Success is cash managed wisely
Knowing when to borrow money, how and when to save it, and what to spend it on are just some of the topics covered in the financial management lectures currently being held for entrepreneurs who are attending the National Home Builders’ Registration Counc
‘For a successful entrepreneur, money can mean extreme wealth. But with extreme wealth comes extreme responsibility. And the responsibility for me is to invest in creating new businesses, create jobs, employ people and put money aside to tackle issues where we can make a difference,” said Richard Branson, founder of the Virgin Group.
He succinctly summarises what many women who own construction businesses feel about managing money.
“Every business exists to make money, but it needs money to start it off and this goes to the heart of financial planning,” says Thomas Kgokolo, a part-time lecturer at the Gordon Institute of Business Science on the National Home Builders’ Registration Council (NHBRC) course.
He has been talking on the topic for many years, and has a company that focuses on strategic wealth creation for businesses.
A lot of teaching revolves around “where to get money. We need to explain where to invest money to make it work hard for you,” explains Kgokolo.
He’s aware that construction projects, especially government contracts, are seasonal, and that big sums can be made, but then there can be months with no work and therefore no income.
“So, for every profit you make, save money to fund future projects. You’ll need working capital to get materials and to hire machinery.
“If you have saved money from previous contracts, you won’t have to waste time when you land a new one by running around to find capital for it,” he advises.
He says that a couple of delegates on the NHBRC courses have been close to tears as they explain how they have wasted their money.
“Some buy expensive cars or go on costly holidays. Cars are not an asset and they don’t look good in your financials.”
Faith Machaba, CEO of Machaba Tau Construction in Polokwane, says that “rushing off to buy cars is one of the biggest mistakes that we make. We learn the hard way that we should rather invest in a construction plant and property.”
One delegate told Kgokolo: “If I had known about better places to invest my money and make it grow, I would be much further down the track in my business right now.”
Kgokolo explains the advantages of investing money. “If you save, it illustrates to potential clients that you have financial discipline and can look after money responsibly.”
You can also use it as collateral if you need a loan. “Additionally, if one of your suppliers needs capital for materials, you might lend him some. You’ll have created a good contact for the future.”
Kgokolo advises delegates on investment strategies and investment management, and feels strongly that these topics should be included in general business courses.
Machaba says that her family helped her financially when she started her civil and general building services, “until my cash flow was good enough for the bank to start financing my projects”.
Doing financial studies at school and always being passionate about proper financial planning has been a big boost for Maboko Mokwena, CEO of Lungi and Basie Constructors in Polokwane.
She makes a point of steering clear of debt “by raising enough working capital so that I don’t have to borrow unless it is absolutely necessary. And then I pay it back as quickly as possible to save on interest charges.”
She was once blacklisted for “some minor debts and it made me aware of how a bad record can slow the growth of your business. I have had to make sure this does not happen again.”
Mokwena learnt early on to keep some of the money she made “in different investment funds. I have both short-term and long-term investments, so I can access some of the money should I need to do so.”
Kgokolo points out that sometimes it’s not a good idea to pay creditors immediately. “Collect first from your debtors and then pay your creditors. This will ensure good cash flow.”
Elizabeth Machethe of Maitemolatelo Business Enterprise in Polokwane believes that getting into debt to finance growth is sometimes a good idea.
Her business concentrates on electrical and building contracts, and she says: “You take a risk in order to grow, but it needs to be a carefully calculated risk.”
She also hired an accountant “to assist me with negotiating with creditors”.
She invested in machinery and property when she had the money to do so.
She’s upfront about why she went into construction: “I did this to make money and to grow, and I am also passionate about the industry.”
Dikeledi Dlamini is the founder of Didintle Supply and Projects in Phalaborwa, which specialises in building and mining construction.
She bravely says that she was once in debt and got out of it by consolidating it into one account.
“I was given two years in which to pay it off and I achieved that,” she says with satisfaction.
Her business got off the ground when Palabora Copper, which was originally owned and managed by Rio Tinto, financed her.
“They were looking for excellent ideas to fund and, fortunately, I was one of the successful candidates.”
Dlamini has now been in business for seven years and her company focuses on building low-cost housing, manufacturing reinforced concrete, mining and steel works.
Dlamini studied business management before going on the NHBRC programme, so learning about financing is not new to her.
“I cannot emphasise enough how important it [sound financial planning] is to the success of your business.”
Mapula Maupye of Hlahlane Developers in Polokwane does maintenance, renovations and construction of RDP houses and schools.
She ventured into construction “to benefit, as a woman, in this previously male-dominated industry”.
“I particularly wanted to contribute to the development of our country.”
In so doing, she is following in the footsteps of that extraordinary entrepreneur, Sir Richard Branson.