Starting a business comes with some sacrifices and excitement at the same time. Every business will demand some form of sacrifice from the owner. This sacrifice may begin with the sleepless nights or the several phone calls to people who might be interested in the new venture. Some email campaigns may follow and there will be a few hours spent with a pen and paper in the night. From there, the sacrifice goes on to the financial pot. Of course, the business will hardly be able to kick off without the financial commitments.
In a number of cases, the reason business owners don’t hesitate to make all the sacrifices they are making for their businesses is because they expect returns soon. It seems perfectly logical to make all the necessary sacrifices so that you can get your returns speedily. Sadly, it is at this phase that some business owners make the greatest mistakes in their businesses.
Because of the expected returns from the business, some startups go for office spaces that they don’t need or are bigger than what they really need. In the name of branding, some startup owners throw too much into unproductive campaigns across the media. Business founders create very colourful pictures, buy some expensive space on popular blogs and newspapers. They throw money into so many things that are necessary for businesses but not mandatory or profitable for small businesses.
All these sacrifices come with some excitements because the young business owner has expectations from the business. For many startups, the only reason sacrifices are being made for the business to grow is the expectation from the business. In the set up phase of the business, every sacrifice seems to be worth it. Business owners, like farmers, put in their best seeds so as to get the best harvest.
It is normal for business owners to expect some returns from their businesses especially when they have invested so much. Unfortunately, precaution is usually not applied by many young business owners. This failure to apply precaution is one of the reasons research has proven that many businesses will not survive the first five years.
What is the precaution? It is the golden rule of never eat your seed. Because of the sacrifices many business owners have made, they start ‘clearing’ the account as soon as the business is able to generate some income. They ‘clear’ the account not because the business has new needs or obligations to meet. They clear the account as a reward for their input into the small business.
When venturing into business, founders should note that for the business to survive, there should be no ‘clearing’ of account as soon as the business makes some profit. The business must be allowed to go through that incubation process where it stabilizes. Business owners who take all the money from their businesses as soon as the business makes money will end up killing the business. The business will not be sustained over time because the founder has eaten the seed of the business.
What can an entrepreneur do with the first cash flow of the business rather than just taking all the money away? Here are a few things that can be done:
Reinvest – Entrepreneurs should bear in mind that they will own the business and its profit will still come back to them. So if a business owner puts in enough funds to give the business a good standing, the business will thrive and the owners will eventually enjoy.
Put money into capital goods – To keep the business going, startups must keep investing in the goods that will bring more money for the business.
Spend on putting the business in good shape – Starting small is nice but to remain small will kill the business. So as money starts coming in, startups should spend on putting the business in shape. This may mean getting a good but not expensive space for the business and it may also mean putting the work environment in order.
Promote the business – When businesses are not promoted, there is no way people will get to know them. Startups should spend some of their first income promoting the business on social media and other platforms available to them.
All the income for a startup in the early days of the business should be poured back into the business. That income is still a seed for the business. That is the kind of fund that business owners use to grow or expand their businesses. There is that tendency for many business owners to think that all the money a business makes is theirs just because they started the business and raised funds for it. Because of this thought, business owners take money from their startups until there is no money to take and the business can’t be sustained.
Entrepreneurs should not forget that there will be justifiable reasons to always take funds from the business even when it is just beginning to grow. That means the business will not die instantly because the fund is not withdrawn at once. To keep the business going, entrepreneurs have to learn to delay gratification because the time will eventually come when they will get paid much more than the work they are doing.