BUSINESS – FINANCE – INVESTMENT – ECONOMY
RECKLING ENTEPRISE OFFERS BASIC COURSES IN BUSINESS MANAGEMENT, FINANCING, INVESTMENT AND ECONOMY.
IN THE LAST WEEKS, I HAD SOME TECHNICAL PROBLEMS WITH MY WEBSITES, AND WEN I RE-CONSTRUCTED THE CONTENT, I REALISED THAT SOME LESSONS OF MY COURSES “BASICS OF BUSINESS MANAGEMENT” AND “FINANCING BASICS” GOT LOST DURING THE RE-CONSTRUCTION OF THE WEBSITES.
I APOLOGISE SINCERELY FOR ANY INCONVENIENCE CAUSED, AND I CAN ASSURE EVERYBODY THAT THE MISSING LESSONS WILL BE REPLACED IN THE COMING WEEKS.
STAY CONNECTED TO RECKLING ENTERPRISE!
MORE A FOREWORD: AS USUAL WITH MY COURSES, THIS ONE ALSO DOES NOT GO DEEP INTO THEORY OF BUSINESS MANAGEMENT, ALTHOUGH THEORY PRINCIPALLY PLAYS AN IMPORTANT PART OF BUSINESS MANAGEMENT. THIS COURSE SHOULD GIVE NEW WOULD-BE ENTREPRENEURS SOME HINTS WHAT TO DO IN MANAGING THEIR BUSINESS, AND WHAT THEY JAVE TO EXPECT.
BEFORE WE START GETTING INTO DETAILS, WE NEED TO KNOW WHAT BUSINESS MANAGEMENT IS.
MANAGEMENT OR MANAGING IS
the process of coordinating and overseeing the activities of an organization to achieve its goals
(COURTESY OF BING)
WHERE BUSINESS IS ANY ECONOMIC ACTIVITY.
WE SEE THAT BUSINESS MANAGEMENT IS NOT A ONE-TIME APPEARANCE, BUT A PROCESS THAT LASTS AS LONG AS THE ECONOMIC ACTIVITY EXISTS.
THE PROCESS “BUSINESS MANAGEMENT” IS IN ITSELF DIVIDED INTO FIVE COMPONENTS WHICH THEMSELVES ARE PROCESSES. THESE COMPONENTS ARE:
— PLANNING,
— ORGANISING,
— STAFFING,
— LEADING, AND
— CONTROLLING.
THESE FIVE COMPONENTS DO NOT EXIST SEPARATED FROM EACH OTHER, BUT THEY ARE USUALLY OVERLAPPING. THAT MEANS THAT ONE OF THE COMPONENTS COMES INTO ACTION WHILE OTHERS ARE ALREADY ACTIVE. FOR EXAMPLE, YOU MIGHT BE PLANNING A NEW PART OF YOUR BUSINESS WHILE YOU ARE CONTROLLING THE EXISTING ONES. OR YOU MIGHT BE STAFFING A NEW PART OF YOUR BUSINESS WHILE YOU ARE LEADING THE EXISTING STAFF OF YOUR BUSINESS.
TO BE A SUCCESSFUL MANAGER, YOU MUST FOLLOW THESE FIVE COMPONENTS OF BUSINESS MANAGEMENT IN THEORY AND PRACTICE. IN THE NEXT LESSONS, WE WILL LOOK AT EACH COMPONENT MORE THOROUGHLY.
AND NOW TO THE QUESTIONS:
THE NEXT LESSON WILL BE PUBLISHED BEGINNING OF NEXT WEEK.
ACCOUNTING PLAYS AN IMPORTANT ROLE IN ORGANISING YOUR BUSINESS. WITHOUT A PROPER ACCOUNTING, YOUR BUSINESS MIGHT COLLAPSE WITHIN THE FIRST YEAR OF EXISTENCE.
WELL, I KNOW THAT MOST PEOPLE BECOME AFRAID WHEN THEY HEAR THE WORD “ACCOUNTING”. THEY ASSOCIATE THE ITEM WITH DOUBLE-ENTRY ACCOUNTING, CALCULATING DEPRECIATION, AND OTHER HORROR IMAGINATIONS.
BUT FOR YOU AS OWNER OF A MICRO OR SMALL BUSINESS, THAT DOES NOT NEED TO BE THE CASE, AT LEAST NOT FOR THE BEGINNING. WHEN YOUR BUSINESS GROWS, YOU MIGHT NEED TO OCCUPY YOURSELF WITH ISSUES LIKE SPROGRAMMES ON THE INTERNET. OR YOU CAN USE SOME GUIDES OF HOW TO USE MICROSOFT EXCEL FOR ACCOUNTING PRACTCES.
BUT LET US GET BACK TO THE START OF OUR ACCOUNTING. FOR THE BEGINNING, IT IS SURELY ENOUGH TO USE A SIMPLE INCOME/EXPENSES METHOD TO SEE AT THE END OF THE MONTH WHETHER YOUR BUSINESS MADE A PROFIT AT THE END OF THE MONTH, OR A LOSS.
