Home > Blogs > IT Entrepreneurs Must Balance Business and Technology Focuses

I just got an email from an aspiring young entrepreneur in South Africa who approached me for some advice on how to grow his company. I think he was looking for a technology solution or suggestion, but I ended up suggesting some ways to find more of that all-important lubricant for business growth instead -- namely: hard, cold CASH!!!

This young man's biggest issue -- let's call him Jack -- is that while he's generating enough cash to cover monthly expenses, he's not generating enough cash to fund additional headcount he needs to grow his business. This is an entirely typical problem for growing businesses at all levels from the smallest one-man shops to the biggest multinationals with hundreds of thousands of employees already on the payroll.

The solution is also entirely typical and predictable, too. It takes cash to grow, because you have to start paying people from the day they start a job, even though it will take months for them to learn what they must do, to start doing it, and for related sales or billings to make it through the payment cycle before it finally shows up on a firm's receipt balance.

The usual source of cash is credit of some kind. For established businesses with solid balance sheets this kind of financing is called a line of credit and is relatively easy to obtain, providing one goes through all the necessary motions of establishing creditworthiness, obtaining open-ended, on-demand access to credit, and keeping up with payments and other ongoing reporting requirements. For my correspondent, who has a three year old firm with one or two employees, he may or may not be able to work with a bank or other finance company to obtain access to this kind of credit.

That's why I recommended that he approach friends and family first and foremost to seek a private loan instead. If he offers interest a bit higher than going rates he should be able to lays hands on some cash to finance growth. I suggested 5% to him as a target figure, knowing that the prime Wall Street lending rate today is 3.25% but knowing little or nothing about lending rates in South Africa at the moment. It turns out that the prime rate there is 8.5% so he'll probably need to offer 10 or 11 percent to do friends and family right by helping him out with growing his business.

He also asked me about technical certifications to help him grow his customer base. I replied that if he's trying to finance growth, he himself would be better off chasing some business training to help him understand marketing, finance, and running his business. "If you need more technical expertise," I said, "you should hire it instead of trying to handle such things yourself." Because he wants to grow his company and is thinking long-term about creating a franchise model, focusing more on business learning for himself, and relying on his current technical skills and "spare time learning" to keep up with the technology side of things, will have to suffice for his own personal development.

If you want to build a company, you have to focus as much on the business side as on the technology side. And because Jack is grappling mostly with business rather than technology problems right now, he will be best served by beefing up his business rather than his technical acumen. If you've got entrepreneurial tendencies, you'll have to strike the same kind of balance, too, and seek out the mix of managing money, time and people versus understanding, creating, and using technology that enables you to create and grow your own business prudently and at minimum risk to yourself and your future financial well-being.