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Creating a business gives you some advantages. One of which is generating revenue that can lead to big profits down the road and the experience you gain in the process. Most often, we think the only way to building a company is when we build it from scratch. Sometimes we think we need to come up with the initial blue print for the company right up to its execution.
Fortunately, you must not start a company from scratch, especially if you want to become an entrepreneur but don't have a concrete business idea or maybe you feel that age isn't on your side.
Here are 4 ways you can become an entrepreneur without necessarily starting from scratch.
1. Buy an existing business.
One of the best ways to own a company is to buy one that is already in business. When you buy an existing business, you reduce your risk since the business model has already been tested and proven. These businesses are typically established and already have a working structure and revenue to support a viable business which you can later develop and grow.
2. Offer your services for equity.
Do you have any unique skills that a startup can benefit from? Are you a lawyer, accountant or marketing pro? Identify skills you can offer startups that will help them build a better business and be crucial in their journey. Find startups that lack that specific skill set and offer it to them in exchange for equity. Professionals can get up to 20% - 40% in equity, depending on the current stage of the company. The earlier the stage, the larger share you could get. For example If you have a unique insight into growing a company using a marketing strategy you're really good at, use that as your pitch to a startup that is primarily run by engineers who don't yet have a marketing professional on their team.
3. Be an investor co-founder.
If you have the funds, you can invest in a startup as an angel investor and bring your expertise to become a co-founder. Investing in a startup as an angel investor often comes with high returns as you are typically one of the first in line to receive a return on profit. However, it's still important to understand the risks involved, such as loss of your investment. You should consider diversifying your investments in different start-ups to reduce your risk.
4. Buy a stake.
You can also become an entrepreneur by buying a stake in a company by investing cold hard cash. Always remember to do your research on the company and understand how the equity allocation works. For instance, a new startup may offer equity equivalent to how much you contributed.
That means if you contributed 250,000 FCFA in a startup with a 2,000,000 FCFA valuation, and the other investor contributes 500,000 FCFA while the owner contributes 1,250,000 FCFA, you can expect a 12.5% stake in the company while the other investors have a much larger stake in the company.
If the startup is more established, the stake may not reflect cash contributions. This can get more complex. What you would want to do is refer to an expert in valuations. Although, when investing in a company, you can also bring value - your expertise - more than just cash. This can fetch you a larger equity than what cash infusion would bring.
Everyone can be an entrepreneur but not everyone should start from ground level up. Understanding where you belong is vital to your success.
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