When starting or thinking about starting a media business, one of the biggest challenges entrepreneurs normally face is how to go about finding sufficient capital to start the business and run it until profits start trickling in. More often than not, business owners or entrepreneurs start their new businesses with their personal savings. But what if one does not have any savings to turn that brilliant idea into a prosperous business? Or what if one’s savings aren’t enough to start the business? What is he going to do? Is he going to just let that great business idea die? The answer is NO!
NBC’s sanction of debtor TV stations exposes media houses’ mismanagement
As it happens all over the world, Nigeria is not an exception; cost of funding a media firm is enormous. Cost of setting up the enterprise, be it print or digital and running cost are on the high side; the current economy status has worsened the already bad situation.
Some of the owners are trying to grow the companies organically and are resisting taking money from other sources because they are politicians who have access to “public fund”. Others, who are not politicians, dine and wine with the politicians, curry their favour and secure their patronages in the process. Just one or two media firms do not belong to these two categories. Initial capital is always raised by the promoters while good will is sought from the relevant public. If some media houses’ financial records are made public for scrutiny, it will be obvious that money from government constitutes more than 75% of their revenue.
It must be known that virtually all of them set-up the enterprise in order to peddle influence here and there with no intension of making profit! This reflects in the way marketing gurus are not always part of the process at the inception, right from the concept stage.
Most of the proprietors are faced with how to raise the working capital at inception. The available means or ways are: venture capital, debt funding, private equity, angel investing, crowdfunding, Bank loans, grants, subsidies, etc.
Venture capital funds are set up to make money for the investors. There are variations on the theme, but ultimately, if one does not produce financial results within a time frame the fund managers expect, pressure will increase and/or funding will be cut. Choices that are strongly driven by finances remain the watch-word. Many venture capital firms require fast growth and a “liquidity event,” such as strategic acquisition, that will bring in many multiples more than the total yearly revenue. In other words, just making a profit and generating cash usually won’t be enough to satisfy investors. Some investment firms are not just funders, but also partners and supporters, known for having great networks of contacts and experts they’ll tap to guide entrepreneurs who need special expertise.
The main motive of a venture capitalist is to invest in a business and reap huge profits hence, why they always focus on the viability of the business. Before one gets a venture capitalist interested in investing in the media business, then one needs to have a very good and persuasive business plan which shows how profitable the business can be in the future.
Debt funding is structured a lot of different ways but basically means receiving money for which interest payments become due. Financial professionals often refer to debt as “leverage,” the theory being that a big infusion of cash can boost a company to faster financial returns by increasing its operational capabilities to churn out more revenue-making stuff. The danger is that the company has to create enough cash flow to not only pay for its operations but also to service the debt. That debt load can undermine a company even if it is cash-flow positive.
Capital through an angel investor or a business angel is another source. Angel investors are also known as business angels. An angel investor is a wealthy individual who provides money to support promising business start-ups. Angel investors are a very good source of capital for business in the sense that not only do they provide one with the capital needed to start the business, but they also give ongoing support to entrepreneurs in order to make sure that their businesses see the light of the day. Although finding an angel investor that might be willing to invest in one’s business is not an easy thing, one improves his chances of getting a business angel to provide financial banking for him if he has a very persuasive business plan. These investors are experts in what they do and they know that if one’s business eventually grows, then they are also going to reap a good profit from their investment.
Raising capital through crowdfunding is another great way to get the funds needed to start a media business. Crowdfunding is the practice of funding a project or business through a large group of people who contribute various sums of money towards the funding of the project or business in question.Crowdfunding is rapidly becoming a common practice these days, which is the reason why it is considered one of the best sources of capital to start a business. Crowdfunding is typically done via the internet. Over the years, numerous businesses and projects have been able to see the light of the day thanks to crowdfunding.
