The need for financial literacy is clear in both our personal lives and in business, but perhaps the highest stakes for personal financial adeptness is in micro-business. Build Institute defines a micro-business as a small company, usually made up of less than five employees. These ultra-small operations often rely on one or two key individuals to make decisions that affect every aspect of the business.
With that, micro-business entrepreneurs have to know their business and it’s financials inside and out. Unfortunately, too many of them are operating with poor or incomplete numbers, or even worse — operating in the dark.
It sounds incredible, but it is common for business owners to rely on an external bookkeeper or accounting professional during tax season, while lacking a personal understanding of the business’s financial health. Until a company is large enough to hire a chief financial officer, the owners should assume that role to the fullest.
Once an entrepreneur understands the finances as well as an accounting professional, the right time to inject working capital into the operation will become clear. Sometimes that cushion is needed when sales are taking off and there just isn’t enough inventory or staff to meet demand. Other times unexpected or unfortunate events (which are part of the process) may decrease sales, require costly legal help, or can otherwise rain on your money-making parade.
Regardless of the reason for a cushion, a business owner that’s comfortable diving into financial statements, unit economics, and projections will be prepared to make the difficult financial decisions that drive their business forward.
When the time comes to inject cash, entrepreneurs should consider all of their options. For some micro-business owners, Kiva is a great place to start. Kiva offers crowdfunded micro-loans of up to $10k with 0% interest, no fees, and reasonable repayment terms. The process for applying and borrowing through Kiva is far less complicated than dealing with traditional means of financing and the often prohibitive requirements that leave so many small businesses to fend for themselves.
Regardless if Kiva is the right fit for your business, the point is that micro-business entrepreneurs must be financially adept. They must know the health of their business in order to know when outside help is needed. When it is time for help, they have to evaluate every opportunity against the reality within their operation. The future of the business depends on it!