Getting a business off the ground is an extremely daunting task. Keeping it off the ground once it has taken off is an even more difficult prospect. Particularly in Zimbabwe where due to circumstances starting a business is proposed as the answer to achieving financial freedom and comfort in life the idea of a business doing anything other than putting money in your pocket is ridiculous. However, for your business to grow, these other things are the very things your business must do. One of these things is saving!
For the Business to be self-sufficient…
The ultimate goal is for your business to be able to stand on its own two feet. This would be lovely if the business could go and run itself in aspects but that is not always possible. We’ll keep our focus on the business being financially independent of you the owner. In the beginning, we all fund our businesses from our own pockets with help from well-wishers, angels and perhaps some small loans. At this point, the business is not independent. As the business begins to find some consistency in terms of customers and revenue you need to start creating a separate financial identity for your business.
…It Needs its own money
The trend is for many to use the revenue or profits of the business to reward themself. This feels great, you’ve worked very hard and you certainly deserve some compensation for the shift you’ve put in. However, this behaviour comes at the expense of your business’ growth. Consider your business as a simple mechanism in which you put money in and get more money out. Sounds like a jackpot but there’s something that could be much better than this. Your business is a mechanism that gives you money with no money being put in.
The point of creating a saving system within your business is for the business to build it’s own financial muscles that it can flex. Much noise was made about Tesla buying US$1.5 billion worth of Bitcoin. That US$1.5 billion is the result of savings via retained income. Tesla could have rewarded shareholders by distributing this via a dividend. However, the business needs to build its own savings and that is just what they did.
Things can go left
Business savings are not just about the business growing and having its own financial capacity instead of pulling money out of your pocket to fund growth and orders. Ask anyone who has been in business long enough and they will tell you about how easily things can go wrong in business. The results can be catastrophic. A business with some savings built up can take the hit before it has to draw on the funds of the owner or owners.
How to manage savings
There are many options for exactly what to do with savings but a few caveats must be observed. Remember the money is being held to be called on in the event it is needed. Whether to fulfil an order or cover another gap that may emerge. So you definitely want o put the money into something that can be sold off or exited from in a matter of days and most of all is stable if not safe. Bank accounts are great though other methods work too.
The goal is growth
The goal of savings in your business is to empower your business to grow. Grow beyond needing handouts from you to finance day to day activities and orders to stand on its own feet and putting a little money in your pocket at the same time. There is no ideal amount when it comes to saving but you may be encouraged to know that the more retain in the business the faster your business grows.