YOU MAKE A LIST WHICH UOU SEPARATE INTO THREE PARTS UP DOWN. ONE SMALLER PART ON THE LEFT IS RESERVED FOR THE DATE, THE NEXT PART WILL SHOW THE INCOME (KEEP IN MIND THAT YOUT INITIAL WORKING CAPITAL IS YOUR FIRST INCOME). THE INCOME MUST CONTAIN THE AMOUNT YOU RECEIVED, AND FOR WHAT YOU RECEIVED IT THE LAST COLUMN IS FOR THE EXPENSES AND MUST CONTAIN THE AMOUNT OF EXPENSES AND FOR WHAT. FOLLOWING IS A SAMPLE:
| DATE | INCOME (IN GHC) | EXPENSES ( GHC)I |
| 1ST JANUARY 2025 | 10,000 INITIAL WORKING CAPITAL | 2,500 RENT |
| 2ND JANUARY 2025 | 5,000 PURCHASE OF GOODS FOR SHOP (SPECIFY) | |
| 3RD JANUARY 2025 | 1,575 SALES OF GOODS ON THAT DAY (SPECIFY; GHC 500 PROFIT) | |
| AND SO ON | AND SO OM | |
| TOTAL JANUARY 2025 | TOTAL INCOME AT THE END OF JANUARY | TOTAL EXPENSES AT THE END OF JANUARY |
| TOTAL JANUARY | INCOME MINUS EXPENSES |
GOOD AND EXACT PLANNING IS ESSENTIAL FOR EVERY SUCCESSFUL BUSINESS. WITHOUT THOROUGH PLANNING, YOUR BUSINESS IS SURELY ABOUT TO FAIL. BUT LET US FIRST OF ALL LOOK HOW BUSINESS PLANNING IS DEFINED:
Planning is the primary function of management that involves formulating a future course of action for accomplishing a specific purpose. Planning enables managers to decide what task to do, how to do the task, when to do the task and by whom the task has to be done.
AND TO ACHIEVE A PLSNNING WHICH BENEFITS YOUR BUSINESS, YOU WILL NEED A BUSINESS PLAN.
A business plan is a roadmap for your business. It outlines your goals, strategies, and how you plan to achieve them. It’s a living document that you can update as your business grows and changes.
(COURTESY wisebusinessplans.com)
BUT NOBODY EXPECTS YOU TO WRITE A BUSINESS PLAN JUST LIKE THAT. YOU WILL NEED GUIDANCE HOW TO WRITE SUCH A BUSINESS PLAN. AND THERE ARE LOTS OF TEMPLATES TO BE FOUND ON THE INTERNET. IN MY OPINION, ONE OF THE BEST TEMPLATES IS THE PRINCE’S TRUST BUSINESS PLAN PACK. YOU CAN DOWNLOAD IT HERE:
BUSINESS_PLAN_2015.pdf (ctfassets.net)
WHEN YOU WRITE SUCH A BUSINESS PLAN – NO MATTER WHERE YOU TAKE THE TEMPLATE FROM – YOU MUST BE AWARE THAT SUCH A BUSINESS PLAN IS NOT A ONE-TIME EVENT. AS MUCH AS YOUR BUSINESS EVOLVES OVER TIME, THE BUSINESS PLAN HAS TO DO THE SAME. THAT MEANS THAT YOU HAVE TO REVIEW YOUR BUSINESS PLAN REGULARLY TO SEE WHETHER IT STILL REFLECTS REALITY, OR WHETHER YOU REALISED CHANGES FOR YOUR BUSINESS THAT NEED A CHANGE IN YOUR BUSINESS PLAN.
YOU SEE THAT THE BUSINESS PLAN’S PURPOSE IS NOT ONLY FOR EXTERNAL USE – THAT MEANS IF YOU WANT TO APPLY FOR A LOAN, OR YOU ARE LOOKNG FOR AN INVESTOR – BUT IT IS ALSO IMPORTANT FOR YOU PERSONALLY.
JUST LIKE THE BUSINESS PLAN MUST BE REVISED REGULARLY, YOUR OWN BUSINESS MUST BE REVIEWED THE SAME. KEEP IN MIND THAT THE BUSINESS IS NOT A STATIC EVENT, BUT YOUR BUSINESS HAS SOMETHING LIKE A “LIFE”. IT CAN ONLY EXIST IF IT IS FED REGULARLY WITH NEW DATA, CONFRONTED WITH NEW SITUATIONS THAT NEEDS SOLUTIONS.THEREFORE, IF YOU WANT TO START A BUSINESS, YOU MUST BE READY TO COMMIT YOURSELF COMPLETELY TO START AND ESPECIALLY DEVELOP THE BUSINESS.
LASTLY, IT MUST BE SAID THAT PLANNING CAN NOT BE SEEN ISOLATED FROM OTHER COMPONENTS OF BUSINESS MANAGEMENT. ESPECIALLY CONTROLLING – AS WE WILL SEE IN ONE OF THE NEXT LESSONS – FORMS AN INSEPARABLE ALLIANCE WITH PLANNING.?
AND NOW TO THE QUESTIONS:
BEFORE WE GO INTO THE DETAILS WHAT ROLE ORGANISING PLAYS IN BUSINESS MANAGEMENT, WE WILL FIRST OF ALL LOOK AT THE DEFINITION:
Organizing in management is a pivotal function that produces the harmonious collaboration of human efforts and resources, aligning them purposefully to achieve set objectives. It entails structuring, grouping, and coordinating resources – be it finances, materials, machinery, or manpower – to work collectively toward a particular goal.