Crowdfunding is normally done this way: A person comes up with a brilliant idea that needs funds in order to kick start it and people who are interested in the idea and believe in it start contributing money towards the start of the project or business. Thanks to technology, crowdfunding is mainly done on the internet. There are presently countless crowdfunding sites that are helping start-ups get the capital that they need to start their businesses. Some very popular crowdfunding sites on the internet include the following: kickstart.com, gofoundme.com, indiegogo.com, etc. All one needs to do is sign up with any of these sites, introduce his idea or project and if it is good, then one is surely going to get people supporting the idea and funding it. One can also visit the site crowdfunding.com for a list of the top 10 crowdfunding sites in the world.
These days, a lot of banks are eager to give out soft loans to entrepreneurs to start businesses with. These loans are called business loans. And the banks offer a variety of business loans to entrepreneurs who are starting new businesses or who already have established businesses that are in need of financial support. Borrowing from banks has always been a very good source of capital to start a business. With the wide range of credit facilities that the banks offer, an entrepreneur can get capital to start or run his business in the form of cash credit or overdrafts. Bank loans are one of the best sources of capital to start one’s business in the sense that they can easily be gotten and that they are also flexible as compared to some other sources of capital. The only catch with a bank loan is that when givingsomeone the loan, the bank would want solid assurance that one is capable of repaying the money that he is borrowing from them. They’d therefore need collateral; something they can take away in the event of default.
Meanwhile, anyone who receives substantial sums from investors should expect to hear from those investors about what is being done with that money. Sometimes, the guidance will be driven by strictures that come from the type of money offered and desire for financial return. Other times, demands are made, or at least hints dropped, due to cultural or political leanings about what should or should not be done. Even charitable foundations have expectations for how one fulfils their mission after taking their money and may try to steer things in one direction or another. If one is going to go after money, it’s a good idea to understand what one is getting into, and carefully explore the business and business model.
For both print and digital media, once production starts, the concerns of media managers should be how to create multiple revenue streams. The major sources of income are copy sales, sellable contents, subscription, advertising sales, special projects and supplementary. However, sources like events, e-commerce, research, education, webinars, informatics, etc are yet to be fully explored. The way forward is for media to have multiple ways of bringing in revenue.
Businesses are grown from loss to break-even point and finally to profit over a period of time. That of media is even complicated because with all facilities put in place, availability of running capital, good marketing drive coupled with superb management prowess, it will take at least seven years before such a company can be talking of break-even point. The gestation period has been extended to a decade based on the current economic situation that has just been aggravated by unceasing inflation. Continuous declaration of profit is an indication that the company has crossed the red line.
Digital media should go beyond publishing news items. It should be involved in building a state-of-the art studio to produce short news videos and shares them on various social platforms. It should get involved in using the studio to make videos for commercial clients who pay handsomely for the privilege. BuzzFeed can be made use of because it does not only run paid ‘listicles’ as native, in-stream advertising for its commercial partners, but also charges clients to use BuzzFeed creative team to produce those adverts.
A number of digital media needs to create marketing arms that will do anything from draft marketing content to run Facebook and Twitter accounts for businesses. Digital media strategy and research consultancy with focus on media technology should be created as it involves developing and execution of sales and marketing strategies. This should be based on scientific research and observations.
The call for adequate funding of media companies has become necessary because poorly funded media companies always bring about poor productivity. Poor funding of Nigerian media companies has not only resulted in poor output but become a source of discouragement to practitioners working in the various companies.
Consequences of inadequate funding and poorly remunerated journalists include promoting corruption in the society as practitioners would be tempted to explore alternative means of surviving against ethics of the profession. If media companies are properly funded and workers well remunerated, practitioners will likely perform creditably well and possibly compete favourably with their counterparts anywhere in the world.
Conclusively, media managers should demonstrate ability to think analytically and innovatively about brand and product growth through integrated marketing campaigns. Furthermore, media managers can thereafter seek for grants and subsidy internationally and nationally respectively in order to ameliorate the effect of harsh business environment.
Abiola Ayankunbi is MD/CEO at AbingMO3 Marketing Management Consultancy.
0802 305 1315.
abiolaayankunbi@yahoo.com.
