Have you ever wondered about the product that you put in effort, effort and investment with sweat and tears, but the result you get is… “Doing a lot but not having much?”. The result of a time series of investing effort and money, ultimately discovering ‘no profit’. Even many business owners make more and more losses without knowing why.
Most startups start making products but do not really have enough vision, thinking and knowledge about finance and business. They do not predict the economic cycle of the industry, do not clearly visualize the financial capital contribution, nor calculate the break-even point… and there are countless other financial reasons leading to the easy path of starting a business. must be risky.
“Without financial knowledge, the CEO takes risks”
Picture: Equitix Investing
Can’t predict the industry economic cycle
Inexperienced startups do not predict the economic cycle of the industry leading to a shortage of working capital. Moreover, there is no plan to supplement capital, leading to negative working capital, thereby leading to debt, causing disrepute with suppliers, even bankruptcy. The phenomenon you often see is businesses “run by trust”, that is, the business owner has to put more personal money into the business to maintain the business. Therefore, it is not possible to evaluate the business efficiency from the internal resources of the Enterprise to live on its own.
Can’t imagine clearly about financial capital contribution
Young entrepreneurs do not clearly visualize the quantitative and qualitative aspects of effort and financial capital contribution, so they cannot aim at the same common goal. They worry about whether their boss or Co-Founder will pay them a reasonable profit at the end of the year, so they can’t devote themselves to developing the business. So, about 2 to 3 years later, they “disbanded and split up” because they found themselves working a lot but the rest of them didn’t do anything but also enjoyed the same.
Breakeven point cannot be calculated
In addition, the risk that startup owners will never increase sales is because they cannot calculate the break-even point, so they do not know how much they can sell in a day. Newly opened stores or markets without specific financial criteria are easy to lead to “closed shop” or better off than trying to maintain business, but it doesn’t last long. . Even business owners do not calculate all the costs to pay, leading to unclear whether they are making this product profitable or not.
No financial mindset
The most risky are start-up entrepreneurs who do not have a financial mindset, thinking that personal or business finances are all theirs. Should be ready to take the money of the supplier to use for personal needs, buy a house to buy a car … without knowing, until the company can not afford to pay the new debt rushed to find out the reason.
All mid-level managers and above according to international standards must be able to read financial statements and make financial plans. And most of the sales bosses in Vietnam who run the company for 5 to 10 years have a financial mindset to be strong enough to walk on a thorny business path.
In order not to have to take risks, it all depends on you…
Written by:
Chairman of international investment Equitix Investing company limited.
Investment Director of Equitix Investing.
Equitix Investing is currently an investment company and main shareholder for startups & SMEs with a diversified portfolio focusing on businesses that can be strong in Vietnam’s raw material areas.