(COURTESY OF BING)
ACTION WITHOUT PLANNING IS FATAL, BUT PLANNING WITHOUT ACTION IS FUTILE, AN OLD BUSINESS MANAGEMENT SAYING TELLS US. THAT IS BECAUSE EVEN IF YOU HAVE THE NICEST PLAN FOR YOUR BUSINESS, IT WON’T BE WORTH ANYTHING IF YOU WON’T PUT YOUR PLAN INTO REALITY. AND THE BEGINNING OF THIS REALITY IS TO ORGANISE YOUR UPCOMING BUSINESS. YOU HAVE A GOAL WHICH – ACCORDING TO YOUR PLAN – YOU WANT TO ACHIEVE, AND NOW YOU MUST START TO MAKE IT THE REALITY YOU WANT IT TO BE.
AS WE SEE FROM THE DEFINITION, ORGANISING YOUR BUSINESS MEANS THAT YOU GATHER ALL RESOURCES YOU HAVE AND MAKE THEM WORK FOR YOUR BUSINESS EFFICIENTLY. TO ACHIEVE THIS, YOU HAVE TO LAY OUT AN ORGANISATIONAL STRUCTURE; THIS ORGANISATIONAL STRUCTURE CAN ALREADY BE PART OF THE BUSINESS PLAN WHICH WE DISCUSSED IN AN EARLIER LESSON. THERE ARE MANY EXAMPLES FOR ORGANISATIONAL STRUCTURES ON THE INTERNET (FOR EXAMPLE 7 Organizational Structure Types (With Examples) – Forbes Advisor ), JUST CHECK IT OUT.
LET ME GIVE YOU AN EXAMPLE FOR ORGANISING YOUR BUSINESS:
LET’S ASSUME YOU WANT TO OPEN A SHOP SELLING BABY ARTICLES. YOU HAVE A SHOP IN A VERY GOOD AREA (REMEMBER: LOCATION, LOCATION, LOCATION IS ONE OF THE MOST IMPORTANT ISSUES RUNNING A SHOP). YOU HAVE ENOUGH CAPITAL TO PURCHASE GOODS TO SELL, AND YOU HAVE ONE EMPLOYEE (IT MIGHT BE ADVISABLE TO HAVE A FEMALE EMPLOYEE, AS YOU WANT TO SELL BABY ARTICLES; MOST OF THOSE ARTICLES MIGHT BE BOUGHT BY WOMEN, AND THEY MIGHT TRUST A FEMALE EMPLOYEE MORE THAN A MALE; YOUR BUSINESS IS NO SPACE FOR GENDER EXPERIMENTS).
NOW YOU MUST FIND THE BEST SUPPLIER FOR THE GOODS YOU WANT TO SELL. GET OFFERS FROM VARIOUS SUPPLIERS, AND COMPARE THE OFFERS. REMEMBER THAT THE CHEAPEST OFFER IS NOT ALWAYS THE BEST. THERE ARE MANY OTHER MATTERS THAT PLAY A ROLE WHEN CHOOSING YOUR SUPPLIER, E.G. DELIVERY TIME FOR GOODS SUPPLIED, REPLACEMENT OF SPOILT OR OUTDATED GOODS, ETC, IT MIGHT ALSO BE THAT YOU NEED MORE THAN ONE SUPPLIER, DEPENDING ON THE RANGE OF ITEMS YOU INTEND TO SELL. IN ONE SENTENCE: BE VERY CAREFUL AND THOROUGHFUL WHEN CHOOSING YOUR SUPPLIER(S).
MAKE ALSO SURE THAT YOUR INVENTORY IS UP-TO-DATE, AND THAT THERE ARE ALWAYS ENOUGH GOODS IN YOUR SHOP. FIND OUT HOW MUCH TIME IT TAKES FOR YOUR SUPPLIER TO DELIVER NEW ITEMS, AND ORDER THESE NEW ITEMS IN TIME.
THE SAME ACCOUNTS GENERALLY FOR YOUR EMPLOYEE. WELL, NOW THAT YOU FOUND A RELIABLE AND LOYAL EMPLOYEE (WE DISCUSS THE MATTER OF STAFFING IN A LATER LESSON), YOU MUST DISCUSS THE WORKING HOURS WITH HER. THE WORKING HOURS FOR YOUR EMPLOYEE MIGHT NOT BE IDENTICAL WITH THE OPENING HOURS OF THE SHOP, ESPECIALLY IF YOU INTEND TO BE PRESENT IN YOUR SHOP YOURSELF, IF YOU HAVE MONEY ENOUGH TO EMPLOY MORE THAN ONE STAFF, YOU MIGHT EVEN OPT FOR SHIFTS. YOU MUST GIVE EVERY EMPLOYEE A JOB DESCRIPTION WHICH DEFINES EXACTLY THE ROLE THE EMPLOYEE WILL PLAY IN YOUR BUSINESS.
ORGANISING ACCOUNTING IS VERY CRUCIAL FOR YOUR BUSINESS. WITHOUT A PROPER ACCOUNTING, YOU MIGHT FACE A LOSS IN YOUR BUSINESS SOONER THAN LATER, AND THEN A BANKRUPTCY OF YOUR BUSINESS MIGHT NOT BE FAR AWAY.
