Every entrepreneur’s dream is to acquire finances and have money available to launch a business. A business newbie may now set his sails in action after successfully navigating the rough path of Investment Opportunities and disappointments and ultimately securing the bag. However, managing this money and making sure your business bank account is always stocked will be just as difficult as it was to secure finance for your company. Although some business owners believe it to be straightforward, it is actually far more complicated than that. Small “financial risks” and blatant errors might capsize your ship even before you set sail.
Many business owners have acknowledged making huge errors that cost them millions of dollars. Jeff Bezos, the founder of Amazon, lost $170 million on his investment in the Fire Phone. Having said that, financial errors are both inevitable and preventable. Here are some frequent financial errors that Kenyan business owners make and advice on how to prevent them.
There are things you can go without even though money is a crucial component of every business. Similar to how Jeff Bezos might have avoided the Fire Phone and saved $170 million, a tiny firm can get by without a large office (or any office), a large retail area, or a ton of high-tech machinery. By doing so, you will avoid wasting money on goods that you later realize you didn’t actually need and, most importantly, you will save money for a deserving cause or a rainy day.
Hiring and Expanding Too Quickly
Bringing on staff before your service or product has even launched might hurt your account. Focus on building your product and becoming your own sales and marketer, pitching to potential clients at every chance available; if not, have at least one. Rather than employing a sales and marketing staff and spending excessive amounts of money on wages, employee upkeep, and equipment. Don’t count your chickens before they hatch, even if you are “expecting” an investor to provide a specific amount of cashflow. Before beginning the employment procedure, wait for the money to arrive. You can start recruiting a crew once your sales start to seem promising and the bank starts seeing the statistics.
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Lack of a Financial Plan
Many Kenyan company owners conduct their daily operations without a budget and then wonder why they wind up broke and needing bank loans before their enterprises have even begun to grow. Even though it might be time-consuming, developing a financial plan is one of the most crucial business planning techniques that every businessperson must adhere to religiously. You may prioritize expenses and dedicate funds to things or initiatives that will help the firm expand thanks to a financial plan. It is a technique for managing money and preventing impulsive spending on items that weren’t originally planned. A budget also aids in planning for forthcoming ta commitments as well as funding existing projects or, better yet, determining whether you have the money to fund these initiatives. Without a budget, managing a business is like going in circles without ever reaching your intended goal.
Borrowing Money That You Don’t Need
Some business owners in Kenya are referred to as “serial borrowers” because they keep approaching the bank for loans. Asking for a loan is not a terrible thing, but you should never do it only to put money in the bank. Some banks quickly provide loans that are alluring and difficult to refuse. You must keep in mind nevertheless that banks are also businesses and want to rake in interest. In light of this, only take out loans that you will be able to comfortably repay and that you will need for emergencies or to maintain your firm. Business debt destroys companies; avoid taking that path.
Personal Expenditure With Business Money
In Kenya, many business owners succumb to this allure. You have a large sum of money in your company account, but there is one personal item you need to buy, so you take a few pennies out of it. One thing turns into two, two things into three, and finally you can end up purchasing a vehicle! There isn’t a method I could suggest to stop this practice; all you need is financial restraint. Spending like this might result in bankruptcy and a depleted personal bank account. Your company could shut down before you realize it.
Failure To Consult With Financial Professionals
Entrepreneurs should seek expert assistance on a few basic financial issues. In order to cope with the legal financial duties that are not always evident to a start-up business owner, certified public accountants, financial advisors, and tax consultants are needed. You’ll be sure to avoid future revenue-related catastrophes that will inevitably occur for inexperienced business owners if you have at least one on board your ship.
Making a financial error is not the end of the world; rather, it serves as a fundamental lesson. However, it’s best to avoid the extra stress that results from attempting to fix a financial error. Always have a business consultant at your side to help you make the best financial decisions.