The biggest challenge in starting a business is raising capital.
Securing enough cash flow to keep the business going until it’s well established is another challenge. You don’t want to lose sleep over the fact that you left a stable career with a steady and predictable income for uncertain future inflows while your business is still getting off the ground.
Reduce pressure from your business, take an investment plan that works. Having a plan in advance will increase your chances of owning a successful business going into the future.
Once you have prepared your business plan, you need to anticipate what it will cost to set up the business and to pay the monthly running costs.
Staff costs, raw material costs, computer costs and rental expenses need to be paid every month. How long can you afford to support yourself without drawing an income?
These are the financial commitments one has to consider in the planning stages of a successful business.
It is best that while you still have a job and a salary you need to save so that you have capital to get your business going. Taking out a loan may be an option but banks usually want collateral ceded to them and many people cannot meet this requirement. Reduce pressure on investment plan.
Micro-lending is very expensive and will put more pressure on you as the interests payments arise. According to South African based Imara Asset Management, most businesses fail because the owner runs out of money.
“It takes time to sell your products and services and sometimes payments only take place after delivery which adds to the cash flow pressure.
“Consider the impact that leaving your job and starting your own business will have your family. Who will support you and pay the bills? If you are the sole breadwinner then you will need to provide for all these costs.
It will help if you can cut expenses down as much as possible. Get rid of all the debts in order to save on paying interest. You will need to calculate as an entrepreneur how much you need to live and support family” said Thato Sebarng, financial planner at Imara Asset Management.
Sebaeng indicated one of the things fellow Africans willing to make it into the business world should consider is retirement savings.
To leave a secure job means you won’t contribute towards a pension fund anymore.
Some people cash in their provident funds to raise cash in order to start business, but this means if the business fails you lose everything.
Imara South Africa is an established asset management that can assist new businesses in Africa.
The information in this article was provided by Thato Sebaeng, a financial planner with Imara Asset Management South Africa (Pty) Ltd.
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