'No honeymoon for business start-ups'

Ms Ethel Nyembe, Head of Small Enterprise at Standard Bank, has urged traders starting their own businesses to be aware of the fact that hundreds of small businesses collapse within their first year of operation.

"For many people starting small businesses, getting the right financial documentation in order is a major challenge. The harsh truth is that having a skill and passion for your work is not enough to guarantee success. Unless you know exactly what your financial position is every day otherwise you will have problems keeping the business on track.

"Successful small business owners understand that their business account is separate from their personal finances. Your financial plan should include a salary for yourself. This can help you to properly manage your personal and business spending as well as ensuring that your accounts are always accurate,” she added.

She said skilled tradesmen are in demand and there is no doubt that there will always be opportunities for those with the proper business skills to build a real future and legacy for their families.

According to her, with infrastructure spending having been identified as one of the key focus areas of the National Development Plan, tradesmen will continue to play a critical role in growing the Ghanaian economy.

Ms Nyembe said if small businesses are to build a successful enterprise then they should pay attention to their financial details and good business plan which is very vital.

"A good business plan not only prepares you, but is also required by a bank if you intend on getting a business loan. Banks will examine the plan, your credit record and financial health before granting a loan.

“The more comprehensive your plan is, the better your chances are of getting the start-up finance you need. As a blueprint, it is also a document that can be constantly referred to and consulted to help keep the business on track.”

She also advised tradesmen to review the area or region where they intend to operate. She said knowing in advance how many people with similar skills are working in the community will help the business to thrive.

Speaking on capital to establish the business, she many people fund a business from their own resources. She therefore advised SMEs to look to investors, business partners or even friends and family for loans in addition to approaching the bank.

"Informal borrowing agreements between friends and family however come with their own challenges such as unclear payback periods and misunderstood conditions. The capital you raise must be large enough to cover establishment costs and also operational costs for several months.

"Few businesses operate profitably from ‘day-one’, so you need to have money available for the business until a positive cash flow enables the business to stand on its own. Putting up one’s own capital in partial fulfilment of the business’s short-term capital needs to demonstrates to the bank that you are a serious business owner that is willing to back your vision."

She added that many customers and suppliers will only deal with a business that is properly registered and has the appropriate tax and VAT numbers. It is also important that one gets a specialist to explain what the requirements for different businesses are, so that one understands the financial implications.