Money Management Advice for Small Business Owners in Nigeria.
Cashflow is the lifeblood of all businesses and any form of mismanagement of funds can lead to the downfall of your small business. Being able to manage (earn, spend, save, invest) money is one of the major skills every entrepreneur must acquire in the initial years of running a business.
According to a study, over a thousand small business owners said that the hardest parts of running a business had to do with the issue of money management. While another report shows that the reality in Nigeria remains that 80% of these new startups and businesses fail within the initial three years of starting. And 82% of small business failures are due to poor cash flow management. Since we have passed the three-year mark, we think we are in a great position to offer some money management advice. The money management advice listed in this article has worked for us in the past 5 years of operations, trying them out won’t be a bad idea.
Operate with A Budget
If you find yourself spending money impulsively in your personal life, you need to take caution as such habits will quickly run your business down. Working with a budget typically means you have a plan for how you intend to spend every penny that comes into your hand. In simple terms, a budget is an estimation of revenue and expenses over a specific future period of time. With a budget, you can plan ahead on what you need to spend money on and how much it will cost. This helps you avoid incurring unnecessary expenses in the long run.
Get Affordable Equipment over Expensive Ones
As a business owner, all you want is to immediately get all the equipment you need to kick off your business. Well, that’s a good thing. But if you’ll be following our money management advice, it’s not such a smart idea to invest in costly equipment when starting out – especially if there are cheaper alternatives. Here’s a typical example, as a Software Engineer, you’ll need a powerful machine like a MacBook Pro but buying a brand new one might cost a fortune. You could consider getting a clean and functional fairly used one rather than a brand new one. If you get a good buy, you’ll get a laptop that works just the way you want at a cheaper price. And no one needs to know if you bought it as brand new or fairly used.
Have a Business Plan
Preparing this document isn’t fun, but be aware that it will save you from a lot of business problems in the future. We already stated earlier that cash flow is very important in your business. With a well-thought-out business plan, you will understand your business properly and determine how you can constantly generate cash to prevent your business from falling apart.
Separate Personal Funds from Your Business
If you use the same bank account for your personal life and business, you are making a huge mistake. Let business be what it is and separate everything else. This way, you can easily account for how every penny is spent. Also, you need to be careful and resist the urge to spend the money meant for your business on personal issues and frivolities.
You Must Get a Salary
Being the owner of a business means that sometimes you might not have enough resources to pay yourself a salary. However, paying yourself is very important. It doesn’t make much sense to spend hours toiling and growing your business every day without getting some form of monetary compensation in the end. Paying yourself may be quite hard in the early years of your business, but make a firm decision to do so. This prevents you from getting tempted to spend funds meant for your business.
Find Out Your Cost-Per-Acquisition
If you engage in digital marketing for your business you can easily determine your cost per acquisition. Just in case you have no idea what this is, let’s break it down. Cost per acquisition is the measurement of how much you use to attract one paying customer out of your entire marketing budget. This is another money management advice that helps you see how much you spend to acquire every customer. When you calculate this, you can easily tweak your marketing campaign and budget till it becomes profitable and sustainable. The formula for calculating this is money spent on marketing divided by sales made.
Not many business owners are great with figures or are accountable enough to be in charge of their business funds. For this reason, if you struggle with money management in your business operation, hire a professional accountant immediately. This might be an expensive option, but having a great accountant on your team will save you and your business in the long run. If you do not have the budget to hire one, here’s another option. You need to get disciplined and enrol in financial training programmes for business owners. Then go ahead and apply the knowledge you get from such a programme to your business. Would you love to share any other money management advice with our community? If yes, we’ll be glad to read all of them in the comment section.