WHEN YOU LOOK AT THE DEFINITION OF ORGANISING IN MANAGEMENT, YOU MIGHT THINK THAT IT IS VERY COMPLICATED. WELL, IT CAN BE COMPLICATED, BUT WE CAN TAKE INTO CONSIDERATION THAT YOUR BUSINESS IS A RATHER SMALL ONE, AND ORGANISING IT IS NOT TOO COMPLEX. IT WON’T TAKE MUCH OF YOU TO ARRANGE THE COOPERATION BETWEEN THE VARIOUS PARTS OF YOUR BUSINESS. THAT IN MIND, YOU MUST BY ALL MEANS HAVE A CLEAR VIEW THAT ALL THE COMPONENTS OF YOUR BUSINESS ARE DOING THEIR CONTRIBUTION FOR THE SUCCESS OF YOUR BUSINESS. HABING A SMALL OR MICRO BUSINESS DOES NOT MEAN THAT IT SHOULD BE ORGANISED BADLY, OR EVEN NOT AT ALL ORGANISED.
ALSO KEEP IN MIND THAT ORGANISING YOUR BUSINESS IS NOT ISOLATED FROM THE OTHER PARTS OF BUSINESS MANAGEMENT. AS WE HAVE DEALT WITH PLANNING BEFORE, THERE IS ALWAYS A CONNECTION BETWEEN ORGANISING AND PLANNING. IF YOU SEE ANY MISHAPS IN THE COOPERATION OF THE VARIOUS PARTS OF YOUR BUSINESS, YOU MUST ALWAYS PLAN HOW TO MAKE IT BETTER.
AND NOW TO THE QUESTIONS:
COMPARED WITH THE OTHER FOUR COMPONENTS OF BUSINESS MANAGEMENT, STAFFING MIGHT NOT BE EASIER TO ACCOMPLISH, BUT IT IS AT LEAST EASIER TO UNDERSTAND. HERE IS FIRST OF ALL THE DEFINITION:
An effective staffing process helps you find and retain strong candidates who are a good fit for your organization. More specifically, you can keep refining your staffing. Successful programs establish a continuous system of evaluating and developing your relationship with employees and selecting for qualities that are most effective. Ideally, the process of staffing can help you find great employees and maintain strong relationships with them.
DEFINITION IS COURTESY OF INDEED
OF COURSE, THE BASIC ASSUMPTION FOR EFFECTIVE STAFFING IS THAT YOU WILL NOT RUN YOUR BUSINESS ALONE, BUT THAT YOU TAKE ONE OR MORE EMPLOYEES.
THE FIRST STEP TO FIND THE SUITABLE EMPLOYEE FOR YOUR BUSINESS IS TO INTER VIEW CANDIDATES. YOU MIGHT FIND THESE CANDIDATES AMONG YOUR FRIENDS AND ACQUAINTANCIES, OR YOU MIGHT PUT AN ADVERTISEMENT IN LOCAL AND/ OR SOCIAL MEDIA.
WHEN ONE OR MORE CANDIDATES HAVE CONTACTED YOU FOR THE JOB, WE WILL GET TO THE INTERVIEWS. BUT BEFORE YOU START THE INTERVIEWS, IT IS ADVISABLE TO DEVELOP A SO-CALLED “QUESTIONNAIRE”. A QUESTIONNAIRE IS A LIST OF QUESTIONS WHICH YOU CONSIDER IMPORTANT TO FIND THE RIGHT EMPLOYEEYOU’RE YOUR BUSINESS. BASIC QUESTIONS SHOULD BE THOSE FOR AGE AND EDUCATION LEVEL. FOR SOME JOBS, IT MIGHT ALSO BE NECESSARY TO KNOW WHETHER THE CANDIDATE – NO MATTER WHETHER FEMALE OR MALE – IS MARRIED AND HAS CHILDREN, OR – ANOTHER ADRA OF IMPORTANCE – HOW THE CANDIDATE’S KNOWLEDGE OF THE ENGLISH LANGUAGE IS. OTHER QUESTIONS MOSTLY DEPEND ON THE KIND OF JOB YOU WANT TO HAVE AN EMPLOYEE FOR.
BUT MOST IMPORTANTLY – AS YOU CAN ALSO SEE FROM THE DEFINITION – YOU MUST BE ABLE TO ESTABLISH A POSITIVE RELATIONSHIP WITH YOUR FUTURE EMPLOYEE. BE CAREFUL: DON”T MISUNDERSTAND A POSITIVE RELATIONSHIP AS LEADING TO AN INTIMATE RELATIONSHIP WITH YOUR FUTURE EMPLOYEE! AN INTIMATE RELATIONSHIP COULD LEAD TO AN INCORRECT JUDGMENT OF THE EMPLOYEE’S HANDLING OF YOUR BUSINESS.
SO, WHAT IS A POSITIVE RELATIONSHIP THEN? THERE ARE FOUR PARTS THAT CONSTITUTE A POSITIVE RELATIONDHIP. THESE ARE:
— MUTUAL RESPECT,
— TRUST,
— COOPERATION, AND
— UNDERSTANDING.
IN PRINCIPLE, THESE FOUR SHOULD CONSTITUTE THE BASIC OF EVERY RELATIONSHIPL UNFORTUNATELY, THEY DO NOT. MOREOVER, THEY ARE EXTREMELY IMPORTANT IN AN EMPLOYER-EMPLOYEE RELATIONSHIP,THE EMPLOYER MUST SHOW RESPECT TO HIS EMPLOYEE (AND VICE VERSA), AND ONLY WITH A TRUSTFUL COOPERATION BETWEEN THE TWO THE BISINESS WILL BE SUCCESSFUL FOE THE MUTUAL BENEFIT OF THE TWO.
