Entrepreneurs are real strength of the society providing value to different stakeholders; but when it comes to their own personal financial planning, many times they tend to take a rudimentary and product centric approach.
This is biggest hurdle SMEs face while operating their business. They don’t consider themselves as a separate entity from business. There is no clear cut distinction between their personal finance and Business finance.
Many times entrepreneurs are so occupied with their business that they totally ignore personal financial planning. They think that their business will take care of all their needs. But we all know that businesses can go through bad phases and when that happens they are caught off guard.
Business people are ambitious but many times they forget the difference between ambition and over ambition. They take huge loans for their businesses which may create lot of cash flow problems for them. Over leveraging (too many loans) the business can seriously hamper the Personal Financial Management of the business owner.
Most Business people buy insurance as an investment and pay huge premiums for their life insurance policies. There is no assessment of actual life cover required.
Also, in case of any eventuality to the business owner there is no plan to protect the family from creditors.
A businessperson thinks that business is the best place to invest money. That is all right but it’s like putting all your eggs in one basket. As most of the investments are made in the business they are not liquid; so they reflect on the balance sheet but they are of no use. This is the reason businessmen don’t have structured Investment portfolio in place.