am not going to tell you which choice to make in this Control vs Growth series. I am just going to share my own experiences. You must make your own decisions).

For example, debt allows you to keep control, but it’s not always good for the business itself. Can you tell me some of the pros and cons, advantages and disadvantages, of financing your business with debt?

Do you understand, for instance, how interest rates work? How about “compounding”? If you’re in the Senior Class, I am sure you do, but if you don’t… beware. “Crunch” (analyse) these numbers with care! (You can be sure the bankers and investors are!)

Being turned down by a bank can actually be a blessing in disguise because you could end up bankrupt, or worse, if you get a loan (debt) that you should never have taken in the first place!

__Understanding what “kind” of money you need, debt or equity, is the first thing a serious entrepreneur tries to establish very quickly using the business plan.

Never, ever, outsource the development of a business plan! Yes, so many people think preparing a business plan is something done by an accountant friend to help you apply for a bank loan!

No sir (ma’am)!

Now if the business (through the business plan) has “told” you it will not grow using bank loans or money borrowed from friends, what are you going to do?

Business to Owner: “I want equity capital!”

Time to go to Shark Tank?

Ouch!!

To be continued. . .

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About Strive Masiyiwa

Strive Masiyiwa is the Founder and Executive Chairman of Econet, a diversified global telecommunications group with operations and investments in over 15 countries. His business interests also include renewable energy, financial services, media and hospitality. Masiyiwa serves on a number of international boards, including Unilever, Rockefeller Foundation, the Council on Foreign Relations’ Global Advisory Board, the Africa Progress Panel, the UN Secretary General's Advisory Board for Sustainable Energy, Morehouse College, Hilton Foundation's Humanitarian Prize Jury and the Kenjin-Tatsujin International Advisory Council. He is one of the founders, with Sir Richard Branson, of the global think tank, the Carbon War Room, and a founding member of the Global Business Coalition on Education. Masiyiwa took over the Chairmanship of the Alliance for a Green Revolution in Africa (AGRA) from Kofi Annan. He is also Chair of the Micronutrient Initiative, a global organization focused on ending child hunger and improving nutrition. In 2012, Masiyiwa was invited by President Obama to address leaders at the Camp David G-8 Summit on how to increase food production and end hunger in parts of Africa. In 2014, Masiyiwa was selected to Fortune Magazine’s list of the “World’s 50 Greatest Leaders”. As a philanthropist, he is a member of the Giving Pledge, and his contributions to education, health and development have been widely recognized. Masiyiwa and his wife finance the Higher Life Foundation, which provides scholarships to over 42,000 African orphans. In 2015, he was the recipient of the International Rescue Committee’s Freedom Award and was presented with a UN Foundation Global Leadership Award for the work of the Africa Against Ebola Solidarity Trust, which he chairs and helped establish to fund the deployment of African healthcare workers to combat the outbreak in West Africa.

7 thoughts on “Control or growth? (Part 2)

  1. Strive Masiyiwa Post author

    Afterthought:
    The other day I was watching one of my favorite tv shows: Bloomberg’s David Rubinstein Show “Peer to Peer”. I love this show and I try my best not to miss it. You can get it on Kwese TV.

    What caught my attention was the interview of the founder of Nike, Phil Knight. He started by selling Japanese imported running shoes from the boot of his car. This is despite having a degree from Stanford University!
    The humility of this extraordinary man who has built a $100bn company was out of this world.

    As I thought of him selling shoes on the streets I saw thousands of young Africans who are doing the same and wondered to myself!!!

    It’s not about where you start, just get started. Don’t sit at home simply because you cannot get a job…

    Reply
  2. Strive Masiyiwa Post author

    Afterthought:
    One of the things I observed in that Phil Knight interview was the importance of passion, and humility:
    Phil Knight was a college athlete. He loved running, and he wanted to improve running shoes.
    If you want to know what business to go into, ask yourself:
    “What is my passion?”
    There is a $100bn business you can unlock from your passion.

    Don’t despise or look down on the guy selling you stuff at a street corner. Smile and say to yourself:
    “One of these guys could be a Phil Knight”!

    Reply
  3. Strive Masiyiwa Post author

    James asks,

    sir, I think I need some clarification, in the main article you are saying the business plan will tell you, however, here you are telling us to consult experts?

    My reply,
    If you have never done a BP you will need someone to show you how it is put together, particularly if you want someone to read it and give you finance. However you are the one responsible for the accuracy of the information that helps build the plan.
    In business as with anything else you do in life, you must learn to seek out experts who can help you:
    This is wisdom.
    Personally I talk to experts on a daily basis. You must develop the capacity to find the right experts, and to learn how to use them properly.

    Reply
  4. Strive Masiyiwa Post author

    Afterthought:
    In 1991 I visited San Francisco to see for myself measures that local and state authorities were taking to promote entrepreneurship.
    Based on what I saw at the time, it did not surprise me when companies like Google, Facebook, Uber, Twitter, and many others began to emerge within a decade.
    In 2008, I spent a month in China studying what they were doing to develop entrepreneurship. It reminded me of what I had seen in California. I was totally stunned!
    Today China boasts some of the fastest growing global companies, and is the only serious competitor to the US when it comes to building global companies.

    #Policy does matter:
    There is a lot African governments can do to use entrepreneurship as a driver for jobs and wealth creation.

    “What do you “see”?”

    Merry ChristX
    [He is the reason for the season, and so I say “peace and goodwill to all men”].

    Reply
  5. Strive Masiyiwa Post author

    Ann writes,

    I have learnt so much from you sir. Since i started following you, my business has taken a positive turn. I get more innovated. I’m writing a business plan for a new business ( unfortunately I can’t disclose much about it now). God bless you sir. Hope to see you someday, hopefully when the world’s greatest entrepreneurs would be meeting, i would be sitting just beside you.

    My reply,
    I could not work out from your name where you are from, but if I do come to your country, and attend one of our meetings be sure to introduce yourself.
    I was thinking to stop the posts for a few months, because of my work load, then I just think there might be an Ann out there whom I need to encourage, so I will stay around for just a little longer.

    Reply

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