AND NOW TO THE QUESTIONS:
THE NEXT LESSON WILL FOLLOW SOON – WATCH OUT!
IN THIS COURSE, WE HAVE FIRST OF ALL LEARNT THE DIFFERENCES BETWEEN DEBT FINANCING AND EQUITY FINANCING. THE MAIN WAY OF DEBT FINANCING OCCURS IF YOU TAKE A LOAN FROM A BANK, THE MAIN WAY OF EQUITY FINANCIN OCCURS IF YOU TAKE AN INVESTOR – WHETHER PASSIVE OR ACTIVE – AS A PARTNER INTO YOUR BUSINESS.
THERE ARE SEVERAL ORGANISATIONS IN GHANA APART FROM BANKS WHICH GIVE OUT LOW-INTEREST LOANS – OR EVEN GRANTS – MAINLY TO START-UP BUSSINESSES. ON THE OTHER HAND, THERE ARE ALSO ORGANISATIONS OF SO-CALLED “ANGEL INVESTORS” THAT WOULD INVEST IN SMALL AND MEDIUM ENTERPRISES, ALSO FOR START-UP BUSINESSES.
THERE ARE ADVANTAGES AND DISAVANTAGES FOR BOTH FORMS OF FINANCING. ONE ADVANTAGE OF DEBT FINANCING IS THAT IS THAT IT IS MORE SHORT TERM THAN EQUITY FINANCING, ONE DISADVANTAGE – ESPECIALLY IN GHANA – IS A HIGH INTEREST RATE FOR LOANS. ONE ADVANTAGE OF EQUITY FINANCING IS THAT YOU DOM’T NEED TO PAY ANT INTEREST, AND THE RISK IS SHARED. ONE DISADVANTAGE IS THAT YOU GIVE AWAY PART OF YOUR BUSINESS, AS LONG AS THE BUSINESS EXISTS.
AT THE LONG RUN, WHETHER YOU PREFER DEBT FINANCING OR EQUITY FINANCING DEPENDS ON THE NATURE OF YOUR BUSINESS, AND ESPECIALLY ON YOUR OWN RISK PROFILE. WHETHER YOU ARE READY TO TAKE A BIG RISK OR YOU ARE A LOW-RISK TAKER, ONE THING YOU MUST DO BY ALL MEANS: YOU MUST ANALYSE YOUR INTENDED BUSINESS, WHETHER AS OBJECTIVELY AS POSSIBLE THE BUSINESS WILL BE SUCCESSFUL.
WE ALREADY LEARNT IN LESSON 2, NAMELY THE VALUE OF THE SHARES ISSUED BY A COMPANY; AND AS YOU USUALLY WON’T ISSUE ANY SHARES FOR YOUR SMALL OR MICRO BUSINESS, YOUR BUSINESS IT SELF IS EQUITY. THAT SAID, IF SOMEBODY INTENDS TO GIVE YOU MONEY IN THE FRAME OF EQUITY FINANCING, HE OR SHE WANTS “A SHARE” IN YOUR BUSINESS. “A SHARE” IN THIS CONNECTION MEANS NOT ONLY ONE SHARE (BECAUSE YOU DON’T ISSUE ANY SHARES OF YOUR BUSINESS), BUT IT MEANS “PART” OF YOUR BUSINESS.
HOW BIG THIS PART IS MAINLY DEPENDS ON THE AMOUNT OF MONEY THE FUTURE PARTNER WANTS TO PUT INTO YOUR BUSINESS, AND OF THE KIND OF BUSINESS YOU WANT TO ESTABLISH. USUALLY IT WILL BE AROUND 25% OF IT, BUT IT SHOULD ALWAYS BE LESS THAN 50%. THAT’S BECAUSE IF IF THE PERCENTAGE IS 50 OR MORE, YOU WILL LOSE CONTROL IF YOUR BUSINESS, AND THAT IS SURELY NOT IN YOUR INTEREST.
A PERSON WHO PUTS SEED MONEY INTO A START-UP BUSINESS IS CALLED AN “ANGEL INVESTOR”. ANGEL INVESTORS ARE EITHER PROFESSIONAL INVESTORS, OR THEY ARE FOUND AMONG FAMILY AND FRIENDS. THERE ARE TWO TYPES OF SUCH INVESTORS: EITHER THOSE WHO JUST PUT MONEY TO START A BUSINESS (OR, NOT LIMITED TO A START-UP BUSINESS, INTO AN ESTABLISHED BUSINESS), OR THOSE WHO ENGAGE THEMSELVES ACTIVELY IN THE BUSINESS BY GIVING ADVICE OR EVEN RUN A SECTION OF THE BUSINESS, LIKE, E.G., MARKETING.
AN EQUITY FINANCING AGREEMENT – JUST LIKE A LOAN AGREEMENT – IS WRITTEN IN FOUR PARTS:
WHO IS THE INVESTOR (NAME AND ADDRESS, CONTACT INFORMATION);
WHO IS THE BUSINESS OWNER (NAME AND ADDRESS, CONTACT INFORMATION);
WHAT IS THE BUSINESS TO BE INVESTED IN?
WHAT IS THE AMOUNT TO BE INVESTED?
WHAT IS THE PERCENTAGE OF THE BUSINESS TO BE GIVEN TO THE INVESTOR?
