Finance is an important aspect of any business. No business can be established or move forward without it, so, where there is no finance, there is no business.
Studies have shown that an alarming 80% of SMEs in Nigeria fail within the first 18 months of starting! Other studies have revealed that 80% of these businesses that failed failed due to issues arising from financing.
The leading cause of high startup mortality rate is not the lack of customers or innovative business ideas or bad location, but poor access to finance. – Nairametrics.
Apart from the limited access SMEs have to funding from fund providers, many SMEs have in place poor corporate governance structure that has led to the death of their businesses. Many entrepreneurs simply do not have the basic understanding of what it means to run a successful business.
Listed below are 5 simple but powerful corporate governance insights to make your small fashion business more attractive to banks, angel investors, venture capitalists, private equity firms and donor agencies.
Corporate Governance Insights To Attract Funds For Your Fashion Business From Fund Providers
One mistake many SMEs make is keeping company and personal finance together, a practice that limits business growth, development and scalability. Failing to separate these two means that company finance might be put to personal use and vice versa.
Keeping these two together means that it will be difficult for fund providers to isolate and analyse financial records and key performance indicators like revenue, expenditure and income. This in turn limits, to a large extent, the business’ ability to attract fund.
If the financial performance of your business is difficult to analyse because your personal and company transactions are muddled up, it becomes red flag.
2. Document All Transactions:
In running a fashion business, many times clients will make cash payments rather than online transactions. When this is the case, it is important that you document every transaction manually because they won’t be reflected on your bank’s financial statement.
Here, good bookkeeping practices come into play because you want to have a sales book to record transactions in. If this is too stressful for you, an efficient bookkeeping app will come in handy in making all the transactions of your business clear for investors and potential creditors to analyse.
3. Pay Yourself a Salary:
Having financial discipline is important in business, but what happens when you need to get something done and you have no money to use? Yes, your business was set up to provide for your needs, but you need to put structures in place for this.
Structures in the sense of a salary for you. Paying yourself a salary from the profits of your business is important to avoid the temptation to dip your hand into company purse for personal use. Before determining your salary, it is best to analyse your business’ performance over a 6 month to 1 year period first so you don’t shoot yourself in the foot.
Keeping your salary and that of your employees below 50% of the profit your business makes is wise. If any need arises that requires for your to borrow from the company, make sure you set up a plan to pay back so you don’t owe the company. Doing this will help you plug any leakages from the company’s account.
4. Learn How to Interprete a Financial Statement:
Data is king in today’s world. As a busines owner, if you cannot interprete, understand and leverage the data your company is producing then you are at risk.
Your data is your most critical asset as an entrepreneur. You need to know how to leverage on that data to build your business. If terms like balance sheet, assets, liabilities and cash flow are too much for you, then it’s time you take a crash course in business accounting.
Knowing how to do basic accounting is your duty as an entrepreneur and is an essential skill for doing business successfully.
5. Take your Business Online:
The world is a global village as the internet has connected everyone in the world together. As a fashion entrepreneur, if your business is not yet online then you’re missing out on a lot.
Having a strong online presence for your fashion business will expand its reach, expose it to a larger market, make it more accessible to existing customers and build its credibility. Fund providers will most likely not invest in your business if it doesn’t have a strong and reputable online presence.
Being a fashion entrepreneur can be trying and tough with so much competition out there. Little changes you make can give you an edge over your competitors and attract investors to your brand.
Applying these 5 steps to your fashiom business will help you build a solid corporate governance structure and keep you standing out of the crowd. Why not try them today?
In which ways have you been able to attract funding to your fashion business as a fashion entrepreneur? Please share them with us in the comments section below. Don’t forget to hit the link button if you enjoyed this read 😁.