Business lesson #2: Raising Cash, and business strategy

When I was 10, I left Malaysia for Singapore to study. I focused on my studies and did very well. Money was always tight. I was always waiting for my mother to send me some cash. I know that it was tough for her financially, but I did not know the full extent of the problem till years later. I found out that my dad was in debt. A humongous debt. I had to do something to help. But what? At that time, starting a business seems like a way forward. I want to be a businessman, and I also want to help my dad.

My next venture: MLM. I joined a network-marketing company called Bel'Air. They sold aromatherapy products. The entry fees was really high. But the returns look really good as well (what did I expect? Those returns come from the really high entry fees from new members). I borrowed about SGD 20k from 15 people to give myself a head start in the venture (the more you invest, the greater the potential returns). In exchange, the company gave me several cartons of aromatherapy products. I had to start looking for new members. You see, we don't really go out and sell these products one by one. We look for what the company called "franchisees". The company said that each of us were selling franchises, not individual products. That was how the money rolled in so fast!

The leaders in the company often used me as an example of a "driven individual", someone who raised so much money even at such a young age (18, I think?). I did not think that much of myself, because I know there are younger people who have done even more than me in other businesses. I will forever be grateful to the individuals who lent me that money. The highest sum was $5k, and the lowest was $90. I have a former teacher taking out money from his retirement funds to lend it to me. I have another teacher who told me that I do not have to repay her the money. She wanted me to learn. What absolutely great, kind and generous teachers. I am forever indebted to them. I have a hostel owner lending me money, when I had barely spoken to her before. I have a friend who lent me money even though I was never close to him. I have a friend who lent me money even though he doesn't have much. I have my brother reveal his stash of money hidden in a suitcase in a cupboard in his room. I never knew he managed to accumulate so much cash so secretly!

Business was hard. I can write a ton about it but I shall not. About 3 to 4 months into it, I gave up. I could see that the company had abandoned its principles, just within the short span of a month or two after I joined. Initially, the way we acquired a new franchisee was to do prospecting patiently. Set up a meeting, have a good chat, exchange books and CDs (these are carrots, so we have an excuse to meet the individual again), talk about our business ambitions, and the likes. The franchisee would slowly learn more and more about our company, and we would slowly coax him or her in.

But everything changed once we heard about how well the company was doing in Taiwan and China. Franchisees seemingly become rich overnight. They would prospect multiple individuals, suck in those who're ambitious, and discard the rest. Turn over a stone, find a gem on its bottom, and shove it into the pocket. Find nothing underneath, and simply toss the stone away. It was really fast and furious. Over here in Singapore, the leaders galvanised the entire team, giving everyone great energy to copy this tactic. It worked. It was euphoric.

I saw the problem with this strategy right away. Taiwan's and China's populations are huge compared to Singapore's. We do not have the luxury to pursue the same strategy! We were made to list out EVERY single person we have come across in life. And contact EVERY single one of them immediately, and set appointments with EVERY single one of them right away. I thought all of us would soon run out of prospects. I thought it was unsustainable. I remembered staring at my sketchbook on which I had drawn up a tree of prospects grouped accordingly to where I got to know them. I stared at it all the time. Most of them are not people whom I am close to. How can I use this aggressive strategy on them? I like to pull people in, not push them in.

Those of us who couldn't keep up with the rest of the team felt enormous pressure. I was one of them. I did not like this new tactic at all. I wanted to bring in new prospects, build relationships patiently, and really make them see the merits of the business before making an investment. I brought in 2 friends this way, within a month or two. This new tactic was nothing like the old model of patient prospecting and build-up. As days and weeks go by, I got drained. The distance between the headquarters and my dorm did not help. The late nights did not help. It was interfering with my studies (as if I bothered about studying). I gave up after having made back about $8k. It was a loss of $12k for me, plus tons of time and money spent on food and travel expenses. Soon after, those 2 friends of mine quit too. And needless to say, the company disintegrated months later.

I learnt 3 things from this experience:
-The first is that raising cash is not as difficult as most people think. My sincerity helped me raise cash from relatives, teachers and a hostel boss. But sincerity alone is not going to cut it when I am dealing with serious investors. I've learnt a lot about business-pitching through the TV show Shark Tank. And I would encourage budding entrepreneurs to view those shows too. Raising cash gets easier the more you know how to do it. What's more, with recent deregulation of crowd-funding (seriously, what's with all these regulations?), it has never been easier. Of course, it does not mean that anyone will fund your project. You have to do some groundwork, which may take months. One just need to learn the ropes.
-The second thing I learnt is that a business should not be blinded by the short-term profits like the MLM company. Think long-term. The business has to grow really fast initially, but it has to be sustainable in the long-run too. Bel'air made the mistake of not thinking long-term. If you chuck away 9 people after prospecting 10 people, very soon you will run out of people to prospect, especially in a small country like Singapore, with a population of just a few million! On the other hand, if a business went on too slowly, market shares will be lost. MLM was really hot back then. Even so, I believe that a business with really strong fundamentals will survive. So, one really has to strike a good balance. Build up a company with strong foundations. Bel'air's foundation was shaky to begin with, and I should have realised it earlier. Their products were too highly-priced. They wanted to use the "sell a franchise right" concept, instead of "sell a product" concept. These 2 factors were what made them money. But what happens when consumers came to their senses? These highly-priced products are going to work against the company! And make no mistake, there weren't really consumers in the traditional sense for Bel'air products. The consumers were the franchisees themselves! I remember being told that. This shaky foundation, coupled with the copy-Taiwan and copy-China strategy ensured the downfall of the company.
-How to do sales and project yourself. Those sales trainings were really useful! There were some intimidating incidents for an 18 year old. I've been shamed and embarrassed in front of a large crowd. But I learnt so much from it. The experience was invaluable.