IS THE PERCENTAGE OF THE BUSINESS TO BE GIVEN TO THE INVESTOR LEGITIME AND FREE OF OBLIGATIONS (PAYABLE TAXES, ETC.);
DATE AND LOCATION OF THE ACQUISITION OF THE PERCENTAGE OF THE BUSINESS;
DISTRIBUTION OF LEGAL FEES;
TERMS FOR TERMINATION OF THE AGREEMENT?
ANY OTHER TERMS THE PARTIES TO THE AGREEMENT CONSIDER IMPORTANT;
SEEK LEGAL ADVICE TO FINALISE THE AGREEMENT (FEES SHOULD BE PAID BY THE INVESTOR, AS THE BUSINESS OWNER IS THE ONE WHO SEEKS FINANCIAL ASSISTANCE);
CHECK THE DRAFT OF THE AGREEMENT THOROUGHLY BEFORE SIGNING IT.
THE CHARACTERISTICS OF EQUITY FINANCING SHOW ITS ADVANTAGES AND DISADVANTAGES:
EQUITY FINANCINGIVES THE INVESTOR PART OWNERSHIP IN THE BUSINESS.
CAPITAL INVESTED IN THE BUSINESS IS PERMANENT; IT DOES NOT NEED ANY PAYBACK.
NO INTEREST MUST BE PAID ON THE CAPITAL INVESTED; HOWEVER, IF THE BUSINESS RUNS WELL, A DIVIDEND MUST BE PAID.
IN CASE OF THE BUSINESS GOING BANKRUPT, THE INVESTED CAPITAL IS THE LAST TO BE REPAID (AFTER ALL DEBTS).
AS THE INVESTOR OWNS PART OF THE BUSINESS, EQUITY FINANCING IS AT THE LONG RUN USUALLY MORE EXPENSIVE THAN DEBT FINANCING.
IF THE INVESTOR HAS EXPERIENCE IN THE BUSINESS HE OR SHE INVESTS IN, THERE CAN BE ASSISTANCE IN BUSINESS MANAGEMENT.
AS WE HAVE NOW LEARNT THE BASIC STRUCTURE OF EQUITY FINANCING, WE CAN COME TO THE QUESTIONS:
QUESTIONS
THE NEXT LESSON WILL FOLLOW AT THE BEGINNING OF NEXT WEEK.
IN THE LAST TWO LESSONS WE HAVE LEARNT ABOUT DEBT FINANCING ABD EQUITY FINANCING. NOW IT IS TIME TO CHECK SOME OPPORTUNITIES FOR START-UP AND MICRO, SMALL AND MEDIUM ENTERPRISES IN GHANA WHETHER THEY CAN BE OF BENEFIT FOR YOUR BUSINESS.
FIRST OF ALL, YOU CAN GO TO THE BUSINESS ADVISORY CENTER (BAC) IN YOUR DISTRICT. THEY CAN GIVE YOU ADVICE, AND IF THERE IS MONEY IN THE BUDGET, THEY MIGHT EVEB GIVE YOU SOME FINANCIAL ASSISTANCE.
THEN THERE ARE SOME INSTITUTIONS WHICH OFFER ASSISTANCE, BUT SOMETIMES WITH CONDITIONS WHICH FOR SOME BUSINESSES – ESPECIALLY THE MICRO ONES – ARE DIFFICULT TO FULFIL:
GEA CAN ASSIST IN FUNDING, DEVELOPMENT OF MICRO, SMALL AND MEDIUM ENTERPRISES, ETC.
FOR MICRO AND MANY SMALL ENTERPRISES, THE GUIDELINES ARE NOT EASY TO FULFIL. NEVERTHELESS, THEY SKOULD BE MENTIONED HERE:
Minimum requirements for the G&O Programme
HOWEVER, THERE ARE SEVERAL PROGRAMMES OFFERED BY THE GEA; THEREFORE, IT MIGHT BE OF BENEFIT FOR OWNERS OF MICRO, SMALL, AND MEDIUM ENTERPRISES TO LOOK INTO THESE PROGRAMMES. THE BUSINESS ADVISORY CENTER (BAC) IN YOUR DISTRICT CAN SURELY CAN SURELY HELP YOU WITH YOUR RESEARCH.
THERE ARE ALSO SEVERAL APPS TO DOWNLOAD ON THE INTERNET, WHICH OFFER LOANS FOR BUSINESSES. YOU SHOULD, HOWEVER, BE VERY CAUTIOUS WITH THESE OFFERS. MORE OFTEN THAN NOT, THERE WILL EITHER BE PROBLEMS WITH EXTREMELY HIGH INTEREST RATES OR WITH PRESSURE THEY MIGHT EXECUTE ON YOU, IF YOU GET PROBLEMS WITH THE REPAYMENT.
FURTHERMORE, THERE ARE GOVERNMENT-BACKED PROGRAMMES WHICH ARE OFFERED THROUGH COMMERCIAL AND RURAL AND COMMUNITY BANKS. IF YOU ARE LOOKING FOR A LOAN TO HELP FINANCING YOUR BUSINESS, THEY SHOULD VE PREFERRED COMPARED WITH THE ONLINE LOANS, BECAUSE
— THE INTEREST RATES ARE USUALLY LOWER, AND
— IN CASE YOU HAVE PROBLEMS WITH REPAYMENT, YOU CAN ALWAYS TALK WITH THE LOAN OFFICER IN YOUR FINANCIAL INSTITUTION TO FIND A SOLUTION.
