PERSONAL MONEY VERSUS BUSINESS MONEY: A TENTATIVE EXPOSITION FOR BUSINESS SUCCESS

Photo credit: worldatlas.com

By Ogiri John Ogiri

Why do most small-scale businesses fail in their infancy? Why do many small-starting entrepreneurs crash out of businesses before they have a chance of growing them to maturity? I know you have many answers streaming through your mind already. Yes, many factors are easily identifiable as being responsible. For example, shortage of funds, hostile business environment, insecurity and general instability, inexperience among many others are easily identifiable. However, my focus in this exposition is not to attempt to discuss those factors. Rather, I will be concerned with helping you understand how another important factor outside the ones itemized earlier can equally contribute to the collapse or survival of small-scale business enterprises in Nigeria.Let me begin with a story. Onyowo is a young graduate of Political Science from a Nigerian university. After her National Youth Service Corps scheme in Abuja in 2014, she, like every other expectant young Nigerian graduate, hit the job market, submitting her brightly captivating curriculum vitae to several organizations who called for submission of job applications from qualified Nigerian graduates. Unfortunately, she never got further invitations beyond the interviews. She had even been advised to seek spiritual help by some of her friends who felt that she was being held-down by family a family curse which needed to be broken. Yes it was that serious. She felt disappointed with life.  Not wanting to resign to fate or slip into despondency and join the bandwagon of those graduates reading, daily, the book of lamentations about job scarcity, she decided to set up a fast food business with the little she had saved from her 11 months' NYSC allowance.

Being who she is- jovial, kind,considerate,easy-going with an impressive ability to get along easily with people, a beautiful lady with a great smile, it didn't take her more than a month before she became known to many customers around. Her unique culinary finesse combined with her quality customer service prowess to make her fast food centre a cynosure of all eyes attracting a sizeable number of customers everyday. Soon, she began to smile to the bank as often as she made more profits.

However, after two years in the business, she came face-to- face with bankruptcy that threatened, with ruthless abandon, the survival of her business. She had spent so much taking care of her less privileged siblings who came to depend on her more than they depended on their parents. She became concerned, almost giving up on trying to resuscitate her ailing business. It was this time we ran into each other in a bank in the city centre. We had been friends for several years before we departed for our various schools a few years ago.

We got talking as is usually the case when old friends meet. It was during our conversations that I got to learn about her business which had slipped into a life-threatening condition due to an acute dearth of more capital to fund the business. With my mouth almost agape, I wondered what could have made a once-thriving business to suddenly become cash-strapped. I inquired from her what she did differently that resulted to her business taking a nose-dive into the near bankrupt situation it had found itself. It was then I discovered that she had failed to differentiate her PERSONAL MONEY from her BUSINESS MONEY. She had failed to pay herself salary because she had felt she owned the business. Consequently, she always spent from whatever she made from the business. I patiently tutored her about how she could draw a clear line between these two areas of personal and business money if she must succeed as an entrepreneur. She went home that day feeling more re-invigorated than she was before meeting me that day. Today, my friend is a successful small food vendor.

Now Onyowo is not alone in this. It is common experience that many small-scale business owners in Nigeria hardly understand and separate personal money from business money. The result is that, they end up spending both the business money and the personal money leading to the collapse of the business venture.

 Personal Money and Business Money

What is personal money? What is business money? This is not an MBA class so I will save you the stress of trying to understand complex business terminologies here. I will thus adopt simple concepts to help your understanding of the message I am out to convey.

Now let us say, you work for a company. At the end of every month, you earn salary for supplying your labour effort. Your personal money in this case becomes your disposable income, that is money available to you for spending or saving after deduction of taxes. Besides, the capital you invest in a business will draw interest while your land generates rent.  All these returns belong to you. However, let me focus on explaining personal money from the perspective of a small-scale business owner.

Personal money in this sense may be used to refer to the income earned by an entrepreneur as a result of his or her participation in establishing and running a personal business enterprise. This in this case may include his return on investment but exclude the capital invested in the business.

On the other hand, business money may be referred to as the capital invested in the business including a part of the profit that should be ploughed back into the business. Therefore, it is important for every entrepreneur whether actual or potential, to draw a clear line between these two areas to be able to succeed in business.

You ask, “how do I do it?” Well, It is simple. As soon as your business enterprise starts operation, from that day, set aside a particular amount from your net profit, (not from your invested capital), to earn as your daily, weekly or monthly wage/salary depending on your choice. But you can decide to re-invest the net profit if you find it convenient. Now, that amount of money you have so set aside becomes your personal money. This is the money from which every of your private expenses should be settled. Whether you can afford a lifestyle or not, as a business man, should depend on the weight of your personal money. As soon as you exceed this limit within a particular period, know that any other money you spend again is your business money. In other word, you have started spending your business money.

Let me warn you. Never lend anybody, and this includes your friend or family member, etc your business money unless you are prepared to receive the obituary of your business enterprise. They will come but you should only lend them money from your personal money. Talking about lending and borrowing, you should never lend money that you can never forfeit if the lender defaults in paying. They will give you different derogatory labels like, stingy man, miser or “aka gum” but do not be deterred. You are not being stingy by protecting your “business money” you are only being a good economist. After all, a good business man cannot and should not be generous with his business money. He is not a “Father Christmas” in business. Only personal money should go into funding private expenses and lendings to friends and family members. Do you understand? Again, that you have a small business of your own should not suddenly mean that you are entitled to acquiring every fanciful or fashionable item of luxury available at a time. Buy them only if you need them. Do not buy if you merely want them or perhaps because your friends are buying them.  That is not your priority. Your priority as a small business starter is to grow your business first. Pay first so that you can play later. Understanding this is key to guaranteeing an appreciable level of success in your business.

While this attempt may not have satisfactorily conveyed the technical concepts of what constitutes personal and business money, it is hoped that it has tentatively opened your minds to what they connote.

   ©Ogiri John Ogiri