Starting a Business Money Matters
personal worth – am I worth it ?
Once you’ve completed the Winning Characteristics and the Skills Checklist exercises, and are convinced that you have all the personal attributes, commitment, organisational skills and passion to run your own business one of the most important thing to consider is your PERSONAL WORTH.
This will determine whether or not you have the financial ability to start or buy a business. Without financial security it can be very difficult to concentrate on the many other important parts of running you business.
What is personal worth?
It’s the financial difference between how much you own and how much you owe, or….. the value of all your possessions less the total of all your debts.
This shows whether or not you have sufficient finances, or if you’ll need to borrow money to start or buy your business. It can also make a difference as to how much money you can borrow from a bank, finance company, venture capitalist, or other source.
If your budget indicates that you don’t have sufficient start up capital it may be wise to put a financial strategy in place and consider a financial action plan to start your business before you consider borrowing any money.
Not enough attention is given to finance in the early stages of the entrepreneur's planning and yet the start up phase is the most critical. Apart from identifying your precise financial position in the pre-start up phase, a statement of personal wealth would most certainly be required by a potential finance lender.
An uninformed or misinformed lender will not be in a position to make a sound financial judgement, especially where the required borrowings are highly geared.
If your personal worth capital base is low, your financial planning statements will need to be well developed to fully inform the lender of the potential and viability of the proposal. The excellence and viability of the business idea must be conveyed to the lender with accuracy and precision.
Here’s a quick and simple way to work out your personal worth. When estimating values of assets and liabilities try to make the amounts as accurate as possible.
The next important step to take is to work out your personal budget. If you think this is too boring or you have difficulty with it you might want to consider that financial budgeting is a very important part of running a business. However, the time it takes to work out your personal budget can be some of the most valuable time you spend in the decision making process.
Financial Action Plan to start or develop your business
If you believe you don’t have enough start up capital to get your business on the road and maintain your lifestyle through the early development stages, and you are seriously committed to making it work, you will need to consider some ways to build your financial base. You need to be creative and determined. Here are a few ideas:
- Open a “New Business” bank account now and start saving towards your goal
- Speak to the financial adviser at your bank about a financial plan
- Work part time while you study, or get a second job
- Check out the benefits of Centrelink’s New Enterprise Incentive Scheme
- Prepare a Business Plan and enter business competitions
- Find a venture partner who can help with extra finance
- Attend the SBDC’s “Applying for finance” workshop
The major sources of external finance for small business are:
- Trading banks
- Finance companies
- Venture capital enterprises
- Merchant banks
- Building societies
- Credit unions
- Creditors
To find out more about the many different types of finance for your business call into the BILC and read the finance section of SBDC’s “Guide for operating a small business” (which is provided free with the “How to start a business” workshop, or you might also like to check out SBDC’s online bookshop for the excellent range of other books on the subject.
Get a free copy of ASIC's Your money booklet
The Australian Securities & Investment Commission (ASIC) wants to help you become well informed and confident about financial decisions and have produced some very useful financial information on their FIDO website.ASIC have also produced an excellent free booklet entitled Your Money which can start you off on the right foot with general tips and explanations. Some of the ideas may not apply to your particular circumstances. If you want personal financial advice, you may need to see a licensed financial adviser. Download a copy of Your money (PDF file, 307 KB), or get a free copy of the full colour booklet mailed to you: email the ASIC Infoline at infoline@asic.gov.au (don't forget to include your name and mailing address) or phone 1300 300 630. This booklet can help you use your money more wisely, save for what you really want and manage your loans, insurance, superannuation and retirement saving.