OFTEN, THESE PROGRAMMES ARE TARGETED FOR LOCAL COOPERATIVES; SO, IT IS ADVISABLE FOR A YOUNG E ENTREPRENEUR TO JOIN SUCH A COOPERATIVE.
YOU MUST GENERALLY BE VERY CAREFUL WITH FINANCING YOUR BUSINESS THROUGH A LOAN. THE AMOUNT OF LOAN YOU TAKE SHOULD NEVER BE MORE THAN 60% OF THE CAPITAL YOU ALREADY HAVE. IF YOU DON’T KEEP TO THAT RULE, YOUR BUSINESS IS SURELY CONDEMNED TO FAILURE.
AS ALREADY MENTIONED IN AN EARLIER LESSON, IF TAKING A LOAN FOR DEVELOPING YOUR BUSINESS IS TOO MUCH OF A RISK FOR YOU, YOU CAN LOOK OUT FOR AN “ANGEL INVESTOR”.
THE GHANA ANGEL INVESTOR NETWORK (CHECK THEIR WEBSITE UNDER Gain – Ghana Angel Investor Network )
COULD BE THE ORGANISATION YOU ARE LOOKING FOR. YOU CAN FIND A LINK FOR FUNDING APPLICATION THROUGH TIS LINK”:
YOU CAN ALSO CHECK THEIR PROGRAMMES FOLLOWING THIS LINK:
Ghana Angel Investors Network (GAIN) – Impact Investing (impactinvestinggh.org)
AND A PERSONAL HINT TOO: FROM FEBRUARY, 2025 ON RECKLING ENTERPRISE THROUGH ITSINVESTMENT COMPANY C.K.J. RECKLING STAR WILL OFFER TWO FINANCIAL ASSISTANCE OF GHC 3,000 EACH TO MICRO BUSINESS START-UPS FOR A 25% SHARE IN THE BUSINESS. INTERESTED ENTREPRENEURS-TO-BE SHOULD COnTACT US THROUGH THE EMAIL ADDRESS recklingenterprises@hotmail.com FROM BEGINNING OF JANUARY, 2025 ON. FURTHER CONDITIONS WILL THEN BE DISCUSSED WILL THEN BE DISCUSSED WITH THE APPLICANTS.
AND NOW TO THE QUESTIONS:
THE NEXT LESSON WILL FOLLOW AT THE BEGINNING OF NEXT WEEK.
IN THE PAST, I HAVE WRITTEN SEVERAL TIMES ABOUT THE NECESSITY OF FINANCIAL LITERACY, AND THOSE OF YOU WHO FOLLOW RECKLING ENTERPRISE AND ITS BLOGS, WILL SURELY REMEMBER THAT..
I CONSIDERED IT IMPORTANT TO RENEW MY THOUGHTS ABOUT THIS MATTER, BECAUSE EVERY DAY I SEE THE STRUGGLE THAT ESPECIALLY PEOPLE IN THE INFORMAL SECTOR HAVE TO KEEP THEIR BUSINESSES ALIVE.
MOST SMALL BUSINESSES COLLAPSE IN THE FIRST YEAR OF THEIR EXISTENCE, AND IN MOST CASES, IT IS BECAUSE OF FINANCIAL REASONS. THE BUSINESSES ARE EITHER UNDER-CAPITALISED, OR THE BUSINESS OWNERS JUST “EAT” THE CAPITAL OF THEIR BUSINESS.
LET;S MAKE IT CLEAR: YOU CAN ONLY RUN YOUR BUSINESS SUCCESSFULLY IF YOU DON’T TOUCH YOUR WORKING CAPITAL. YOU MIGHT TAKE SOME OF YOUR NET PROFIT FOR CONSUMPTION (NET PROFIT EQUALS GROSS PROFIT MINUS ALL EXPENSES), BUT ONLY PART OF IT. THAT IS BECAUSE YOUR BUSINESS SHOULD NOT ONLY MOVE ON THE SPOT. IT SHOULD ALSO MOVE FORWARD, AND IT CAN ONLY MOVE FORWARD, IF THE WORKING CAPITAL INCREASES. YOU MUST SEE TO IT THAT YOU CAN ALWAYS OFFER MORE GOODS OR BETTER SERVICES TO THE PUBLIC.
BECAUSE THERE IS A LOT OF MISUNDERSTANDING ABOUT RUNNING A BUSINESS – ESPECIALLY THE FINANCIAL ASPECT OF IT – RECKLING EBTERPRISE HAS DECIDED TO OFFER THE GENERAL PUBLIC A BASIC COURSE ON FINANCING. THE COURSE IS DESIGNED FOR BEGINNERS IN THE AREA OF FINANCING, WITH STRESS ON ENTREPRENEURS IN THE INFORMAL SECTOR OF THE ECONOMY.
