The Question: I was employed in the private sector with a gross salary of about Sh60,000. I quit this job in January 2025 to start a clothing and beauty business targeting professional working women in Nakuru’s CBD.
I used my savings of Sh600,000 as my start-up capital. I then injected Sh400,000 bank loan into the business in April. My current expenses are as follows: Rent 16,000, Utilities 5,000, Phone 2,500, Food 25,000, Commuting 5,000, Church 6,000, Personal grooming 5,000, Fees 10,000 per month for my son, Rent shop 20,000, Employee 15,000, tenant security guard contribution at shop 2,000, merry-go-round women chama 10,000, KCB-MPesa loan 6,500.
Despite putting in about Sh1 million in savings and loan into the business, I am still struggling to live within the same standards I was used to before I left my old job. The bank loan is for a term of one year in instalments of Sh36,000. I have repaid two months. The mobile loan recurs every month. I have a lot of dead stock that is not moving and I am wondering what I did wrong.
I am not certain I will manage to pay next month’s loan and am considering taking a top up loan of Sh250,000 to jumpstart the enterprise or selling my 136,000 Home Afrika shares which I bought at 1.10 apiece at a loss and inject the money in my venture instead. Other than the shares I have no other investment or savings.
I am also getting a feeling that I should quit and seek employment again. I don’t even know how much money I am actually making from this venture. Everything seems so overwhelming and I don’t know how to untangle myself. Please advise me.
The Answer as provided by Benjamin Cheruiyot – the Engagement Lead at Abojani Investments.
Firstly, it is important that you understand that you don’t have to quit your job to achieve wealth. Many professionals can build massive wealth not just by working hard, but by working smart. It’s generally recommended that you get into business while still at employment. Only when the business net returns double your salary should you consider quitting to focus on further growth of your business.
Entrepreneurship is often glamorized. As an outsider, you think you are really missing out on a lot. It is only when you dip your feet into entrepreneurship that you realize it is not a walk in the park. Whereas in employment, as an ordinary employee, you didn’t have to make hugely consequential decisions, in a sole proprietorship, the business trajectory lies on you – you are the chief executive officer, the chief finance officer, salesperson, storekeeper, and cleaner.
There is no guarantee of income unless you put on the overalls. Every day counts in business. You do not have the luxury of taking leave and still expect the business to grow. To be really wealthy in business, the business structure plus strategy are the deal maker.
Now, your total monthly expenses amount to Sh128,000. There is also the bank loan repayment of Sh36,000, totalling Sh164,000. It is the third month of business and you are already feeling the pinch of entrepreneurship. You have questioned whether you did proper due diligence before quitting your job and plunging into business. Typically, you do a business hypothesis first. Did you check out market potential, existing competitors, business location, current trends, and strategy?
Assuming you did all these, we could just assume it’s ordinary start-up challenges that characterize SMEs that have weighed heavily on your venture. It takes about a year for an SME to get on its feet. Building a loyal repeat customer base takes time. You will need a lot of referrals from existing clients and soft marketing skills to start gaining solid traction. Pricing is key, though this depends on where you source your merchandise. It is better to be content with small profit margins but enjoy constant and growing volumes in sales.
A business emergency fund is necessary. In your case, the most important business expenses are rent, employee wage, and loan repayment. These total Sh71,000 monthly. You need at least Sh210,000 as business emergency funds to take care of these expenses in slow months. An ideal place to keep this is a money market fund. It’s a medium-term strategy that you can grow from savings especially in good months with interest that is compounded on a daily basis.
There are lots of personal expenses you could review to steady your ship. Look at foodstuffs which you have currently allocated Sh25,000. If living with your son only, you could evaluate your shopping habits. Stock more dry foodstuffs especially in bulk. Smaller package purchases are expensive. Could you defer the expense on church and chama contribution until you’re stable? All these could release Sh25,000 that you could channel towards more pressing needs like eliminating recurrent mobile loans.
READ MORE: My Sh272,000 savings in MMF earned Sh1,100 net interest in 15 days
Unless the business nets Sh200,000 monthly, it may not be sustainable in the short term. Selling the 123,000 Home Afrika shares at the current price of Sh0.64 could get you about Sh78,000. This may not do much but help pay off two monthly loan installments. It is only a temporary relief. It is also a lesson in stock market investing.
Always speculate on quality holdings where you’ll enjoy dividend income besides capital appreciation instead of penny stocks which will give you a huge volume but low returns, and more often than not, paper losses that your portfolio can’t seem to recover from. I would also advise that you do not take the Sh250,000 loan top up to put into your business for now.
This will just add you more debt without resolving the fundamental reason why your venture is frail. Never mix personal and business finances. Even if taking from the business for personal needs, consider it an expense, like a salary. However, in the initial growth phase, businesses take more than they give.
A knowledge of business accounting will help you know projections on your business break-even horizon. If you do not know how to run proper bookkeeping, you might want to have a professional conduct an analysis on the business that will determine its actual financial status including operating capital, expenses, revenue, net profit / losses.
This will help you make an informed decision on whether you should bite the bullet and go back to salaried employment and, or whether your business will grow in your absence. If it is a zero-sum game, you must know that there is no shame in starting over. You should not allow your ego to keep you stuck in a loss-making, debt-piling venture that has no real chance of turning a profit.
If you decide to go back to employment, you will need to be strategic with your finances to ensure you continue to honour your monthly debt obligation. This may require you to reorganize your budget and make cuts on some areas. Depending on what net salary you are able to negotiate for, you might want to involve your bank on a non-costly loan restructuring so that you don’t overburden your payslip.
This switch from business to employment should be done strategically, and possibly involve a professional, to avoid sudden, disorienting closures and losses, as well as establish potential of the business running as a side hustle in a different, more affordable location and, or even online and on weekend market days.
A version of this personal finance question and answer was also published in the Saturday Magazine. The Saturday Magazine is a publication of the Nation Media Group.
