One of the most important aspects of being a successful entrepreneur is being financially prepared for the best as well as for the worst.
Entrepreneurship comes with its own challenges. During the inception process, you tend to see the bright side of entrepreneurship and put all your eggs in one basket. You positively assume that it will be successful. But, upon launch you realise that success is not that easy.
Either the market is unstable or there is a shortage of resources. These are just some problems that an entrepreneur faces due to being intuitive, overconfident or unprepared. While being intuitive is good but not weighing all your options or decisions concerning the business may lead to several losses.
What should entrepreneurs do?
If there is one area that entrepreneurs usually ignore, that is financial planning. One of the most important aspects of being a successful entrepreneur is being financially prepared for the best as well as for the worst.
Entrepreneurship and financial planning are two sides of the same coin. Investors and venture capitalists tend to see business plans including financial plans and projections or assumptions behind a forecast. A common mistake made by entrepreneurs is that their financial projections are too unrealistic and unattainable, leading to not achieving the desired funding. To tackle this, it is always advised to process the ins and outs of money management or get the desired guidance by a certified financial planner.
What else?
Financial analysis is another important aspect for a business to become successful. Young entrepreneurs fail to foresee the financial imbalances or repercussions they may have to bear if the returns are not as expected. To establish a sound financial goal of a company, financial analysis or planning is crucial. To assess the imbalances either the projections need to be revisited or the method taken to achieve the projections need to be renewed or changed. Either way, you need to know what went wrong or what went right.
Not only are entrepreneurs a renowned source of innovation, creativity and growth but their ability to achieve the set outcomes are directly intertwined with being able to make the right financial decisions. Entrepreneurship is vital in the creation of a healthy and independent economy. Not only are they a force for driving innovation but also help drive job creation and fuel a sustainable community of other entrepreneurs or start-up enthusiasts.
It is important for entrepreneurs to feel confident not only in their ideas but also in themselves. One way of achieving this is a sound financial plan or future. If your personal finance is sound, it can give you the conviction needed to support a plan for your business, as well.
Another reason a financial plan is crucial for young entrepreneurs is that it allows you to gauge the type of funding your business will require. A lot of investors or venture capitalists usually look at funding that is higher or at a set value. In case your business does not match the requirements of the particular funding, you may have to carve out a plan appropriate for the current running of the business- it may require you to take a loan from close friends or family.
Repayment of those loans becomes an added responsibility. To combat these, the readiness of a financial plan is again mandatory to allow the smooth running of your business.
It is advised to revisit your financial plans frequently to avoid any financial loopholes and help you create a balanced future. Increased financial stability, literacy or a sound financial plan not only helps you succeed as an entrepreneur but helps you grow as an individual and a community.
(By Mandar Marathe, CEO, Koppr)