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Entrepreneurs make a profit from every Rand spent

  • By Alan Knott-Craig
  • September 14, 2015

entrepreneur capital


The danger with being a startup specialist is that you can forget what the purpose of “capital” is.


Capital is not meant to be spent on anything unless it will generate a return on capital. Ie: if you buy something or hire someone you must be able to correlate that expense directly to new income which is greater than the expense.


Generally speaking that means capital should only be spent on inventory and capex (balance sheet items).


Opex should be avoided like the plague.


In startup world the above rule is suspended because startups are not about making a profit. Startups are a frantic scramble to find a repeatable business model, whereafter you are either self-funding or you raise money to scale your model.


Thereafter the money you raise must be spent exclusively on expenses which you know will generate more income.


If you don’t internalise this then you will always be a startup entrepreneur and never a successful one. And your startup will never become a business.



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