A word of caution
By Allon Raiz
It’s not always possible, particularly in the early stages of a business, to be as focused as you would like to be. I am a realist and I know, from my own experience, that there are times when cash is so short that any business is good business.
As entrepreneurs, we all started building a certain type of business based on an idea we had. And, after spending hours working on the business and plotting it out, there are instances when the fancy Excel spreadsheets we design do not equal reality because we very often underestimate the financial burn that our businesses will create. As a result of this, we have to become quite creative in trying to find other sources of income to supplement the income required by the business and, by extension, ourselves.
I have come across many entrepreneurs who were running small business that were not making sufficient sales and, when an opportunity arose for them to do some consulting work based on their experience from a previous life or job, they leaped at the opportunity to make some money.
I met Thembi, an enthusiastic young entrepreneur, a few years ago and she told me how she had left her marketing career in the corporate world to launch Thembi’s Make-up Emporium. Running her own business hadn’t gone as smoothly as she had initially projected and she struggled with cash flow in the startup phase. So much so that, when a friend asked her if she would help analyse and develop a strategy for their company’s marketing department, Thembi agreed to help out. She needed the money and decided to pursue the consulting work.
Word of mouth spread and two months later another person contacted Thembi about doing some marketing consulting work for them. Thembi was still struggling with cash and agreed to do the next consulting job to get more money, and then the next one and, as a result, completely neglected her make-up business.
Over time Thembi ended up becoming a marketing consultant and never followed her dreams of opening up her new make-up business. The way you as an entrepreneur register the cash you receive interprets whether the additional business income is a means to an end or the end itself. Thembi invoiced all the consulting work she was doing under her own name and lived off that money. If she had invoiced clients for the consulting work she was doing under the name of Thembi’s Make-up Emporium, putting the money she was earning into that business and drawing a regular salary from it, she would have been far more likely to have built her business.
Instead, she made the common mistake of invoicing directly as Thembi, putting all the cash in her pocket. If she had invoiced clients for her consulting work and drawn an appropriate salary, she would have more likely reached a point where she would have built up her make-up business enough so that she would no longer have had to take on consulting work.
A temporary loss of focus is alright but be careful that it does not divert you from your original path. Quick and easy money is a great temptation. If you see the additional income as a means to an end, you will not lose focus; if additional income becomes the end in itself, you mind find yourself in a completely different business!