Financial Strategies Towards A Sustainable SME [Part 1]

One of the most crucial aspects of any business is finance. As a matter of fact, the reason why businesses are being set up is to earn profit, which, of course, revolves around finances. The future of any business, particularly the SME, is dependent on financial management. So here, we shall focus more on the SME - Small and Medium-sized Enterprises, because the majority of the businesses that fail do so at the level of infancy. This is why the financial foundation must be strong so as to sustain the business. So let us look at points to get handy with in order to sustain the financial foundation of an SME.

1. Have a financial plan to guide you

As an entrepreneur, if you do not have any financial plan or budget, there will be nothing to guide your financial activities, your spendings, and even your investment. Can you imagine how a civil will sound like if he tells you that he is building without a plan? He has to first put a working plan, then the plan will guide his actions towards the building of the house. Similarly, for the effective running of an SME, there is a need for the entrepreneur to have a working budget and a plan. One of the benefits of having a plan is that it prevents unnecessary expenses and avoids wasting of resources.

More so, adequate planning helps to effectively utilise the available resources because it keeps the entrepreneur on course and helps maintain focus. In making plans, you should also include future projections to it. That is, draft a plan that will chat the course for your business. For example, if you are into food processing and your business processes a certain metric tonnes of food over a particular period, you can make plans to increase it and work towards it. If your plan does not include actions for the growth of your enterprise, then it is lacking a very vital aspect.

However, one thing to note is that even though you are to make plans and even make projections, you should do it logically and reasonably so that it will not become your own discouragement. Imagine an entrepreneur that is still in its infancy making projections to be a multinational conglomerate overnight without having anything on ground, this will only amount to daydreaming. It is true that we are to dream big, but wisdom demands that you should make plans from where you are.

2. Research before investing

As an entrepreneur, during the start-up phase and the infancy stage of your business, you may be required to undertake a lot of investments here and there, and most of them may be virgin investments (that is the investment that you have not undertaken before), so you need to research well and then investment with knowledge and discretion. That an opportunity comes your way is not an express call for you to sink your funds into it. Still take out a bit of your time to do extensive research and study it. This should include feasibility studies about, first, your own business, then what you want to invest in.

Even if the investment opportunity looks very welcoming, you still need to ask yourself if it will be relevant at that moment to your business. You have to understand that having a wrong investment can wreck havoc in your SME, so you cannot afford to invest blindly or without good information. After you have acquired some relevant information about the proposed investment, then you should figure out when will be the right time to invest. That you have what to invest in, and that you know how to invest, it also requires your to know when to invest. A right investment at a wrong time might also be disadvantageous to you. Just like in the crypto space, timing can be a very great determinant for either profit or loss, so you should be very keen on answering the "when" question.

Furthermore, when investing as an entrepreneur, you should be able to separate your personal emotions from it. Your investment should be in the interest of the future of your enterprise, not to satisfy your emotions. Finally, you should not investment simply because other entrepreneurs are undertaking the investment, but do it because you have researched on it and because it will bring benefits to your enterprise.

Thanks for reading