OPM in business simply means Other People’s Money, and it’s one of the means of raising capital to start a business venture – although one of the riskiest means. OPM is simply the act using the money for the purchase of a said set of goods to deliver and raise enough profit to kick start your new business and keep it running.
Raising capital with OPM is a means that suits a business dealing with goods much more than one dealing with services; although it can work for both. There a lot of successful businesses today that had their capitals raised from OPM and as opposed to some critics of this method, it’s not a morally questionable method; it’s simply a business tactic.
To adapt using the OPM method to kick start a business, there are a list of things you need to have in your inventory or else you might not only find yourself on the wrong end of a business deal, but you might also be toying with some legal issues.
>> Market Survey.
>> Feasibility Studies.
>> Selling Skills.
>> Power of Conviction.
>> 85% or more ROI.
These statistics and information would definitely help you decide if it’s a wise idea to adopt this Capital raising method or not and would boost your confidence level. A quick example of an OPM started business is this:
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You decide to start a “Watch Importation” business and you don’t have the capital to start up. You then gather detailed information on how to import watches cheaper and with good quality (There are always information marketers selling those). Also, info from those already in the business and from people who seem to have a thing or two for watches to see the demand and supply scale.
You pose as a wholesaler and visit shop owners and you propose the delivery of quality watches for some amount less than what they are used to.
Assuming one watch cost ₦4,000 per piece but bulk order makes it go for ₦3000 per piece (that’s what you tell the shop owner but the actual price you’re ordering each piece from the manufacturer is ₦1,500) and the shop owner orders 20 pieces (for a start), that’s ₦3,000 X 20pieces = ₦60,000
Now, imagine you ask for half payment before delivery as a sign of good faith and you and the shop owner sign an agreement that you’ll get the remaining half after delivery. The shop owner agrees and pays ₦30,000 (not knowing that the half is enough to bring the whole pack of goods home). You deliver and get the remaining half (₦30,000) which is the capital needed to start your personal watch importation business – That is the simplest illustration of starting a business with OPM.
It’s quite technical but if you get your research and information collection correctly; and you also play your cards right, you might almost not have any issue raising capital for any business you desire to venture into. All you’ll just have to do is to use OPM to your advantage.