When it comes to owning a small business, millennials in South Africa are in a committed relationship. According to the Millennial Survey 2019 from Deloitte Southern Africa, 58% of South African millennials have the ambition to start their own business, compared to 38% of their global peers.
However, if not managed properly, business finances can be a roadblock to future success. Many millennials who are just setting out on their own for the first time are still learning about business finances and rely on a wide net of resources — including family, friends and other business owners — for financial success.
So, how can we help today’s millennial business owners succeed and have a comfortable future? Seasoned entrepreneurs can offer up proven financial advice, including these five tried and true tips.
5 financial tips for millennial business owners
Pay attention to your credit.
Seek out a financial advisor.
Use a financial management app.
Embrace a personal spending freeze.
Establish Plan B.
Let’s look at each tip in more detail.
Pay attention to your credit
Many millennial entrepreneurs face major obstacles when it comes to traditional business banking. Their age, business size and annual revenue (or lack thereof) may prevent them from qualifying for financial assistance. Hence, using a personal credit card may be one of their few options.
After a couple of years in business, these same millennials will be able to return to financial institutions a little older and wiser, with bigger companies and some earned revenue on the books. But, returning and seeking a loan with outstanding debt on a personal credit card isn’t a good idea.
New millennial business owners need to make sure they make their monthly payments so their credit is strong. Potential borrowers who have some history of being able to pay off or pay down debt will have better luck with the banks than those who carry a high balance.
Seek out a financial advisor
Most successful small business owners depend on the advice of financial professionals to make good financial decisions for their business. If you have enough within your budget to bring in outside resources for help, go for it. Do your due diligence to find accountants and tax practitioners who have worked with businesses similar to your own.
If you’re running a limited company, you will need an accountant to do your annual financial statements. If you’re running as a sole proprietor, a tax professional’s advice will still be invaluable. They’ll know exactly what you’re going through and will be able to provide the best possible assistance in keeping your business financially sound.
Use a financial management app
Need a little extra help managing your business’s finances but don’t have enough within your budget for professional assistance? Try out a free app, such as Goodbudget or 22seven. Goodbudget is budgeting software based on the envelope method. You make envelopes for all your spending categories – rent, groceries, eating out, business costs, etc. After that, you set aside money in each envelope. It’s a way to plan your spending instead of just tracking it. 22seven is a free budgeting and investing app from Old Mutual. The app helps you budget, track your spending on all your accounts and invest for your life goals.
Related: Great apps for small business owners
Embrace a personal spending freeze
In the early days of a new business, every penny counts. Now is not the time to spend frivolously on yourself. Instead, freeze your personal spending habits to save money. Keep in mind that a freeze isn’t about giving up all small pleasures, but rather cutting costs in creative ways. In place of going out for coffee with a potential business partner, go for a walk together, for instance. This keeps copious coffee outings from adding up.
Establish Plan B
No matter how prepared you might be, not every start-up makes it to the five-year mark. If the business fails, what happens next? Outline and establish a plan B so the worst-case scenario doesn’t completely blindside you. If one business doesn’t work out, it doesn’t mean you can’t start a new one. Always start a business that interests you and isn’t created just for the money. Be creative, think outside the box, and be willing to work hard to continue to take the relationship you have with your business to the next level.