Gideon jokingly says that his path to success seems to be permanently under construction. He is in his eighth year of business yet he is always struggling with finances and cash flow problems.
Although he has many loyal customers and his business has good profit margins, Gideon is always struggling to raise money to buy stock.
He is deeply in debt and more often than not, unless he gets a soft loan from a friend, a supplier to give him credit, an LPO finance or a client willing to pay in advance, he does not supply on time.
Gideon’s problem is typical of many people in business today. It is has nothing to do with business environment but has everything to do with personal finance management. Gideon is a high spender and often withdraws money for personal use.
There is growing evidence that entrepreneurial success is directly related to personal financial success. People who are good at personal finance are more likely to succeed in business.
In terms of financial lifestyle, people fall into three classes: Those who spend above their income, those who spend everything they earn and those who spend less than they earn.
It is only those who spend less than the earn who attain financial stability.
It is estimated that about 90 per cent of the world’s wealth is in the hands of 10 per cent of the population. This skewed distribution of wealth is mostly erroneously attributed to uneven distribution of resources that produce wealth as well as one’s background, social connections and environment.
For example it is believed that the rich, progeny of rich people as well as those living in rich countries with better pay and better environment for wealth creation will continue to be richer.
This is not actually the case.
Financial experts tells us wealth is more about attitude and sound habits than external conditions such as inheritance, good income or an enabling wealth-creation environment.
Although these factors help, they rarely determine the outcome. Experts further argue that even if the entire world’s wealth was redistributed equally, it would be back in the hands of the 10 per cent within seven years.
Being in a high margin business, in a strategic location or having a lot of capital and credit lines does not guarantee success.
Good finance management does. If you are not able, after supplying goods to customers and getting paid, to buy the same or more stock without borrowing, then it means you are spending capital rather than profit.
Manyara Kirago, one of the leading local experts on personal finance in his book, How to Become a Lifelong Financial Success, outlines some of the tools that one must apply in personal as well as business life.
They include: setting goals, budgeting, saving, investing and discipline.
All these will require sacrifice and discipline. But nothing worthwhile comes for free.
Entrepreneurial success is not an overnight thing. Some of the successful enterprises we have around have been nurtured for a while and have weathered and withstood storms and tough times.
Treat yourself as an employee of your business— pay commensurate salary and withdraw not a cent more.