Financial Tips to consider when Starting a Business in Kenya

Financial Tips to consider when Starting a Business in Kenya

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Starting a business can be very challenging if you do not have your financial game right. Growth of the business is greatly determined by how well you manage your finances and what how well you make your financial decisions.

With the many challenges around starting up a business in Kenya, the pivotal one is the financial. As an entrepreneur, you must try to minimize financial mistakes and draw lessons from any mistake made.

Sources of Finances for your Startup

Financing your startup is a key aspect of your business actually starting up. You can look into different avenues to finance your business in Kenya. Some of these financing sources include:

  1. Your own investment – In most cases, this is the common source of finance. Your personal savings that you can drive into the business to kick-start it. You are lucky if you can get your savings to cover all the financial needs of your startup. You can also use your personal assets to add up.
  2. Friends and Family Financing – This can also be a great source of financing depending on your relationship with the friends and family and the terms you agree to. Some might just boost your finances while others may expect that you pay them back after a period of time.
  3. Loans from Lenders – You can also get access to debt financing from different lender who will be willing to finance your startup with the aim of profiting from the debt repayment. Be careful about the repayment terms and make sure that you will be able to pay back the debt timely. It can be better if you seek this financing from institutions that focus on startups and have flexible schedules for startups to repay the debts.
  4. Angel Investors | Venture Capitalists | Business Incubators – If you know your business has the potential to grow fast and the idea is sure to make invaluable returns, it is worth looking into equity financing from external sources. Terms may be different, but, in most cases, the financiers will require a stake in your business.
  5. Government Grants and Subsidies – The government of Kenya has various programs that support businesses with grants and subsidies. Especially for women and youth, you can take advantage of these grants and subsidies to get capital for your startup. An example of this is the Youth Enterprise Development Fund.

6 Crucial Financial Tips for a Startup

Let us dig into these crucial financial tips that will help your startup sail through the challenging initial stages.

Business Financing Tips Kenya

#1 Manage your Cashflow

The main reason why most of the businesses that are just starting up tend to fail is because they run out of funds to sustain the business. Cashflow management is very crucial and as a startup owner, every shilling counts.

You will need to trace the source of every shilling and equally be mindful of everywhere the shilling goes to. If you are not aware of the cashflow, you are risking your business. You might have a brilliant business idea, but if you fail in cashflow management you will definitely run out of funds. Without funds, failure is imminent.

#2 Monitor your Expenditure

You always want to keep your expenditure on the low. When starting up, you will find that there is always something that the business needs and money is required. Hiring an accountant to check on the books might be a bit costly.

You will have to play accountant for the better part. Therefore, you might want to look for an accounting software that can help you monitor and regulate your expenditure. If something is not absolutely important, do not spend a dime on it.

Accounting will be a bit simpler during the startup phase. Doing it yourself will even help you understand the business better and make things easier for you when you get to hire an accountant. However, do not be shy to consult your friends who are in the field of accounting. This will keep you on track, especially on matters tax and filing of returns for the business.

#3 Set Financial Goals

Dreams get real when you start breaking them down into goals. As much as you may want to compete with the likes of Safaricom and other financial giants in Kenya, you need to break down your financial goals.

Create financial milestones that you need to achieve over time. Make targets that are attainable over periods of time and make sure they are measurable. Break down into monthly goals, weekly goals and even daily goals.

Constantly compare with returns so that you can readjust your strategies to ensure you meet the goals. Achieving these short-term goals will constantly motivate you into achieving your business’ long-term financial goals.

#4 Manage your Expectations

Businesses are challenging to start. There is no way to project how your business will fare. So, if you are currently employed or have a source of income, do not quit to run the business. Always expect the best with your business, but also be ready for the worst.

Always set aside some savings in case you may need to bail your business out. When you start making some money, always find ways of saving some amount because you can never be too sure about your future.

You can join a chama where you save some amount every month or week. You can also consider joining a sacco and start saving. This can also come in handy when you want to expand the business and you might require a business loan. However, it is important that you join certified saccos and microfinance institutions so that you do not end up losing your hard-earned money. Avoid pyramid schemes and MLMs.

#5 Time Management

How you spend your time will translate to how much you make. It is true that time is indeed money and you need to spend yours wisely. Plan your day well and make sure you carry out the duties you allocated yourself to the business.

Try as much as you can, to get rid of distractions that might cost you time/money. If you do not need your phone during the business hours, keep it aside and focus on the things that will impact your business positively.

#6 Optimize Customer Acquisition

When starting a business, it is always a learning curve. Customers are the backbone of your business and therefore it is important that you learn how to acquire customers and how to make your customers come back for more.

Make sure you identify the different customer acquisition channels. Use channels that require less expenditure, but have great returns. When you learn how to optimize customer acquisition, your business will be on the fast track to success.

Startup Finance Tips Kenya Business

#Bonus: Are you on the Payroll

While you put your blood, sweat and tears in the business, do not forget to pay yourself. An occasional pat in the back is not going to put food on your table. Make sure your business affords to pay you so that you can also live comfortably as your business grow.

However, be careful not to overpay yourself, entrepreneurship requires sacrifice.

We hope these financial tips we have shared will impact your startup positively and with much discipline, you will get returns. Do you have any more financial tips for startups in Kenya? Share the financial tips in the comment section below.

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