Money blunders are where grand visions go to die. How can entrepreneurs avoid them?

Wednesday May 10, 2017 , 5 min Read

Most of us who form the burgeoning working class in India feel deep down that entrepreneurship is the last mile in freedom. The wonders of being your own boss, making your idea come to life, and living to see the fame and glory that follows – that seems to have become the new Indian middle class dream.

In our increasingly fractured, hard-to-navigate lives that need all the help we can find, from apps that makes lives easier to social enterprises that make the world a better place, it is the power of ideas and faith that have kept us going.

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But often, in the whirlwind of finally quitting that soul-killer of a cubicle job and building on the dream a step at a time, it is easy to lose sight of financial prudence. And it is not just our fault. Thanks to the intense conditioning of pre-liberalisation years, money continues to get a bad rap even as so many of us generally work harder than any generation before us to make some of it. Nawazuddin Siddiqi, the quintessential Alice In Wonderland in the big bad world of affluence and power in Bollywood, put this conditioning to words when he said in a recent interview that he finds it pathetic when actors start to talk money and collections. Even Dilip D'Souza's review of Barkha Dutt’s This Unquiet Land wonders if we were a better country before liberalisation. The answer in my opinion, like most things in life, is yes and no.

While I understand these sentiments very well (so well!), I am just not sure if anyone can afford to be that callous about money, definitely not entrepreneurs who hire people and buy services or actors who have the salaries of an entire industry riding on their shoulders. It is only a matter of accountability.

Yes, creativity and vision must win, and an organisation’s culture can’t be measured in terms of pennies and cents alone. But money is what keeps the wheels turning. It is not hard to see that, is it?

So how can entrepreneurs avoid blunders relating to money and finances? It is not as hard as one would imagine.

Find a financially prudent partner

Not everyone understands money. I know this from personal experience. Especially when it comes to our own ideas and vision, it is hard to be objective. Therefore it becomes important to find an equal partner in your business, someone who can balance the objectivity when it comes to balance sheets and will not be afraid to tell you when you are about to make a mistake.

Create an emergency fund and forget about it

Because really, if push comes to shove, the last thing you want to do is lose credibility by not paying, or firing, the people who have worked hard with you to help you achieve your dreams – business partners and employers. Stayzilla and their founder's reputation following the advertising agency debacle will remain a grey area till we know both sides of the story. The value of a strong contingency plan to avoid bad reputation or worse, shutting shop, is extremely underrated.

Don’t mix the personal with the professional

The power of vision is such that entrepreneurs often put their lives on hold for their ideas. Self-funding is not a no-go zone. But it is important to separate personal finances with the business ones. Entrepreneurship is already a high-stress, high-risk endeavour. Add the stress of dwindling personal finances when you have a family to support to the mix and it all becomes much harder to navigate, hard enough to contemplate quitting.

Secure enough working capital before you take the plunge

Sure, funding is one way to do it. But it is no longer as easy as it used to be. Another way is to ensure that you have at least six months to one year’s worth of working capital in savings. Raise it before you need it.

Don’t rely completely on debt

Yes, banks have made it easier to take a loan to start a small business. It is an easy temptation. But that loan needs to be repaid even if your business fails, as 75 percent of even venture backed startups do. Put some savings into the mix and apply prudence as far as debt is concerned.

Clearly, it does take more than a great idea to build a unicorn startup or even just a moderately successful one. Idealism is great, but not always practical. Focus on cash flow just as much as you would on the product. The two don’t have to be mutually exclusive.

Here are some more reads if you are toying with the idea of taking the plunge or working to perfect your idea before you do.

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