The other evening a business radio show had on a banker who was saying how many loans his institution provides to entrepreneurs. He said that the bad debt percentage was about 3.8%, adding that entrepreneurs manage their money carefully and pay back their loans. If they run into trouble, the entrepreneur would sit down with his or her banker and work out a repayment plan. Continue reading “Is a banker really your start-up friend?”
At a small rural town that I was visiting I came across an interesting business relationship between a butchery and a small micro-enterprise trading on the street cooking and selling meat products from the butchery. The small enterprise, run by a husband and wife team, had set up and warning canopy and were grilling boerewors (farmer’s sausage) and vetkoek (fat cake) and curried mince. They were doing a brisk trade because many people were stopping at the parking area which also led onto a liquor store. The butcher benefited because customers could taste his meat cooked outside and the small business benefited from the quality of the meat products as well as the steady stream of customers that flowed into the butchery. Continue reading “Do you have a cash kitty to invest in your new business idea?”
My father who was a part-time jazz musician in his early years used to often sing this song “You’ve got to put your money in the bank Frank, you’ve got to have money to start”. Yes, you can’t start a new business or anything else if you don’t have money saved. But the real challenge is building up a cash kitty when you are running your business.
I recently came across a small business that was forced out of its premises because the landlord had increased the rent. The problem was that the small business owner did not have the cash to secure new premises and inform all its existing customers that they had to vacate their present premises. The result was that customers started making plans about obtaining alternative suppliers of the service that the business was offering. Whether this business will find new premises and bring along all their customers that they have built up over years is difficult to say. But the likelihood is that they have lost many customers and it will be difficult to rebuild their customer base that they had acquired. But there is another issue and that is that by not having cash reserves the business wasn’t even able to move all their fittings and equipment from their existing premises with a professional mover and had to rely on friends and family to cart the equipment out piece by piece over more than two weeks.
You know what it’s like with a small business, once family and friends know that you are a small business owner you are leaned on for all sorts of cash requirements. Children who need motor vehicles or education or even airline tickets home from faraway places. Extended family suddenly need money and lean on you for loans. Soon the business becomes a cash machine for many people and is unable to build up cash reserves.
Without cash reserves, you become extremely vulnerable and there is a strong possibility that your small business will deteriorate. Just think about it. If you don’t build up a cash reserve, where’s the money going to come from when you need to protect your business against a fierce competitor? How can you keep running the same business for years on end without improvements or even giving the inside and outside a coat of paint? Your business can also remain stagnant or trapped in that you are not able to do improvements or expansions.
We all know how tough times are at the moment. With a large strain on your cash resources, how is it possible to build up a cash reserve to make your business more resilient? How can you stop the drainage? How can you put an end to living from hand to mouth?
It all starts with making sure that you pay your business first before you pay anyone else. You need to set aside a small amount each month and put it into a cash reserve fund so that you can build up a cash kitty to tide you through bad times. Even very small amounts in the beginning will get you into the discipline of saving on a regular basis. You’ve got to start somewhere. Small amounts accumulated each month will eventually amount to something sizeable if you look over a period of a year. Do everything you can to build up a cash reserve in your small business so that when the time comes to protect your business, improve your small business or expand it, you have the necessary financial resources to do so.