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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Q and A with our Group CEO, Dave Romero.


What is it like to be an entrepreneur and what insight to being one do you have for new entrepreneurs?


I often get asked what it’s like being an entrepreneur. It’s interesting the perception people have of starting a business. Some romanticise that they want to be the next Richard Branson or start a company like Apple. What many fail to see is the journey people take to reach the point where you can say you have reached success. I don’t think I have reached that point in my life yet, but I know that I will be at that point soon.

But getting to that point, you have to endure the following:

Personally

  • Accept that like scientists, you will have to try and try again until you get the winning formula; while accepting that business goes in cycles, it has ups and downs. And how you handle the downs is what makes or breaks you;
  • Having life partners, family and friends questioning why are you’re putting yourself through such pain. Loosing friends that can’t relate to what you’re going through;
  • Waking up in the middle of the night having to write some new thoughts that will enhance your business;
  • Joining gym not only to get fit but to work through your frustrations of the day. Dealing with people that don’t have a clue about business but telling you what you’re doing wrong;
  • Go through the day realising you have not eaten all day. Feeling dehydrated and weak from not having hydrated yourself with drink of water;
  • Watching TV and not having a clue what is going on because all you’re thinking about is the deal you’re working on;
  • Realising that you are actually a bit crazy to do what you do.

 

Financially

  • Sometimes not having any cash at all;
  • Going to your bank manager for a loan and when they see you they literally run away;
  • Making creditors understand that paying late is character building for them;
  • Asking clients to pay before you supply and getting it right;


After 25 years of being an entrepreneur, would you change anything?

 

Not on your life. I LOVE what I do. I love the fact that I am making a difference and that rewards do come to those that follow their passion. You see, it’s not so much that you become an entrepreneur just to make money. It’s because you can have a positive impact to the people around you, that’s the main driver. The feeling of living your dream is immeasurable.

 

What would you say to a potential entrepreneur?

All it takes is the courage to take that first step and say yes, I want to do this and keep on doing it. The rest is easy!

 

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When walking down the road of establishing a business you will often find yourself asking who can truly help you. You can talk to your life partner and family, accountant and lawyer. It is always important to obtain professional advice in business matters. But where do you turn when you are feeling a bit lost or even despondent. When you get conflicting advice (which happens more often than one would think), which advice do you follow? I am often amazed to hear entrepreneurs seeking advice from friends that never have been in business! It is surprising how keen and willing everyone is so willing to give business advice.

We at Caban believe that only entrepreneurs can effectively assist other entrepreneurs. Only those that have walked down the entrepreneurship road can truly understand the pitfalls.

I remember before I had kids (I started a bit later than most at the age of 35), I used to ask my friends what it was like to be a father. The answer was always the same – it cannot be described and one has to go through the experience. I am now the father of three wonderful children and the experience is truly magical, beyond explanation. Entrepreneurship is the same; you have to experience it to be able to advice properly.

I am a great believer in the right MBA programmes. In fact I am embarking once again on this route. My previous attempts were unsuccessful. Not because the material was hard, it was the fact that the professors teaching about business had never been in business themselves! I started my business when I was 25. I started my MBA when I was 29. I already had four years business experience. My argument with the lectures used to be the fact that the examples that were given were taken from the assumption that most things went right. The reality is that most things go wrong!

Furthermore, the lecturers were academics with no business experience! I would pose questions to them such as what do they suggest one does when the debtors are slow in payment, your bank facilities are maxed, you have no cash flow and you need materials from your suppliers to produce? The answer was usually, “let me look it up and I will come back to you”. Through experience one knows that in this kind of a situation, more often than not, if you speak to your suppliers frankly, honestly and come up with a plan that is acceptable, your suppliers will assist. After all, they want to keep you as a client. This comes through experience. No text book will tell you what to do under the above circumstances. Having said that, there are MBA programmes that add a lot of value. Do research on the lectures before choosing one.

You will only learn from the failures. It is pointless to focus on the success. Why did a company go wrong and what did they do to fix it? You learn more from that exercise as opposed to learning how Apple became successful. Don’t get me wrong, that is also important. But what happens when things don’t go according to plan when you try to emulate a successful story? You get frustrated and despondent. It’s more inspiring to study a problem company and how they manage to overcome their problems.

At Caban, we are entrepreneurs helping other entrepreneurs. It is our duty as fellow entrepreneurs to assist other entrepreneurs. We understand what it’s like being an entrepreneur because we have walked and continue walking the entrepreneurship path. We are committed in assisting entrepreneurs. For that reason we have decided to introduce an entrepreneurship helpline. You will have access to our executives for free advice.

To access this service you need to contact our offices on +2721 683 2425 and speak to Vuyiseka Ndinisa. She will register you as a member and give you access to a contact number for free advice. You may use the service as many times you wish and we emphasise once again – it is a free service.

Caban, helping entrepreneurs one day at a time.

 

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