By Babajide Komolafe

Still on the fellow discussed in the last edition. We said the first shortcoming of his approach is that he wants to start a school business with insufficient money – less than 20 percent of what the business requires – but hopes to raise the balance by borrowing or getting a grant.

Even if he is able to raise money to set up the school, it will take a long time before he realises income (profit) from this venture. Meanwhile, the profit margin might not even be up to 15 per cent and the venture may not even yield profit.

For someone with a pressing need for money to address domestic issues and barely enough income, this fellow is unreasonably stretching himself too thin, and even more so with a flawed approach to starting a business.

Many people, especially in the low-income and low-middle income bracket, have failed in their attempt to start a business due to this kind of wrong approach.

When you are in the low-income and low-middle income bracket, and you choose to start a business to create an additional source of income, you must do it with the right approach to achieve your goal.

First, start with the money you have and it must be money you can afford to lose. Don’t expect or depend on other people’s money either in the form of loan or grant to start a business. You risk being disappointed or being under undue pressure of loan repayment that can injure your health.

Also, the money you invest must not affect your ability to provide for the basic needs of your households. You and your family should not suffer from lack of food, clothing, shelter education etc because you invested money to start a business.

Furthermore, don’t pour all your life savings into a business. The amount to be invested should be a fraction of your savings, at most 50 per cent. Why? Your savings are your shock absorber or protection against sudden loss or drop in income, that may be caused by factors beyond your control.

The second point is that you should choose a business that you already have the skill, experience and reputation for. And the business should be one that requires a small amount of money to start. The business must however be one that you can grow over time into a medium or big one.

The third point is that you should choose a business that can give you income within a month or even on a daily basis. Why? Remember your income level is low or a little above your basic needs. Hence you need investment that gives you that additional income almost immediately, and as a result, financial relief. (To be continued)