To be able to raise more capital to fund your business pursuit, the first business you set up should not necessarily be your main business. Your first business could be petty trading in consumable items varying from clothing, food items, electronic gadgets etc. You can carry out your petty trading at church (or your place of worship), workplace or in front of your house.
There is no real business school like a business you set up yourself. With your own business, you can learn quickly about what works and what doesn’t work, as you do your utmost to manage your cash flow.
Cash flow is simply money that comes into your business from the sale of products or provision of services. It is also money that goes out of your business in the form of expenditure or expenses. Efficient management of cash flow in any business will ensure its rapid growth.
A business has positive cash flow when it uses its money prudently to make more profit. Negative cash flow is attributed to lack of proper financial management in a business which results in financial loss.
For example, let’s assume you run a booming T-Shirt retail business. Averagely, you make daily sales of GHC 300. And out of your daily sales of GHC 300, you make the following daily expenses: GHC 100 on nightlife and GHC 100 as housekeeping expenses each day.
These bad liquidity practices in your business (thus, making expenditures which do not generate profits for your business) amount to negative cash flow.
If your business is run in this manner, you will soon have to fall on external funding to support your operations no matter how much cash or inventory (stock) your business has.
On the other hand, if you calculate your profits each day, and for instance, you invest your profits wisely in your sales strategy in order to induce more sales resulting in more profits, your business will be making positive cash flow which will result in business growth.
So you can actually transfer your savings from your day time job into setting up and growing your own business on the side.
Your small business venture can generate more profits than a huge car rental company. It is not the size of a business that makes it profitable but the efficient management of cash flow.