ONE THING MUST BE SAID BEFORE WE START: THE PURPOSE OF THIS COURSE IS NOT TO EDUCATE PEOPLE ABOUT THEORIES OR DIFFERENT MODELS OF FINANCING; THE PURPOSE OF THIS COURSE IS TO GUIDE THE LEARNER TO FIND THE BEST WAY TO FINANCE A START-UP BUSINESS AND TO RUN AN EXISTING BUSINESS. THE USER OF THIS COURSE WILL LEARN TO UNDERSTAND THE DIFFERENT ROLES WITHIN A FINANCING AND ECONOMIC FRAMEWORK. NOW LET’S START:
THIS COURSE CONTAINS THE FOLLOWING LESSONS:
EVERY LESSON IS SEPARATED INTO THREE PARTS. THE FIRST IS THE TEXT, OF WHICH YOU SHOULD UNDFRSTAND THE CONTENTS.THE SECOND PART CONSISTS OF UP TO FIVE QUESTIONS ABOUT THE CONTENTS OF THE TEXT; YOU SHOULD DISCUSS AND ANSWER THESE QUESTIONS. IN THE THIRD AND FINAL PART, SEND YOUR ANSWERS TO RECKLING ENTERPRISE. WE WILL CHECK THE ANSWERS AND, IF NECESSARY, CORRECT THEM. WHEN YOU HAVE COMPLETED THE LESSONS SUCCESSFULLY, WE WILL SEND YOU A CERTIFICATE FOR COMPLETION.
NOW LET’S START WITH THE DEFINITION OF FINANCING:
BEFORE WE START DISCUSSING THE SUBJECT, AND HOW YOU DEAL WITH IT IN THEBEST WAY, WE MUST FIRST OF ALL FIND OUT WHAT FINANCING IS. THEREFORE, IT IS BEST TO START WITH THE DEFINITION OF FINANCING:
Financing is the process of providing funds for business activities, making purchases, or investing. Financial institutions, such as banks, are in the business of providing capital to businesses, consumers, and investors to help them achieve their goals. The use of financing is vital in any economic system, as it allows companies to purchase products out of their immediate reach. (COURTESY OF INVESTOPEDIA)
WE SEE FROM THE DEFINITION THAT FINANCING IS NOT A ONE-TIME EVENT, BUT A PROCEDURE. AND THIS DOES NOT ONLY APPLY TO THE INVESTMENT OF THE MONEY INTO THE BUSINESS, OR STARTING A NEW BUSINESS WITH IT. IF YOU ARE NOT LUCKY AND RECEIVE THE MONEY FROM FAMILY MEMBERS OR FRIENDS AS A GIFT, WE REALISE THAT THE ACQUIRING OF THE MONEY IS ALSO A PROCEDURE. AND THIS ACCOUNTS WHETHER TOY CHOOSE DEBT FINANCING OR EQUITY FINANCING (MORE ABOUT THE DIFFERENCES BETWEEN DEBT FINANCING AND EQUITY FINANCING IN ONE OF THE NEXT LESSONS).
WE ALSO SEE THAT FINANCING IS THE BASE OF EVERY ECONOMIC ACTIVITY.
Economic Activity is the activity of making, providing, purchasing, or selling goods or services. Any action that involves producing, distributing, or consuming products or services is an economic activity. Economic activities exist at all levels within a society. (DEFINITION FROM BING)
YOU SEE THAT NEARLY EVERYTHING YOU – OR OTHER PEOPLE – DO IS AN ECONOMIC ACTIVITY. IF YOU HAVE YOUR BREAKFAST, YOU ARE INVOLVED IN AN ECONOMIC ACTIVITY. THAT’S BECAUSE YOU CONSUME WHAT OTHER PEOPLE PRODUCE (ALSO AN ECONOMIC ACTIVITY).
AND ALL ECONOMIC ACTIVITIES NEED MONEY. WHETHER PEOPLE PRODUCE, DISTRIBUTE, OR CONSUME ANY GOOD OR SERVICE, THEY NEED MONEY TO DO IT.
IF YOU BUY SOMETHING, YOU FINANCE THE PURCHASE FROM YOUR INCOME, OR, MOSTLY IN CASE OF LARGER PURCHASES, THROUGH A LOAN.
AND, AS THE LAUNCHING OF A BUSINESS – AND THE RUNNING OF THE BUSINESS FOR THAT MATTER – IS CERTAINLY AN ECONOMIC ACTIVITY ACCORDING TO THE DEFINITION MENTIONED ABOVE, IT SURELY NEEDS FINANCING (EVEN IF YOU HAVE THE MONEY FOR IT UNDER YOUR BED OR BETTER, IN THE BANK).
HERE IN THIS COURSE, WE ARE NOT TALKING ABOUT BUSINESSES WHICH ARE FINANCED WITH MONEY THAT YOU ALREADY HAVE, BUT WITH MONEY FROM DIFFERENT SOURCES. THESE SOURCES ALSO GIVE OUT THE MONEY AS A BUSINESS, WHICH IS ALSO AN ECONOMIC ACTIVITY. MORE TO THAT IN THE NEXT LESSON.
THIS ECONOMIC ACTIVITY FINANCING IS, ACCORDING TO THE INVESTOPEDIA DEFINITION “VITAL FOR THE ECONOMIC SYSTEM…”
LET ME GIVE YOU AN EXAMPLE: IF THERE WOULD NOT BE ANY FINANCING, THE AUTOMOBILE INDUSTRY WOULD NOT BE ABLE TO SELL AS MANY CARS AS THEY DO, BECAUSE NOT MANY WOULD-BE OWNERS OF A CAR HAVE THE MONEY TO PURCHASE A CAR RIGHT AWAY. THEREFORE, THEY NEED FINANCING.
I THINK THAT NOW YOU KNOW ENOUGH WHAT FINANCING IS; LET’S GET TO THE QUESTIONS:
QUESTIONS
NOW ANSWER THE QUESTIONS, IF POSSIBLE WITHOUT LOOKING AT THE TEXT.
THE NEXT LESSON WILL FOLLOW WITHIN ONE WEEK.
