Leading the way to financial independence for women small business owners

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At the age of 21, when Shibani Kharbanda (name changed) decided to start her own pastry shop, she was primarily concerned with creating a menu that would delight her customers instantly and make a name for herself to be reckoned with. Delhi. culinary landscape. After setting up the kitchen of her dreams, Kharbanda realized that given her experiences as a student at one of the best culinary schools in the world, she was more than suited to conjuring up divine delicacies, but the hardest part of the trip would be managing the finances.

Entrepreneurship may have been painted with glamorous touches by pop culture and the media, but those who have embarked on this path will be able to corroborate that the journey is more difficult than most people think. ‘It is. Add gender stereotypes to the mix and you’ll get a glimpse of why entrepreneurship is more difficult for women than for men.

A 2019 report titled Powering The Economy With Her: Women Entrepreneurship In India, published jointly by Google and Bain & Company, a leading global consulting firm, said that women entrepreneurs could potentially create 150-170 million jobs by India by 2030. However, only seven out of 100 entrepreneurs in India are women and among them, nearly half (49.9%) are starting a business out of necessity rather than aspiration, according to one. November 2020 Report of the Initiative for What Works to Advance Women and Girls in the Economy, a gender research and advocacy organization.

A major hurdle faced by female business owners is the challenge of managing their finances with dexterity. While our education system prevents students of both sexes equally from acquiring basic financial skills, the problem is more complex for women. Indeed, financial management is still considered a male stronghold in most families, and women’s participation in money management is limited to maintaining budgets. Although a wave of change is underway, the younger generations are actively taking charge of their finances, but the milestone where women are seen to be on par with men when it comes to portfolio is still a long way off.

This has a ripple effect even when women decide to start their own business. Kharbanda says, “I had the privilege of growing up in a home where young girls were never told that there were a lot of things they couldn’t or had to do because of their gender. Despite this, I don’t remember seeing my mother or my aunts actively managing investments. Therefore, I grew up with the idea that there will always be a man to do this for me. And when I started working on my project to launch a pastry shop, I felt like I was at sea when I had to manage finances. It was then that I realized that for women who run small businesses, they may have to walk a few extra miles to learn the ropes of financial management, but it’s something they can not ignore.

It has been five years since Kharbanda’s pastry shop saw the light of day and today, it has carved out a place for itself as a pastry chef in the capital with the who’s who of the city having tasted its creations. “Hard work, dedication, skills aside, at this point I can safely guarantee that I wouldn’t have tasted this level of success as a small business owner if I hadn’t learned some financial lessons and would have simply outsourced all the financial responsibilities. to a third party. It is extremely important that women who aspire to start their own businesses strive to break free from gender-related psychological blockages, ”says Kharbanda.

Amrita Shahi, 32 (name changed), runs an Instagram store that organizes and sells hand-woven textiles from all over the country. Shahi started this as a side business in 2015 when she was working as a financial analyst in a multinational and over time the company generated enough interest that she could quit her job and dive into it in time. full. “The main things to remember as a small business owner are never to blur the lines between personal and business accounts and never settle for your business finances, even if you’ve hired the right people. most efficient and trustworthy to get the job done, ”advises Shahi.

“If you don’t separate your personal expenses and income from your business, it can quickly get out of hand and you could end up spending more than you or your business can afford. This can create a dent in your credit scores and make it very difficult to find loans in the future. Moreover, unless you have a clear idea of ​​how much revenue is generated and how much is spent, it would be difficult to formulate effective strategies for your business and there is also a risk of misuse of company resources. And with societal perceptions being largely negative about women’s money management abilities, it can embolden your customers, business partners or employees the wrong way, ”she said.

When it comes to investing, Shahi believes his business and personal finances have benefited tremendously from investing in mutual funds. Shahi recalls starting separate investments to create the capital she needed to start her business. “Even though it was a very small business, I was convinced that I didn’t want to drown in loans or dip into my personal investment reserve. I diverted some of my savings into a mix of mutual fund investments with more weight in debt funds because the investment horizon was short and the returns were above what I needed , which gave me the freedom to start my business without having to compromise on my personal finances. “

Ananth Ladha, the founder of Invest for Aaj Kal, advises, “The best thing about successful investing is that you don’t need a lot of money to be successful. The most important thing in investing is to start early. So, if you are a female small business owner or run a home business, you need to focus on getting started early and investing regularly. For example, an investment of ??5,000 per month via equity SIPs with expected returns of 13% can create a body of ??1 crore + in 25 years. You can achieve financial independence with mutual funds as long as you let your money work for itself and you stay patient enough that the magic of compounding can work.

Key points to remember

• If you don’t know what to do, it’s always a good idea to ask for help. Consult a financial advisor when you are unsure of making the right decision.

• Pay close attention to the tax implications of your business. You can significantly reduce your debt with proper tax planning.

• Do not delay in setting up the organization’s financial apparatus and processes for a later stage. Without a system in place, the risks of misuse of financial resources can be very high.

Disclaimer: This article is part of the HT Friday Finance series published in conjunction with Aditya Birla Sun Life Mutual Fund.


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