5 Financial Mistakes Entrepreneurs in Kenya Make And How to Avoid Them – Acquiring Finances and Getting money set for starting a Business is every Entrepreneur’s Dream. After surpassing the rocky trail of Investment Opportunities and disappointments and finally securing the bag, a business beginner may now set his sails in motion. However, as tough as it was to acquire funding for your business, as equally tough it will be to manage this money, ensuring your business bank account is ever loaded. While some entrepreneurs think it is easy, the bitter truth is that it is far from simple a, b, c. There are small ‘financial risks’ and downright mistakes that can sink your ship even before you start sailing. Many entrepreneurs have admitted to making land-sliding mistakes that cost their businesses millions; for example, Amazon’s brainchild, Jeff Bezos who invested in a phone, the Fire Phone, that lost the company $170 million. With that said, money mistakes are inevitable but at the same time avoidable. Here are some of the common Financial Mistakes Entrepreneurs in Kenya make and how to avoid them.
While spending is a necessary part of any business, there are things you can do without. Just as Jeff Bezos could have done without the Fire Phone and saved $170 million, as a small business, you can do without a big office space (or office at all), a big Shop (or shop at all) or a lot of technological equipment. This way, you will not burn out your money on things that you will realize along the way that you didn’t really need and most of all save your money for a worthwhile cause or a rainy day.
Hiring a workforce too early into launching in your Service and Product could be detrimental to your Account. Instead of hiring a sales and marketing team and spending too much on salaries and employee maintenance and equipment, focus on developing your product and be your own sales and marketer, pitching to potential client at every opportunity possible; if not, have at least one. Even if you are ‘expecting’ a certain amount of cashflow from an investor, don’t count your chicken before they hatch. Wait for the money to come in before starting the hiring process. Once your sales begin to project and the numbers come in to the bank, then you can start hiring a team.
Many Entrepreneurs in Kenya go about their everyday businesses without a budget and wonder why they end up penniless and asking for bank loans too early into the birth of their companies. As tedious as creating a Financial Plan may be, it is one of the most important Business planning practices every business person must religiously adapt. A Financial Plan enables you to prioritize expenditure and allocate money to items/projects that will help grow the business. It is a method of controlling finances and curb reckless spending on things that were not part of your initial plan. A budget also helps you fund for currents projects or better yet, know if you have enough money to fund for these projects and also preparing for upcoming ta obligations. Running a business without a budget is like running around in circles without really heading to a proper destination.
Some entrepreneurs in Kenya are known as ‘serial borrowers’ because they are always asking for loans from the bank. Asking for a loan is not bad; however, never ask for a loan just for the sake of having money in the bank. Some banks readily offer loans which are enticing and hard to resist. However, you have to remember that banks are in business too and set out to collect interest. That in mind, borrow only what you need to incase of emergencies or to sustain your business; an amount that you can comfortably pay back. Debt kills businesses- don’t go down that road.
Many Entrepreneurs in Kenya fall victim to this temptation. You have a lot of money in your business account and have that one personal thing you want to purchase so you pinch some shillings from your account. One thing becomes two things, two things become three things and eventually you might find yourself buying a car! There’s no tool that I might recommend to curb this behavior; you just need financial discipline. This kind of spending might lead to bankruptcy and an empty personal account too. Before you know it, your business might close down too.
There are some fundamental elements of finances that entrepreneurs need professional advice on. Business start ups need the help of Certified Public Accountants, Financial Advisers and Tax Consultants to deal with the legal financial obligations that are not too obvious for a start-up entrepreneur. Having at least one on board your ship is sure to save you from future revenue-related messes that are sure to arise for novice business owners.
Making a money mistake is not the end of the world; it is in fact a Fundamental lesson learnt. However, it is always good to avoid the unnecessary stress that comes about while trying to resolve a Financial mistake. Be sure to always have a Business Consultants to guide you through making the right Financial decisions. Contact us Today to for Financial & Business Planning, Tax, Accounting and Management Consultancy Services and Kill Two birds with one Stone; have a Booming Business while Saving Your Money.