Hi Waceke. I follow your column regularly and I would like an honest answer about entrepreneurship. Can you really be financially free as an entrepreneur? Some of my friends have gone into business and I see them really struggling. They cannot even afford lunch the way they used to. This really scares me and in my opinion the ones that have made it are much fewer then the ones still hustling. Please advice. Betty
I received this extremely honest question on email and had to share it. The quest for financial freedom can stop people from pursuing entrepreneurship and at the same time it is also the same thing that motivates people to get into business. The potential financial challenges keep people in their comfort zones and the potential upside propels others forward. It’s no surprise that an entrepreneur at some point will face challenges with money. Many of us do and continue to tear hair out when it comes to finances in business. But there are others who seem to have this freedom. So where does this financial freedom come from? Can we help Betty? Her concerns are valid. When most people think about financial freedom, they relate it to money in the bank and a great lifestyle. That’s what Betty is questioning. However as I and many other entrepreneurs have learnt, that’s the end result of a process. Financial freedom starts way before that. With your mindset and relationship with money. Let’s imagine you only have 200 shillings to your name. You left your nice job with regular income. Hook, line and sinker you bought into the pros of starting a business. You rock up at the ATM one day and that’s all you have. What will you do? It’s moments like this that people contemplate suicide. This moment once happened to me. I didn’t contemplate suicide but I did try to bargain with God to zap me into heaven. However you do eventually get away from suicidal thoughts and start figuring it out. What you then realize in the process is that money does not define you. You may have two hundred bob but you have a brain that can think, you have an idea that you can take the first step on and you discover in that moment of desperation that you have abilities that were dormant. This is mental financial freedom. When money is not your identity or sense of personal worthiness. You don’t feel and act inferior because of the size of your wallet. You don’t really care that you can’t go out for lunch and you have no problem admitting you can’t afford it. On the flip side you also don’t act superior when the wallet fattens. Too many of us have our identities mixed up with the amount of money we have or don’t have and it limits us. Entrepreneurship has a way of straightening things out as you will go through peaks and valleys and you cannot afford to have different personalities for each stage.
Many entrepreneurs who have stuck it out will tell you they don’t do what they do for money. I’m not saying paying bills is unimportant but there’s got to be more than money to keep you from jumping of a cliff during the challenging times. That’s another extremely liberating aspect. You have an ability to dream, and a right to have a dream that’s bigger or more important to you than money. Many investors are attracted to people because of the vision they have not just the financial targets they set. Entrepreneurs never know how that vision will be achieved and/or how to get the money to achieve that vision. They dream anyway and take the first step. Your business should not simply be a money making tool for your current lifestyle or it will always be limited to your lifestyle. So if you remove money from the equation, why else do you want to run a business? Is there some form of impact you want to have, is it more control over your time, is it legacy? No one can define it for you. The financial freedom comes in understanding that money cannot be the objective for everything. As an entrepreneur you will have to look at the bigger picture some times and forsake short-term financial comfort. As a start up, to build your profile you will give up the huge profit margins. You may be paying everybody else but yourself at some point. You may have to discount a service heavily for the longer-term opportunities that partnership will present. You cannot be blinded by money. And lastly the tangible financial freedom that we all want and is a favourite topic in our entrepreneurship program. Money in the bank. Betty, it is possible and it is not for the chosen few. We all want that. When you have the right balance with money and a vision stronger than just yourself you tend to persevere through the challenges and put in the right resources to support that vision. This will mean that eventually you create structures in this business that will make it run even without you being there. To put this in money terms, it means that you can go on holiday for three months and the business can make money and pay you. Your kids will still go to school and rent will still be paid. It’s not just about having a lump sum of money in the bank. It is being able to have that money sustainably. A guaranteed Kshs 100, 000 per month is way better than a one off lump sum of one million, which you are not sure will occur again. It is important to progressively put in these structures even from an early stage. If the business will always need you to run, you can forget about financial freedom. Entrepreneurship is definitely one of the key ways to become financially free but be prepared to have your attitude and relationship with money tested before it translates into money that you can spend.
Waceke runs programs on Personal Financial Management and Entrepreneurship. Find her at waceken@centonomy.com| twitter @cekenduati| facebook.com/cekenduati