There are people who have ‘successful’ businesses. Money is ever flowing in. They drive big cars and always seem happy. You will be shocked to find out that these ‘successful’ people with ‘successful’ businesses are always broke.
Statistics show that 80 percent of businesses in Kenya are small medium enterprises (SMEs). 60 percent of these SMEs are struggling to remain afloat because the owners are completely broke. The paradox of the most ailing SMEs is that they have a constant flow of cash. Is it possible for a person to have a business that brings in money but remain ever broke? The answer is, yes. It is possible.
“I have come across several CEOs who are broke but hiding behind black suits and a fake smile,” said Juma Mrisho Sinino, a Business Consultant in Nairobi and a Former Lecturer at the University of Dar es Salaam.
According to Mr. Mrisho, if you are the ‘poor rich CEO’, you need to do the following:
Separate Your Business Account from Your Personal Account
Your business should be independent from you when it comes to finances. When it comes to matters to do with money, do not trust yourself with the money from your business if you want it to grow. One way of controlling the appetite to want ‘consume’ your company money is separating your company account from your own. There are people whose company account is the same as their personal account. The moment you start budgeting for your car, clothes, house rent and even paying your house girl using the money in your company account, you are done. If you have a business, you should have two bank accounts; one for you and another for the company. Have respect for the business account and the business will respect your personal account.
“You cannot start buying grocery using money from your company account and still call yourself a successful entrepreneur. No. That is being disrespectful to your business,” said the good old Professor, Juma Mrisho Sinino.
Put Yourself on the Payroll
Many business people fail because they think that all the money in the business is theirs. The best way to make a young business grow is to let the business employ you. Put yourself on the payroll and start earning like the rest of your team while investing back all the rest of the income.
“You must learn to pay yourself. Monitor your business and set a salary for yourself. The salary should be enough to sustain you until the next pay. It is always hard for business owners to pay themselves and refrain from ‘consuming’ the remaining part of company money,” said Mr. Mrisho.
Have a Signatory
This is an extra person whose authorization is key for any withdrawal from the business. A signatory is a key element that will help save you from the temptation of having to use to use your company money for other purposes apart from those of business.
“Having a signatory does not automatically mean that you will control your spending. Many business owners get a signatory who is easy to manipulate every time they want to make a withdrawal from their business. That will be the same as not having a signatory at all,” Mr. Mrisho said.
Don’t Take a Loan if You Don’t need it
Take a loan for your business only if it is necessary.
“Why take a loan to finance your personal car, do your shopping, pay your house rent and then use the income from the company to pay for the loan? That is being foolish.”