Following from some of our blogs on what it feels like to go through the entrepreneurial journey (22 April and 29 April) I want to share what I personally go through. This is shared by most entrepreneurs.


You do all the motivational stuff, such as being grateful for what you have, be in positive frame of mind, carry on regardless of adversity and realise that there is a light at the end of the tunnel. But sometimes it just gets too much. Sometimes you wake up and think to yourself, “I have to make things happen but I just feel drained, emotionally and physically”. You don’t want to show it because you’re afraid to show any signs of weakness. At that point you don’t want people to give you a pep talk, a “don’t worry everything will be fine” rap. You want to be left alone, you just want to be.


When you feel like this, what do you do? Here is my advice. Sometimes it is fine just to let yourself go into that feeling. It’s fine to feel the pressure, the fear, the anxiety. We are all human and it is impossible to always feel positive and motivated.


You don’t have to feel guilty for feeling down, it’s not a sin. Be conscious of the fact that you’re feeling that way and make a decision that you will get out of state within a day. Do not allow yourself to carry on with such feeling for longer than a day. If you let yourself go, be conscious that by the next morning you will out of that feeling. If you let it persist for more than 24 hours you have a problem and it’s time to communicate with your mentor.


I look back at my ups and downs. The lows have been quite hectic, but the highs have superseded my expectations. I know that sometimes things don’t go according to plan. But of late, things have gone spectacular well. On 1 of May 2012 I made a decision to start again with no capital, no income and no assets. 

 

16 May 2014 will remembered as the day a nominated advisor (NOMAD) said they will back our listing of our company on AIM of the London Stock Exchange. This particular NOMAD is one of the largest. This feeling I felt back in 1997 when I listed my first company. The feeling is overwhelming. This is huge for Caban due to the fact that we will be able to assist many more entrepreneurs. Furthermore, we are proving that it is a profitable business to back entrepreneurs. The more entrepreneurs we back, the more jobs are created and unemployment is reduced with a resulting drop in crime. We are currently working on initiatives that will create thousands of jobs. We are humbled by this opportunity.


So sometimes you will feel down and that is OK. But remember, when it turns it normally turns in a positive way that turns your life around. You just have to keep at it, all the time. One day at a time, because eventually it does turn.


As Paulo Coelho states, “Wear your scars of life as medals”.


Cabanites, making a difference one day at a time.

 

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Budgets


Budgeting should not be confused to forecasting. Forecasting is normally done for investors and information is disclosed differently to a company’s budget.


Each year an entrepreneur should produce budgets. When preparing year on year budgets the following should be taken into consideration:

 

  • How much do think your sales will increase by and why;
  • Can you improve your margins and how will you achieve this;
  • Have you made enough provision for increase in costs;
  • Have you covered all incidentals?


Record all your assumptions. When you compare the management accounts’ to your budgets, it will be useful to revisit your assumptions and adjust accordingly. After a few years, your budgets will become accurate due to the fine tuning of your assumptions.


Forecasts


If you are a start-up, preparing your five year forecasts can be a very difficult task. Entrepreneurs are positive individuals and always set their forecasts high. When preparing forecasts, the following has to be taken into consideration:

 

  • What is the market size and how much of that market do you want to capture;
  • How do you plan to capture the forecasted market share;
  • Is it a realistic expectation;
  • Have you taken all the potential pitfalls into consideration;
  • Have you covered all your costs;
  • Are your margins reasonable and have you taken potential price increases into consideration?


Always back your forecast with proper research and references. Do not make broad statements, be specific with solid facts.  List all your assumptions and be very clear as to why you have decided on the various costs. It is also a good idea to have professionals look at your forecasts and obtain written opinions that the assumptions are reasonable.


Once you’re happy that you have taken everything into consideration, half all your turnover and adjust accordingly! Investors will use the forecasts to decide on a valuation for your project. Your credibility will be greatly enhanced if you meet your forecasts. That will make it easier for second round investment.


The above analysis is obviously the tip of the iceberg. This blog is to assist you in getting you motivated to do budgets and forecasts. If you’re stuck, chat to us, we can help.

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What a boring subject. I would rather be talking about entrepreneurship, but this is important stuff! Should companies, even start-ups, have monthly management accounts? Entrepreneurs have a “feeling” of how a business is doing. A lot of business people will gauge the success of their business on how much money is in the bank.  While both methods might seem “adequate”, how do you really know what the actual situation of your company is? What are your trends? Are you growing or slowing down?


Management accounts are a necessity, period. Any entrepreneur worth their salt will make sure that they have monthly figures prepared by competent people. You need to know exactly how your business is doing financially and that can only be determined through management accounts. Although spouses can assist, it’s better to get the professionals involved.


It does not have to be an expensive exercise. The best option is to go for a monthly retainer that includes:

 

  • Management accounts;
  • VAT, PAYE and other returns;
  • CIPC returns;
  • Yearly financial statements;
  • Company tax return;
  • Personal tax returns.


For an average company R1, 500.00 per month should be sufficient to cover all the aspects detailed above. It is a good idea to have the same person that handles the company tax also handle the personal tax.


Also, management accounts should be compared to budgets. If you’re not on track to meet your own budgets, analyse why and fix the problem. We will be covering how to compile budgets and forecasts in our next blog. Again this is another process that is important.


Management accounts are not only important for the reasons stated above, but the following parties are also interested in seeing your results:

 

  • Bankers;
  • Your suppliers especially, if you want to negotiate extended terms;
  • Business partners.


If you’re trying to secure investors for your company, investors will ALWAYS ask for management accounts. It adds an enormous amount of credibility if they are properly prepared and you have a good understand as to where your company is financially. Furthermore they would probably conduct a due diligence, therefore your management accounts must be accurate. If during a due diligence process discrepancies are picked up, you can kiss your investor good bye.


In conclusion, have you hugged your accountant lately?

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