7 top financial tips to aid for budding entrepreneurs

If South African entrepreneurs are going to succeed, a significant part of their entrepreneurial education needs to focus on financial know-how and financial advice, says Gert Bezuidenhout, regional executive at Sanlam.

He adds, “This is a dire need for entrepreneurs in a country which is ranked the sixth worst in the world. The ranking is based on the National Entrepreneurship Context Index which assesses the conditions of a country’s ecosystem that enhance or hinder starting and developing a new business.

“Moreover, with South African SMEs representing 98% of businesses and employing 60% of the country’s workforce, there is a critical imperative for focus on robust financial planning. The upshot of it all is opportunity, but entrepreneurs need the knowledge and support to diversify and scale successfully.”

The urgency to pay attention to this imperative is amplified by the fact that South Africa’s National Development Plan forecasts that by 2030 SMMEs will catalyse 90% of the 11 million new jobs the country so desperately needs. This is against the backdrop of the fact that just 20% of South Africans have entrepreneurial intentions, according to the Global Entrepreneurship Monitor (GEM 2021/22).

A big part of boosting entrepreneurial intent is firstly to create an environment of opportunity, and secondly, to give people the financial skills to build something from scratch. Here are some of what Bezuidenhout believes entrepreneurs should focus on, when it comes to financial planning:

Fail to plan and you plan to fail

First and foremost, it’s essential to have a holistic financial plan in place. A trusted financial adviser should do an audit of where an entrepreneurial venture is at, and then devise a realistic roadmap that’s future-fit and includes basics such as managing taxes and optimising returns. Importantly, this needs to include short-, medium- and long-term goals and be adaptable – circumstances change so any plan needs to be nimble.

Entrepreneurs must cut to the core

Prioritisation is key when it comes to financial planning. It’s pivotal to pinpoint core financial areas to focus on to prompt sustainable growth. Liquidity and cash flow management consistently come up as ‘danger zones’ for entrepreneurs everywhere. It’s important to examine a business consistently for ways to cut expenditure – plus, opportunities to ramp up internal operational efficiencies and integrate transparent money management systems.

To market, to market

Access to market remains a big issue for South African entrepreneurs. Owners must consider ways to diversify into additional revenue streams by reaching new client-bases, while looking at local – possibly cheaper and more sustainable – substitutes for their supply chain, especially in the current climate. Increased eCommerce adoption also means ample opportunity to reach new customers via online marketplaces, social media and micro sales platforms.

Doubt the debt

Some credit is good. However, debt is a big trap for business owners as it can be easy to over-leverage and get stuck in a loan spiral. Deal with debt by considering paying off the smallest loans first, to free up capital to pay off a slightly bigger loan and so on.

Seeing to financial well-being

Money stress can be all consuming. Financial self-care is vital. It’s important to take time to ensure both personal and professional finances are running smoothly. Again, a financial adviser can share the load here. One of the biggest burdens – and privileges – of being a business owner is how many people may rely on you. This means it’s imperative to protect your assets to ensure your dependents are secure should anything happen to you.

Becoming future fit

Another “biggie” for entrepreneurs is the need to save for the future – specifically retirement. With the escalating cost of living, South Africans must start saving earlier and smarter to ensure financial independence come retirement. That means managing assets carefully and planning for future expenses.

Investing in financial confidence

Upskilling oneself with savvy business acumen is an investment. Financial competency is invaluable and something that’ll set an entrepreneur up to build a successful business for the long term. Plus, a rising tide lifts all boats – being generous with newfound financial know how is one of the best ways to mentor and upskill other entrepreneurs.

Financial planning is a critical part of entrepreneurial education. “A financial adviser will take the time to understand your situation, concerns and aspirations. Their role is to partner with you to build a solid plan, with solutions that mitigate risk and protect the venture for the long term,” concludes Bezuidenhout.

ALSO READ: To retain and re-attract talent, culture is key differentiator