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People start their own businesses for a variety of reasons, some want freedom, others want to control their destiny, some want to live out a dream and many have no idea – why they started their own business, perhaps it just seemed like a good thing to do at the time.
Whatever the reason for starting your business, some degree of financial success is required – if you are going to survive.
If the business fails to record a profit year after year, there generally is only one result. The business shuts down causing a lot of grief to the owners and others involved in it. You only hear about the big companies which fail – yet small businesses all over the Country continue to fail on a daily basis. The failure of small business is so commonplace, that it does not make news.
One of the main reasons for businesses failing is a lack of understanding of financial matters – Money Management.
There are so many aspects to managing money and the challenges are far greater if your business is either rapidly growing or at the other extreme, really struggling.
You need to be able to make money, manage it effectively, invest it wisely, to survive in your business. If you fail to do so, you will not have much to show for your hard work.
Businesses need money to survive, develop and prosper. You need money to live and reach your own goals. Lifestyle goals and choices will often come down to how much money your business generates and how you invest it.
In small and medium sized businesses, there is a direct relationship between the business and the personal affairs of the owners.
The better the business performs, the better you will do out of it.
Your first goal should always be to ensure the business performs well – only then will you be able to reach your own personal goals. But you need to ensure that you do not take out all the surplus cash and leave the business with no capital to grow.
Remember, in your business, the personal and business affairs are intertwined; we need to look at the complete picture. You need to look after your personal, as well as the business finances. You can not afford to ignore either one.
Like most things, success in money management requires planning and strategic thinking combined with a real commitment to the goals you establish. Once you have worked out where you want to go – getting there is a lot easier.
If you had no idea where you were going – you are likely to go around in circles. So it is with your own business and making money.
On a recent visit to New Zealand, I came across a wonderful young lady, named Jessie, who lived on a property with her mother.
In an attempt to teach Jessie the basics of business, her mum had allowed her to keep a few chickens and a rooster. The chickens laid eggs and Jessie was allowed to sell them to the neighbours, family and friends.
Jessie quickly learnt that the more she looked after the chickens, the more eggs came her way. If she forgot to take care of them or to lock them up at night there was a chance that they may be taken away by a fox or a dog.
The end result of this experience has been that Jessie takes wonderful care of her chickens, feeds them well and never forgets to lock them up at night. I couldn’t help but admire this method of teaching young children the basics of financial responsibility
The above example highlights many of the things you need to do to be successful in business – looking after your assets, re-investing and managing risk.
Before we wrap, just one more thought.
There is a wonderful song by the band Savage Garden – The Karma Song, ever heard it? One verse goes something like this:
Whether you want a comfortable life or just spend more time with the kids – maybe you want to see the world, perhaps you want to donate money to charity – whatever it is that you want; having money will help you achieve it. But remember, money is a means to an end and not the end in itself.