IN the cartoon series Jake and the Neverland Pirates, there is a pirate captain who is so amusing! See, whenever he gets into any jam or problem and our heroes in this cartoon ask him whether he needs any help, he always shouts and says, “I am Captain Hook, and I do not need any help from anyone, I am just fine!”
This he will say when he is stuck in a pool with a crocodile after him, or when he creates a contraption that refuses to work according to plan. In fact, Captain Hook would rather face the perils of death other than ask for help!
That character reminds me of many of our budding entrepreneurial hopefuls that want to start business but never bother to learn about what they plan to get into!
If you have been following what I have been writing over the last couple of months, the seventh core quality of the successful is that they always do their homework. If they see something that looks worthwhile, they will take their time and do a couple of things.
Firstly, they get in touch with those that are successful in the chosen field in order to just chat with them and get a general idea of what are the pros and cons. Secondly, they go out of their way and read as many books or articles as they can find about what they plan to venture into.
Thirdly, if the business still looks workable, then they consult an expert (at a fee of course) in order to create a viable business plan (not a proposal, but a plan). This will allow them to have all the relevant info and the “roadmap” necessary to realize their vision.
The above methodology applies whether you are starting a project, a ministry, a business or even a club. It is always about how much ground work and preparation you put in that will determine the overall survival of the venture you are embarking on.
Proper-planning-presents-poor-performance, also known as the five ‘p’s of performance, is a tune to stick to if you want to succeed in your scheme.
Meantime, there are some basic tools that you must learn or at least have someone prepare for you in relation to your business if you want to remain afloat.
These are a bit technical (and God knows I am no accountant) but extremely necessary. These are a profit and loss statement, a balance sheet and a cash flow statement.
As always, my definitions are not “text book” kind, but rather a super simplified version that a grade three pupil would understand.
The simpler, the better! So, the profit and loss statement is a breakdown or explanation of all the expenses your business has against all the profits your business has at the time of preparation.
One notable thing about this statement is that it includes all sales (transactions) regardless of whether money has been paid for them or not.
This would mean that if you are running a “malasha” business in the market and you decide to give out some of your goods on credit basis and some on cash basis, all these would reflect on your profit and loss statement.
In short, the profit and loss statement is accrual, not cash based. What is this for? It is there to give you a global or overall view of your business.
A balance sheet is a statement (normally one page) that gives an overview of the assets (like wheelbarrows, stock – the malasha), liabilities (like the wheelbarrow pusher, transport, calls etc.) and the capital (usually in cash form or the stock – the malasha).
As all book keepers are taught, it must always balance. In truth that means the three above must balance out from a cost vs income aspect.
The cash flow statement – this is the real deal here – will tell you how much income and expenses go through the business each month.
Again, book keepers will teach very complex projections and sheets that are very difficult for lay people to understand but the simplest example is just your ledger book.
This is where you record all transactions related to your business. There is a saying is Swahili that states and I quote “mali bila daftari hupotea bila habari” loosely transliterated would mean “property without a record book is lost without your knowledge”! How true!
See, the most common reason why businesses fail after overcoming the barriers of lack of a burning desire and lack of information is this one, lack of cash flow.
A good cash flow is the one thing that will keep your business afloat. All businesses have running expenses and overheads that will not stop whether income has been obtained or not.
A great example is the one where you start the malasha business, you invest about K10,000 ($2,000).
You decide you will go a step further and give out this “malasha” on credit. Well, as you know, people love credit even when they can buy for cash.
So, your profit and loss statement would show you have K20,000 in sales (at retail returns) but what you probably do not bargain for is the cost of collecting the money from the debtors.
Meantime, your weekly running costs must be met, that probably includes a daily
commute to the market, your meals, your airtime on the phone (to follow up the debtors) etc.
So, soon you find the funds have dried up, you have a K15,000 still out there and can no longer get it back, and that is how your business ends up in the garbage piles of so many other “promising” businesses!
So, what is the lesson here? It is this one, learn to plan effectively, be strategic in your roll out of the business and wherever you can, get experts, consult thoroughly and keep abreast of the trends within your field of operation.