Thread by @talkcentss

How to start a Business without the Costs.

[ THREAD ]

Introduction

The aim of any business is to drive down costs and maximize profits.

Easier said than done, right?

When it comes to having a business, there are running costs to maintain it, and you’ll need a revenue model to keep afloat.

Take a look at these 7 steps:

1/ Step 1

Starting out,

you’ll need a business partner(s) and between all of you, you will need to have saved R5000

Then,

go open a 32 day investment account. Monthly fees are rebated once you have over R5000 in the account

Interest rates are rising, so it’s in your favor

2/ Step 2

You want to expedite your growth, and in order to do that - you’ll need capital

No way a bank will lend to you, without collateral, a revenue model, or only a 32 day account

Hence an investment stokvel…
to pool funds together to make investments

3/ Step 3

Define your target and niche and
recruit a small group of people, friends, family, investors.

Have a window period for recruitment and target a predetermined number of people, then close admission.

*Try to Keep it as confined as possible.

Reasons below 👇🏽

3.1/

At some point,

You’ve got to level up and actually open a business account - this is when you will decide who continues, becomes directors, secretary etc.

You’ve got to decide on two things
You either,

3.2/

(1) Give equity of the business away -pro rata- based on members contributions

(2) Have a loan account where members lend you capital for a return

Both have pros/ cons,

the former (1) gives you more working capital, but you lose ownership, the latter (2) = vice versa

3.3/

This is why I say keep it as confined as possible

Most stokvels are just large groups of members that are being used as financing tools for a respective company,

the company is accessing capital for cheaper than they would have if they had borrowed from the bank

3.4/

That’s why if you are part of a stokvel, ask for equity - because your money is just being used for the benefit of the business you don’t own.

Unless you are happy with the return you’ll get.

4/ Step 4

Back to the costs,

at this point you still don’t have any monthly running costs + members are contributing monthly while the fund earns interest (which will be above inflation now)

You need time, consistency, and discipline at this point. It won’t happen over night

4.1/

Again, you’ll have a choice/decision to make,

(i) At the end of every year transfer all or a % of the monies to a brokerage account to invest

Or

(ii) keep accumulating in cash and earn risk-free as rates rise.

Combination of both is best, imo

4.2/

Look for a broker with a FREE monthly account.

Because at this point,
as a stokvel you'll now have two accounts to oversee - and they’ll both be free to maintain.

1. 32 day investment account with your bank or one of the other big banks.

2. Brokerage group account

4.3/

When it comes to investing,

You’ll begin to make profits immediately through earning interest on your cash deposits (32 day account)

You can Increase risk by investing in liquid equity that pay dividends too (cashflow)

- REITs
- Top 40
- Commodities

5/ Step 5

After 2 years of contributing saving, and investing - you’ll have built up some breathing room to handle the monthly running costs of a business,

You can now look to

Register a company and open a business bank account. @BizPortalGovZa

#firstfixedcost

5.1/

From here,
Transfers funds from your 32 day account into your business bank account.

You now have the ability to issue shares to members if you wish.

You can

- give equity away, or
- have loan accounts

Link all your accounts under the business umbrella now.

5.2/

Use the money from earning ( cash interest + investment returns) to fund your revenue model ideas

-Pay content creators to write for you
-Create digital products to sell
-Micro financing
-Podcasts aimed at advertising etc.
-Buy plant & Equipment to rent out

5.3/

Ultimately,

start building a business model around growing audiences (attention) then look to experiment with what sticks using the returns from your investments (as described above)

6/ Step 6:

Now,

Look to build a credit history with the bank - transact, and build rapport

Director(s) will be able to sign assurity for a loan later on

Look to buy:

-property,
-build etc.

7/ Step 7

You can now open a stokvel account to fund your main business.

You’ve seen these guys/ girls on twitter asking you join their stokvels and promising you returns.

They not promising you equity - because as mentioned, they are tapping you for cheaper finance.

7.1/

You can do the same by following these steps.

Use the liquidity from new members and the loan facility to leverage up and scale.

That’s it!

* There are risks, of course*

8/ Summary

- Open Free accounts
- Contribute collectively
- Use returns to test ideas
- Open Business
- Build rapport
- Leverage and scale
- Access cheaper finance
- Get into property

That’s it, that’s the tweet. You can follow me @talkcentss for more ways to access capital for cheaper.

I founded @FundUp21 like this.