Loans and Entrepreneurs
Correspondent | Monday October 26, 2015 12:32
Now he can be in control of his own money, and spend the money on what he chooses. He is excited that he no longer has to answer to anyone about his decisions, and can’t wait to start doing business with his friends and family. Wow this new life is going to be so exciting!”
Is starting a new
business easy?
How many of us have either been in Kagiso’s shoes, or heard about hard times falling on people like Kagiso who have tried to open their own businesses, and later struggled to make their businesses work and pay back their loans?
What is the Plan?
It is very important to plan your business before investing your retirement savings or a business loan into a new business idea.
When we make a business plan, we have to project targets over a five year term.
A business plan lists your monthly expenses that you will have to meet, thus showing you how much money you will need to bring in each month to cover these expenses.
The business plan also makes you conduct some market research, analysing your target market, their requirements and the logistics of your business idea.
By conducting this project, we can quickly see where the problems may arise from.
We will be aware of the costs involved in running a business, how much money you will need to make monthly in order for your business to be successful, and how much money there is available for luxuries such as your salary!
Is it worth going into debt, to pay yourself a salary?
Loans for Businesses
If you were to be granted a loan of P500,000 or perhaps a million pula, wow that sounds like such a lot of money.
We can easily fall prey to our minds convincing us that as there is so much money available now, that we can spend some of it on ourselves. How many people have you seen using some of their business loan money to buy a new fancy car?
If you have a business plan in place, you will know that you cannot afford such items until your business is established and earning more than is needed to run it, and only after your loan has been repaid.
Retired Entrepreneurs
Some of us fall into the trap of using our retirement money to open a business. If you are of retirement age, you cannot afford to lose your money in the gamble that your business may be successful. How will you earn the money again to retire if your business is not a success?
“Most businesses take at least five years to make a profit and be successful.”
Things to ask when considering opening a business
Any of us investing money, ours or borrowed, into a new business venture, need to consider the following things:
Can I afford to live on my savings for the next five years whilst my business develops and hopefully becomes successful?
If not, can I afford to pay myself a salary from my new developing business, and for how long?
Can I sell? Am I an Entrepreneur? Am I good enough to make my business profitable? Remember, I cannot rely on my friends and family only, my business must stand on it’s own in the market place.
Do I have the drive and committement to make my business a success, it will take longer and harder hours of work than I have ever had to give in my past?
Do I know if there is a demand for my business idea, have I done a market survey, or do I just think it is a good idea?
How will I manage my cashflow? Do I need a professional to assist me?
“If owning your own business was easy, we would all have one.”
Beware of falling into this trap of owning our own business and expecting them to be a success. Successful businesses were either lucky, or in the right place at the right time.
Hard work and commitment is not a guarantee that the business will succeed. Most millionaires will tell you it took them many unsuccessful attempts to finally get the right business. Most of them have lost everything they own, many times….
Author: Lechedzani Pitso – Financial Wellness Trainer with S.C.I. Training (Pty) Ltd. © S.C.I. Training run financial wellness programmes in Botswana. For help and information contact them on 72309719 or training@wellness.com