Failing to stick to a budget can kill your business

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Fin24 user Xolani Shelembe, who is in the training business specialising in Stress Management, Career Guidance for schools, Study Skills, Motivation and Student Mentorship, shares a major pitfall he encountered on his journey to building a successful business and also gives some advice to start-ups. He writes:

One of the major mistakes I committed in my business was failure to have a budget and sticking to it. 

Many start-ups fail because their costs are astronomical and they are often not directly related to the business. Is that fancy expensive smartphone really necessary? Unless your business requires you to have a certain image or the fancy features and apps in your phone; you probably don’t need it. 

Plan your purchases

Any purchase I make is planned for and budgeted well in advance. I actually write up a report to myself justifying the need for such and such an acquisition or purchase. Sometimes I end up not making a purchase as it becomes clear during analysis that it is not really necessary. 

My costs structure is well planned and budgeted for. I try by all means to reduce, eliminate or find alternatives if possible. I compare prices compulsively and would never purchase anything unless I have seen alternatives. 

Pay yourself a salary

I pay myself a reasonable salary which is also clearly budgeted for. It doesn't matter how much I have in the bank. I stick to the budget. My wife understands and supports me. 

Sometimes things are bad and there is no job forthcoming but my cost structure allows me to survive those ‘winter’ months.

Limit overheads

I have no office and I work from home. I meet clients in restaurants where we discuss and sign deals. People laugh at me and call me stingy. I sympathise with them when they have to close down and move elsewhere. 

I have learned the hard way, but this is how I survive. We live by months. If we have enough for the next 6 months we sleep tight like babies! If we had enough for the year we would start to get fat!

Be prepared

If you are not ready for this I would rather you never go into business on your own and stick to your job!

- Fin24

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Disclaimer: All articles and letters published on MyBusiness have been independently written by members of the Fin24 community. The views of users published on Fin24 are therefore their own and do not necessarily represent those of Fin24.

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