Image: Shutterstock
As you start your entrepreneurial journey, there are a million things you need to think about, plan around with and strategise with. Among these is one of the most important aspects of this journey – finance. While entrepreneurship is the buzzword these days, it is difficult for entrepreneurs to balance their personal savings and investments with the demands of their venture.
Balancing Personal And Professional Finances
As an entrepreneur, you often end up putting all your money into your venture to help start it off and maintain it in the coming years. But, in doing so, you can’t guarantee your personal – your own and your family’s – financial security. So you need to ensure that you manage your money in a way that you get enough capital for your venture and also maintain regular savings. “Separating personal and business finances is crucial for an entrepreneur and can be achieved by setting well-defined and differentiated financial goals for their personal as well as business needs,” says Zohra Hajiani, managing partner, Validus Wealth. “This helps establish the right balance between their finances while achieving both their personal as well as business financial goals.” She says that entrepreneurs should consider diversifying their investments to protect their financial future, as having all their eggs in one basket by only investing in their own business exposes them to significant risk if the business is in a downturn.
Image: Shutterstock
Investment Options
“Before investing, one must consider their investment horizon, risk appetite and financial goals,” says Hajiani. Someone who then wishes to invest in the equity markets with limited capital can do so via a Systematic Investment Plan (SIP) in an equity mutual fund scheme by investing as little as `100 per month, she suggests. She adds that there are several tax-saving investments to help future financing requirements of a new venture, like Equity Linked Savings Scheme, Unit Linked Investment Plans, Tax- saving Fixed Deposits and Public Provident Funds (PPF).
Managing Finances
Any new venture would take a certain time to break even before generating positive cash flow, depending on the size and nature of the venture. “One should plan and set aside the required cash outflow, based on pre-agreed commitments and personal needs, before such a break-even period with sufficient buffer,” notes Hajiani. If one is considering taking a loan, she advises that they consider customer-focused ones. “Lower interest rate offerings and flexibility in repayments are also very important for a business and should be considered as well,” she adds. Look for lenders or banks that have a wide range of products to choose from as well as ones that have a convenient digital platform with useful tools. Haziani advises entrepreneurs to be “aware of where every rupee is coming from and where it is going, which will enable you to set financial goals as well as achieve them smartly.”
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