Wimpie van der Merwe, CEO of Global Choices
Innovative ideas and business models are the foundations of a promising start up. Still, you will also need a steady flow of funds, especially in the early days, to turn those ideas into reality.
Funding is crucial for improving and developing innovative technology, hiring the right people, and launching a comprehensive marketing strategy to promote your solutions and to get traction to gain the critical mass to be sustainability. However, sourcing enough money to start your new venture is always a challenge and can be costly.
From online virtual stores, the apps to SaaS (software as a service) products, start-ups are popping up in virtually every field around the world, despite the risks. As an entrepreneur, I faced several challenges seeking the funds or using my own funds, in part because you’ll have to convince others that your idea is a solid investment. Over time, after many opportunities, challenges, and mistakes I developed this framework for me.
The significance of creating a scalable business model
Whether you are hoping to expand an innovative business opportunity with a loan or going for a round of venture capital, make sure you have a scalable business model. Investors want to fund only scalable or ready to scale businesses. Your business model must demonstrate the potential to increase the revenue with minimal expenditure in the coming months or years. Your business idea alone needs to be scalable
This means being able to increase your profits without increasing costs at an equal or a higher rate. The business idea should be unique, but if it is not scalable, it is probable to be investable.
Scalable business models normally have higher profit margins and lower infrastructure development and marketing investment. When the business is expanding, your business model needs always to be aligned with the company’s core offerings.
Timelines of business goals and defined milestones are very important, if your business model is likely to result in the overextension of time, money, and resources, funders will be hesitant to commit. A complete and scalable business plan with realistic financial forecasts is the core and your guideline for your innovative idea to become a reality.
Do you share the same values in what you are investing in?
I go beyond chasing success. I dig deeper before I fully invest as a shareholder in a business, but in my earlier naïve days I made mistakes not applying this and in hindsight, it always came back and create losses. I value partnerships and I must share the same value system as the business founders or partners I invest with.
Innovative ideas always require traditional values and empathy.