Money Mistake #1
Wait! Before you borrow money to start that business - think carefully and plan well.
Borrowed funds accrue interest, so if you borrow to start a business consider how are you going to repay?
Yes, we have all heard that other people's money is a good way to start, but do your homework well first.
Unless you are repaying the loan through your salary it may not be the best idea to borrow funds to START, however, if it is to GROW an existing business already generating considerable income, then that is fine.
Do your financial calculations and have a 3 scenario analysis well laid out, with pessimistic, expected and optimistic outcomes.
Have a detailed strategy and financial plan in place - what will be your response if things don't turn out as expected?
Focus on your top line, strive for constant sales, don't get lost in expense details by trying to reduce the bottom line.
Strive to get your business into constant cash flow as soon as possible, even if significant profit is not yet being made, if you have a steady cash flow it confirms that there is a demand and people are willing to buy.
So don't make the mistake of hastily borrowing funds to start a business without sufficient research and planning. Consider grant options first if they are available.
Make sure you have a tested product or service that has a market, start small and scale-up.
Money Mistake #2
Never spend money you haven't received.
Don't plan with money you have not received
And don't someone else money you have not yet received.
There is a probability that you will never receive the money or you may receive less than expected and you will run into problems.
Don't rely on uncertainty.
Stay within what you can deliver, make your word count.
It is better to tell your creditor the truth that you will be unable to pay and then if the money comes in, you can go back and pay earlier than expected. Your creditor would be grateful, rather than promising the creditor and then defaulting.
Learn to stay within your means, it can be hard but try as best you can, you will reduce any emotional stress if you are able to achieve this.
Money Mistake #3
When you get the opportunity to meet a very wealthy or influential person, avoid entering the "begging" mode.
What do I mean?
Resist the temptation to ask for help like money, a job, a business deal etc.
Do you know how many people they meet who ask them for the same things? It can be overwhelming and annoying sometimes.
Yes, I know you need help, but it is better to show this important person that you are not a beggar but rather you also have value to offer and you seek to learn and develop yourself.
Instead, ask for A - I - R.
A - Advice
I - Insights, information and introductions
R - Recommendations
• Asking for advice is a compliment
• People hardly turn down a request for advice.
• Ask for advice on the subject matters and issues relevant to the person.
Insights, Information, Introductions
• Ask for insights about the company, business or industry the person operates in
• Ask open ended questions, to allow for free flow answers
• Ask for other relevant sharable information (never ask for confidential information).
• Ask for recommendations - many people forget this
• Who do you recommend I speak with concerning xxxx?
• What do you suggest I do to take this further? etc.
Always show appreciation for the insight.
The most valuable thing you can get from a rich person is not money - it is insight, wisdom and direction.
Money Mistake #4
Don't save what remains, take out what you want to save first.
Whenever you receive money, don't start spending and think that you will have something left over to save, you won't. Once you have money to spend, there are numerous things that will appear as important that you think you need to buy or spend on.
Once your money has finished you will also discover that somehow you will cope without it. When money is not available, we naturally find a way of doing without it.
So, create an investment account, join a cooperative or "ajo". Have a savings scheme and set money aside on a regular basis towards future greater investment opportunities.
Written by Lady Shayo Imologome
Management Consultant, Strategy Thought Leader, Facilitator and Trainer