In this initial series on lessons from my coach, we begin to implement ideas into money. You have this great idea and you are thinking of going into business to turn it billions worth of wealth. You are pretty sure that all you need now is a little guidance on how to get started! You will be shocked. We have some free advice for you. Welcome to this home of the chosen few.
Starting a business is never easy, and you want to be as prepared as you can possibly be for what may be lurking ahead. First, a little litmus test to check if you really ready to choose financial freedom.
The first lesson is to equip you with warning signs and battle gear. You must understand that in order to get things up and running, there may be times that you will need to dedicate extra time and energy to your business. These longer hours will eat into what would typically be personal or family time. Are you willing to make that sacrifice?
The second lesson is to equip you to take on loads of emotional “asprin or panadol”. In business you need others minds, bodies and souls. You must ask yourself is if you are willing and able to leave your ego at the door. Are you willing to seek out the advice of those who have been there and succeeded in doing what you are working to achieve? Are you aware of your strengths and weaknesses? And are you willing to bring on board others who are skilled in the areas in which you are lacking?
The third lesson is to equip you with inner motivation beyond question. How much do you truly desire this idea? Are you ready to commit to what you are beginning, and see it through to the end? It is here that you will find yourself most greatly challenged. It may challenge everything that you thought you knew about yourself. Do you have what it takes to absorb the highs and lows of building a business, and do you truly possess the unmitigated drive to succeed? My coach told me that if you doubt yourself, then do not get started until the time comes that you have the confidence to do what is necessary to prevail. If you can honestly answer yes to all these three questions, then move on to prepare the business plan.
The fourth lesson is to convey the idea in a manner that others can relate to it without any spec of doubt. A business plan helps to achieve this goal especially with financiers and other partners critical for the success of your business idea. A business plan is your road map to your final vision. It will help you to focus on exactly what it is that you are trying to accomplish, and how you plan to get there (strategies).It represents your ability to visually see your proposed road to success and will enable you to develop confidence in your vision, and win others such as financiers and other partners to come on board. It is crucial to have a written plan when presenting your ideas to others.
The fifth lesson is on the choice of entity that will best represent your business idea on the ground. You must now decide on the type of entity your business will be. Will you be a sole proprietor, a partnership or a limited liability company? This decision is an immensely important one. You are advised to seek the knowledge of a professional especially a commercial lawyer with expertise in the development of professional entities and also and a tax expert.
You will also want to consider the fiscal year of your business. Depending on your circumstances, you may want to use the regular calendar year as a start and end date, or it may be more beneficial to use different months as start and end dates.
These decisions will have an impact on your tax filings at the end of the year, so choosing the most appropriate entity and fiscal year for your situation will both be very important decisions.
Lesson number seven is on funding, a lesson for mature students.
You need to understand the possible sources of capital that you can tap from in order to make progress. It is normal to start on a smaller budget and expand as you gain experience.
As a general rule, the bigger the business, the larger the overhead you need to cover. Consider starting out of your home or shared facilities to keep your costs low and expanding only as finances allow.
It is be important to work towards building a good credit rating during this lean phase. When you are later presented with an opportunity in which it makes sense to borrow extra funds to grow your business, financial institutions will be more readily willing to lend it
Lesson eight is on tax compliance – an invitation to honor Caesar as Jesus advised.
His agents are silent killers to good business ideas of greedy men. Tax reporting information is important but not well known in Kenya due to historical constraints at the tax authorities. Unlike in Rwanda where business registration and reporting issues are online, immediately available and friendly, officers of the tax authority in Kenya have thrived in controlling information for power over the years. Get ready for some hard lessons here.
The lack of tax reporting knowledge has cost many businesses unnecessary penalties that almost cripple their business ideas. Personal Identification number (PIN) now combined with Value Added Tax registration is given to you by the Kenya Revenue Authority for identifying your business for tax reporting purposes. Obtain it before you start off and thereafter make your tax returns every month before the due date.
The final lesson is on keeping track of your efforts also referred to as accounting and contracts. You are now ready to begin turning seeds into effort and results. You need to choose the method for keeping accounting records. Firstly, it is possible to keep records using a non-computerized method of accounting as one option, but it has its future costs of inefficiency as you grow bigger. There is a wide variety of accounting software available on the market for keeping the books well organized.
You will want to do some research here with the help of a very honest partner in accounting and information technology. Some software is more user-friendly than others. Purchase a software package that is most appropriate for your circumstances.
Lastly the lesson on cementing business relations especially contracts.
Your business may require that you enter into contracts. It is important to discuss with a professional before implementing contracts, to make sure they meet your requirements for personal and professional protection within the laws of Kenya. Start your business the right way by taking the proper initial steps. There have been countless unfortunate situations in which people tried to cut corners knowingly and unknowingly when starting out.
Patrick Wameyo, has practised commercial and investment banking for over 19 years in Kenyas Financial System. He is currently practising as a Financial Literacy Educator and coach, and Small Business Consulting on finance and business strategy. He holds a double speciality MBA in Finance and Strategic Management from University of Nairobi. Email [email protected] for a personalised personal finance management coaching plan.