Financially literacy IS the ability to exercise the right financial moves, and if properly assimilated, can orchestrate businesses well into the long-term financial sustainability.
But do Namibian businesses and their owners practise financial literacy?
The ‘lifespan’ of incubated businesses in Namibia is often too brief and short-lived, mainly because business people are not invested enough in financial literacy and make no plans for sustaining their businesses financially.
A typical Namibian start-up has a financial lifespan of between 18 months and three years.
The most well-known and active commercial sectors in Namibia include entertainment, food production and construction.
Instead of financial literacy, most business people would rather remain consumed in their unsustainable personal financial habits and trends.
It is important that business people understand that personal finances must be strictly kept separate from business finances, as mixing or confusing the two could easily collapse a business.
Financial literacy assumes a pivotal role in guiding business people towards developing their businesses.
This is because the essence of business boils down to finances.
Earning a sustainable profit remains the reason any business is started in the first place, but money is what keeps any business going, and the lack thereof could lead to an inevitable premature collapse.
The premature collapse would come before a business has fully lived its life cycle as identified by French economist Clement Juglar in the 1860s.
Juglar sets out that a business must go through four stages. The start-up stage, growth stage, maturity stage and the decline stage.
The start-up stage includes decisions about the type of business venture into, the products and services offered, and the costs associated with business operations.
A business model will clearly show all aspects that should be covered.
A lack of financial literacy tends to make a businessperson over-romanticise starting a business with the assumption of instant profits and riches being guaranteed.
They instead look forward to the profits at the expense of healthy business operations and practices. The growth stage is when the venture distinguishes/sets itself apart in its uniqueness, separating it from its competitors.
It will also be evident how the business can grow and in which direction.
Business focus should then be on client/customer/consumer relationships, increasing business investments/assets, and seeking additional capital.
This stage will then also show clearly where challenges are.
The businessperson tends to make the mistake of using all revenues as personal profits, and spends on personal wants, and as a consequence depletes all the incoming revenue, instead of investing it in the business.
In the maturity stage the business should be established in the business sector with a strong team and strong product or service dedicated to business employees and growth.
Growth should be consistent, and opportunities must already be clear at this stage.
At this mature stage it is wise to reinvest all incoming revenue and profits for further growth.
However, those who lack financial literacy do not reinvest, cutting the growth of the business.
Management does not dedicate time and effort to the employees, which in turn compromises the quality of the product and service produced by those very same employees.
This is the business-defining stage, as in this stage revenue may rise and fall due to the financial decisions made.
Sustainability is evident in the decline stage: This stage is the result of the mature stage.
This stage is where the business owner/managers should look at ways to revive and grow the business. This could come in many different forms or shapes.
Consequently, the journey towards business success rests heavily on financial decision-making.
With a foundation rooted in financial literacy, businesspeople are equipped to navigate the flows of entrepreneurship, maintaining a thriving venture while ensuring its continuity.
In essence, financial literacy acts as a catalyst to help businesses thrive rather than just survive, enabling them to withstand economic downturns and endure through the centuries.
Business people are given the ability to handle both their immediate financial needs and the conditions necessary for their companies to continue operating.
According to this perspective, financial literacy is more than just a learned ability, it is a cornerstone, a crucial component that lights and maintains the flame of company continuity for future generations.
