The belief of many is that money is the most important. Money is not the most important – not even among the first two most important resources needed for a good business.
There are some factors (resources) that interact to make possible the creation of wealth and generation of incomes.
In the elementary economics, we were told these factors of production (resources for wealth creation) are four factors, and among them is capital (money). Now the critical issue is which among these resources needed for income generation and wealth creation is the most important? Truly without sufficient money to turn a good idea to a profitable venture, it will be difficult to make headway in business. But the fact is that if you are holding unto this money-first belief, you are very wrong. Money is not the most important of all factors or resources needed for good business. Money is not even among the first two most important resources for a good business.
The most important resource a business needs is the owner (or owners) of the business, the capacity possessed by the entrepreneur. After the owner of the business, the next most important resource are the people that are employed to work in the business. Money comes in distant number three in the hierarchy of importance. Are you really surprise about this? Think about it: if you have millions of naira to put into your business but you lack the requisite technical and managerial skills, the millions you have worked hard to gather, or borrow, can go down the drain within a month of doing the business. Likewise, if you find it difficult to find and engage right-fit employees who can’t support you to deliver the strategy, vision, mission and set targets of your business, the poorly-skilled employees will help you waste the money within one or two months while they are drawing salaries every 30 days without adding anything to the business. Employees have the capacity to waste your business’ capital (no matter how huge) within few days. It is a fact that today’s employees care less about the company and more about the security of salaries and allowances they draw every month. If you fail to get it right, they will use the resources of your business to prepare themselves for employment in other organisations they consider better than yours.
The above explanation points at the importance of managerial acumen of a business owner in determining how successful or otherwise a business will be. This is why in attending to several issues in business, the starting point should be to discuss the entrepreneur; and examine thoroughly the kind of mindset, especially money attitude or financial management mentality, the business owner is going to run the business with. If your attitude to money before you start a business is nothing to write home about, or you are the type that believe money must be spent once it is available, the probability is high that you may not be able to differentiate between what business money to spend and which one should not be touched. A successful business is about good money management. If you don’t know how to separate your personal expenses from business expenses or you believe your business money is also yours and you can dip your hands into it at will, the business will struggle to stabilise.
It is necessary at this juncture therefore that we query your personal finance intelligence by asking some questions and point out some facts. For instance, is what you spend money on (your possession values) assets or liabilities? What do you really understand to be an asset? Do you really understand that it is what you spend money on that is capable of generating more money (income) on its own for you? Look at what you have been buying in the past two years: do they qualify as things that generate money for you? Now liabilities are things you buy that cannot generate any income for you. Rather you spend more money on them to maintain or service them. Also look at what you have been buying and see how many qualify as liabilities.
Some people believe that building a house is an investment and the greatest asset to acquire while some believe that a house is a liability. From what we learn from above, a house that is not generating income is not an investment, but a consumption item – liability. Therefore if anybody borrows money to build a house that will not generate income, he has borrowed money to acquire a liability. Also your car is not an asset but should rather be a working tool. It is more expensive to run cars than using public transport. It is only advisable to get a car if your means of income generation can afford it and if your schedule is so tight and you need to move faster from one location to the other; and your daily schedules can adequately cover the costs you will incur in running the car. But if you have developed streams of income that generate money for you on their own, you can buy any car of your choice.
Your children education should be an investment but it can become a liability if you spend the money but you leave out good training that will enable the children acquire good virtues that will enable them leave a promising and productive life. Without proper upbringing and home training in societal moral values, a child may end up becoming a disappointment and the money you spend in educating them a waste instead of good investment.
All these money lessons are the basics you need to run a business very well. If you lack it, you may not have the financial discipline you need to run good business.
Emmanuel is a business planning and cooperative consultant. He works with a team of international consultants to conceptualise and plan agribusiness and housing projects. As a certified trainer authorised to use the International Labour Organisation’s enterprise development modules, he trains entrepreneurs and organises workshops and seminars for potential and practising entrepreneurs as well as business managers and cooperatives. He also speaks and facilitates at leadership and management workshops on invitation. His book, Business Planning Made Easy: Step by Step Guide On How To Turn Your Idea To Profitable Business’ is the latest of the books authored by him. Tel.: +234(0)9068602954 (call and sms), +234(0)8023257707 (whatsApp only).
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