By Charles T.M.J Dube
IN an earlier installment on the two million jobs, I contended that it was naïve to expect the government to provide those jobs.
The government’s role is merely to create conditions that could make you and I create them.
You do that as an individual or a business organisation.
When you decide to get into business, you will get in alone as an individual (sole proprietor), with a few friends in a loose relationship called a partnership or as a private liability company.
There are advantages and disadvantages in every form of business organisation.
A sole proprietor is easy to form as the individual makes all decisions by himself without having to consult anybody.
It is also less cumbersome in terms of paperwork and institutional requirements. However, there is no separation between the business and the owner and in the event of any claims against the business, these will not be restricted to the business only, but extend to any other properties of the owner.
The business only becomes as good as its owner’s business acumen, financial base and organisational capacity as there is no cross-fertilisation of ideas and pooled funding.
Because the owner is accountable only to himself, there tends to be a thin line between business and personal exigencies.
The business therefore becomes very vulnerable to abuse through non-business related expenses.
Most of such businesses die with their owners in the event of there being no capable and committed heir.
Partnerships are a mere extension of the sole proprietorship and have the same advantages and disadvantages that a sole proprietorship has, serve for those that go with more than one person engaging in any other social activity.
Partnership can be sealed by agreements or no-written agreements.
There could even be silent partners who just co-fund a business without having to actively participate in the day-to-day running of the business.
There is no limited liability and in the event of claims against the business, such claims will again go beyond business assets to personal ones.
It is important to note here that an individual who acts as if he is a partner in a business, when actually he is not, will be just as liable as a real partner.
There is the added advantage of more skills/ knowledge apart from the advantage of pooling funding and sharing risk as every business has its own risks.
Greed and selfishness has broken many a partnership and it is therefore essential to know the characters you will be wanting to enter into business with.
In forming a partnership, it is important to have some reasons for bringing some people into your business.
It could be because they have the money, collateral (lest you might want to borrow), or for the skills and experience they have in the business you want to get into.
Many a business has operated sub-optimally, because their founders are too greedy and prefer having a whole rabbit to themselves to sharing elephant meat with 10 others.
The company route has a rigorous registration process.
You begin from choosing a name and filling a name search form to ascertain if the name you want to use does not belong to another company or could be confused with another existing company.
After the registrar of companies has approved your name, you then submit to the same office copies of your company’s Articles and Memorandum of Association, a CR6 and CR14 forms.
A private liability company has between one and 50 members, while for more than that you register a public company.
There are reporting requirements to the registrar of companies and other requirements with the Zimbabwe Revenue Authority (ZIMRA) to begin trading.
Companies are individuals in their own rights and are like corporate citizens who have to comply with the law of the land although there is separation between the company and its owners in terms of liability to third parties.
They have the advantage of a large pool of resources and therefore even more shared risks than other forms of business organisation.
The separate individuality of the owners and the company and reporting requirements to third parties institutionalises accountability and a flair for professionalism.
This separation of the owner from the company has its own advantages and disadvantages which we shall not delve into except to mention that the owner can participate in such organisation through board representation and his financial contributions.
It is important that before embarking on a business, the investor develops a plan. This has the advantage of having to research and understand one’s intended business.
This also reduces the unknowns and surprises at project implementation.
In this plan you lay bare your motivations for getting into the business, your anticipated income and market, expected expenditures, your competition, the need you are going to satisfy, how you are going to distribute your product and all the activities expected for the business to be a success.
You also budget for different possible outcomes.
All your business activities are reduced to money, in what are called cash flows, through which you indicate all the money coming in and out of the business.
This cash flow will include your finance plan as business boils down to cash and how you are going to fund your activities.
Money has a time value, and so your profits or losses must be put in terms of today’s value as a dollar earned five years away cannot have same value as one earned today, given today’s can be invested and bear fruit.
There has been a preponderance of people who inflate the income side of these cash flows for purposes of impressing bankers or other third parties to obtain credit facilities.
It is therefore no wonder that such projects tend to fail.
There are also those who divert loans obtained for business to personal use. Businesses are funded from personal resources called equity or loans.
There are also many forms of financing structures for businesses.
Public companies that are registered with the stock exchange can obtain equity financing through this equities markets.
It is only through our active participation in the production processes that we will be able to create the jobs we want and a solid base for future generations using all those business ownership forms.
In life generally, fortune favours the brave.
Those who fear failure and fear losing the little they have through business are said to be risk-averse.
To these are also added those who prefer an assured monthly wage as employees other than risk going without as they struggle to establish a viable business.
Our future prosperity is hinged on those members of our population who can take the risks of starting their own businesses without fear of failure.