Four money management skills for a startup

 

Learn money management skills before starting a business. PHOTO | FILE 

By Isaiah Opiyo

In Summary

• Many firms collapse because business people don’t know how to manage finances.

Every time I listen to stories from successful entrepreneurs, one favourite biblical scripture comes to mind – Zechariah 4:10: “Do not despise these small beginnings, for the Lord rejoices to see the work begin.”


Many successful entrepreneurs started small, grew and flourished to build business empires. This means that what forms the foundation or strong pillars of success are the small things that entrepreneurs do at the beginning of the journey.

Share This Story

0
inShare

One of these things, which is often ignored by most budding entrepreneurs, is money management – how to manage personal finances even as they source for funding to build their capital.

Whereas research studies show that majority of enterprises collapse before they attain their third year, not all of them result from lack of business viability or ready market for their products or services. Some startup deaths are caused by blunders committed by entrepreneurs from the day they open their premises.

Most budding entrepreneurs suffer from financial extravagance or mismanagement. Although they are burning with innovative ideas worthy of growth, they lack basic money management skills required to manage their personal finances.

This explains why majority of those who seek to resign from employment to purse entrepreneurship often lack sufficient savings to get their business ideas running. I have encountered many young entrepreneurs struggling with credit cards debts arising from impulse spending.

This underscores why money management skills should form the basic foundation for entrepreneurs willing to see their dreams thrive into viable multi-million ventures.

But one would ask: “Why is money management skill or training more essential to an entrepreneur than capital at the start?” Below are the reasons.

1. Lack of book-keeping skills.

Most banks are usually leery of lending to startups because they lack proper financial records to evaluate performance and so they are considered risky.

This is not only unique to startups because even established businesses are also required to present financial statements as record of financial position and performance when applying for a loan to fund expansion plans.

Most entrepreneurs lack basic book-keeping or record-keeping skills. Majority think they don’t need to keep records of financial transactions until they begin to post profits or attain the point of break-even.

Obviously as an entrepreneur, you don’t need to start making profits to keep financial records. With proper book-keeping, you can monitor how your capital is utilised, how much savings you need to accumulate or the kind of loan you need to borrow.

2.Lack of skills on how to use debt to create wealth.

Most youths getting into entrepreneurship usually decry lack of capital as a major challenge. Nevertheless, many don’t realise that even those startups that have successfully managed to secure loans from banks collapse due to lack of skills on how to use debt to create wealth.

Securing a loan from a lender does not guarantee an entrepreneur success if he lacks the basic skills of debt management. With the rising costs of borrowing, budding entrepreneurs need to be equipped with debt management skills. Established companies lose their assets to auctioneers due to lack of skills on how to use debt to create wealth.