A new company is going wrong
Thank you for the beautiful course outline.
l live in Kenya and l started a little business of supplying local schools with waste bins. At the beginning, I was so excited and l did well because every school had a problem of waste management.
I bought the plastic bins with covers then l improvised a metal ring for a handle and a metal stand with a caption for peace club in schools. ie a peace message on the stand. As you are aware, political conflict is common here. This sold well for a year. I opened a bank account and made delivery notes and receipt for this business.
After 1 year, l got money to buy myself a parcel of land 0.1 ha.
Now l have no capital to continue with the business. Where could l have made a mistake? I feel l can still do well in the same business but probably l lack skills
Please advise
Answer
You have done very well to make a success of your business in the first year. Many of us would be excited to be able to do that. Well done.
I think the mistake is in withdrawing your capital. Businesses need capital to work with and you took yours out too early. For most new businesses, the owners do not take any money out for quite some time, unless the business is able to thrive without new capital.
In basic Economic theory terms, there are three Factors of Production -money, materials and labour. If you do not have the money, you can’t purchase materials or pay the labour costs.
You need to define what your business strategy is. Perhaps buying the land is a good investment for a property company, but not for a waste management company.
You need money to work with now. Do you have a business plan and a cash flow forecast?
We cover many aspects of starting a business in our first module. perhaps you would benefit from rereading that?
So I am sure that your business is viable, and you could probably grow it nicely. But you need to look at it from a strategic point of view and use the tools I have given you, particularly the business plan and cash flow forecast.
Without them it is difficult to see the overview of the business. With them you can see what is required in terms of resources and cash and make appropriate plans. So, produce the reports and talk to banks and investors to raise capital.
You are in a strong position in that you can show a good years trading. Institutions may take a dim view of you withdrawing the capital so early, and ask you to invest again yourself.
Perhaps you need to sell the land for now, -you may even have made a profit on that transaction.
Make sure you are keeping the records required by law to produce accounts and pay taxes if appropriate. You may need to engage an accountant, and allow for the cost of that in your planning
Again , congratulations on your first years trading and good luck for the future.