Its amazing the number of businesses which start each day. I don’t have statistics, but using the numbers from my circle of influence alone, they’re a lot.
A key question is “Why don’t some of them live beyond a month, six months or beyond its first cycle of product sale/delivery?” A lot of reasons could be the cause for this but a popular one is ‘LACK OF CAPITAL’.
Excuse me, please what happened to the capital you started with, and the profit you made from your first cycle? Then you begin to hear answers like;
- “I had bills to pay”,
- “I paid myself a salary”,
- “I kept a few items for myself”,
- “I had to take care of some pressing needs”, etc
It is fine to spend your profit on the above, but to spend your capital is completely unacceptable. A popular cliche in certain circles is “Don’t eat your seed because it is your future”. Your capital investment is necessary for continuity of your business, while your profit is important for expansion of your business. Eating up both of them leads to the death of your business.
There is someone very close to me who is a sales guru. She can sell ice to an Eskimo and fishes to a dolphin. I have lost count of the number of businesses she has started and abandoned all because she doesn’t have the discipline required to handle ‘business money’. She has the clients, she has access to the products, but every time she needs to run a cycle she has to borrow money. At the end of that cycle she will spend the profit, repay the capital and return to square one.
As entrepreneurs, its important to know your strengths and weaknesses. Leverage on your strengths and mitigate against your weaknesses. If you have challenges with money management, it is wise to ensure you are financially accountable to someone so that your business can grow.
Tips On How To Employ Financial Accountability.
- Ensure you are not the sole signatory to the business accounts.
- Put yourself on a realistic salary. No matter how successful that particular business cycle was, don’t increase your salary arbitrarily.
- In some cases, you might need to employ a trusted Financial Manager who has some level of financial power over some accounts.
- At the start of each project/business cycle, draw up a comprehensive expenditure budget and ensure that your expenditure sticks strictly to the budget. Absolutely no un-budgeted expenses. (Miscellaneous as a budget item can address un-budgeted business expenses).
- Outsourcing your accounting function.
The bottomline is all of the above are still within your control because you own the business, they are just measures to assist you be financially responsible.
As an entrepreneur, to ensure the future and sustainability of your business you must learn discipline with managing money.
BI Empowerment Team