Entrepreneurs, looking for funding or investment, often start with the largest amount that they can ask for, with the lowest amount of responsibility to account for how the money is spent. This kind of approach may be setting your business and yourself up to exclude one of the greatest tools an entrepreneur can leverage to grow, accountability.
The commonly accepted view of accepting funding is that the lower the level of accountability, the better. You should be free to spend the money however you see fit, because as owner and founder, you are the resident expert in your own business.
Lisa Illingworth, CEO of FutureProof recently applied for and received grant funding for enterprise development from FNB. This grant forms part of FNB’s strategy to support black-owned SMEs that play a significant role in addressing pertinent social challenges.
The money is stipulated to go to projects within the business that results in the growth of our business and an increased sustainability, says Illingworth. “When applying for the grant, our directors went through the decision-making process and one of the considerations was the level of involvement that the funders were going to have in monitoring how it was spent”.
This is what Illingworth and her team discovered were the upsides to being accountable:
1. A Fresh Set of Eyes
“One of the most valuable assets to a business is having the cleverest people give their valuable insight and experience to your business particularly in the early stages when you cannot afford to pay what it costs to hire those minds into your business,” says Illingworth.
By accepting people’s money in whatever form of investment, you can harness their value with real interest in seeing your business succeed. These people may even leverage their network and broader skills base to ensure that their investment is protected, affording you access that you never would have had without their involvement.
The majority of entrepreneurs don’t appreciate systems of accountability because they are beholden only to themselves. However, as Brendon Buchard states in his book on developing habits that sustain high performance, he cites deliberately setting up structures of accountability which dramatically improve delivery and performance.
In having investors genuinely interested in growing your business alongside you, not by means of ‘the big stick’ approach but purposeful systems of accountability, you are able to pull a lever for growth that many entrepreneurs cannot access. “You will have to account for how you spend your time and the money which simply by stating this externally becomes a powerful means of driving performance,” Lisa continues.
“When someone else sees value in what you are doing so much so that they are willing to part with hard cash to develop and scale, it creates social proof. Proof from others outside of the organisation with a level of objectivity that you are who you say you are and do what you say you do”.
Credibility like that cannot be bought. It builds trust in the minds of other potential funders and customers and adds gravitas to the value your organisation is bringing and any business, at any stage of growth could do with more of.
In the chaotic world of entrepreneurship, where owners and founders have to spread themselves across many areas of their business sometimes simultaneously, the mundane admin-related tasks often fall by the way-side in the constant effort to put out the next fire.
When you are forced to get all your internal administration and compliance documentation up to date it creates a level of order that makes it increasingly easy to access contracts, register as a vendor and demonstrate efficiency instead of wasting time and money searching through reems of unfiled documents or apply for another tax clearance certificate.
“Whilst there is certainly a delicate balance in applying for investment or funding for the right reasons and at the appropriate stage in business growth. The misconception that taking other people’s money results in a burden of accountability for how and what it is spent upon is mostly unfounded,” Lisa explains.
Through this experience, not only has the investment given FutureProof the ability to scale in what would have taken 10 years to achieve organically, the additional spin-offs have proven substantially more beneficial than anticipated.
About the author:
Lisa Illingworth is a qualified teacher turned entrepreneurial educationalist and is the co-founder of FutureproofSA.
With a post-graduate degree in education specialising in curriculum studies from the University of the Witwatersrand, Lisa has written a full curriculum on entrepreneurial studies and this essentially forms the foundation for what Futureproof teaches nationally – to children from the age of 8 years old.
Lisa first discovered her love for entrepreneurship whilst working as a journalist for Finweek Magazine for three years. She then moved onto hosting a radio show on Hot91.9fm to begin and currently presents a daily radio show for Radio Today focusing on educating and inspiring start-up and scale-up entrepreneurs alike.