Even with their courage, enthusiasm and determination, entrepreneurs still need some form of support and inspiration from a spouse, family or friends to succeed.
Commenting on a recent episode of Standard Bank’s ‘Think Big – Building Business Champions’ TV series, Ravi Govender, Head of Small Enterprises at Standard Bank, says without support from the family, the road to success can be infinitely longer and bumpier for an entrepreneur. Deciding to go it alone can have serious implications for the whole family, such as financial strain and resentment due to the entrepreneur spending many hours away from home, or taking up space in the house for a home-based business.
Honest and open communication is a must when planning to start a business. Thoroughly discussing your business idea, strategy and what inspired you, with your spouse, family or friends is essential if you want them to share your passion and enthusiasm.
“Similarly, all the potential risks that may lead the business to fail should be clearly highlighted. Keeping family and friends up to date with what is happening promotes understanding. A ‘problem shared is a problem halved’ and business problems can often be minimised or solved through positive discussions,” says Mr Govender, adding that starting a business can put a lot of strain on a relationship if the spouse does not support the idea and is not actively involved in the development of the business.
Friends and family can often offer entrepreneurs moral or even financial support. Convincing family and friends to invest in your business idea requires that you approach the matter sensitively. However, this should not be done at the cost of the relationship.
Mr. Govender advises entrepreneurs to follow this approach when engaging family and friends for support when starting a business:
- Be realistic and do not request huge sums of money. It is far easier to get people to part with small sums of money rather than large lump sums.
- Make it clear that you will pay back loans with interest. If you do not want to pay back loans, accept the fact that you will have to offer lenders equity in the company in exchange for their monetary support.
- Start by making your business pitch informally. Ensure that you have written down the major selling points of the business idea and present a basic financial plan at meetings.
- Ensure that loan agreements with friends and family are in writing so that all parties understand what is expected of them.
- Keep everyone updated. Informal investors are backing you as a person, so they will be more patient waiting for their money to be repaid than people investing in major companies. Providing information by phone, e-mail or at a braai will keep everyone satisfied.
“Family and friends who believe in what you are trying to achieve will always be the first to offer words of encouragement and practical help when you need them. It is only fair to return their faith in you by demonstrating that you do not take their assistance for granted.”
“By treating them with respect and showing that you are serious about using their money as responsibly as possible, you show that you are worthy of support. This could become important if the business grows and you need to approach them again for additional funding,” says Mr. Govender.
Press release by Magna-Carta.