Adriano now feels that he is almost ready to start setting up his dance teaching

Question

Adriano now feels that he is almost ready to start setting up his dance teaching business, however, there is only one more issue he is concerned about. Adriano will be investing a significant amount of his time, efforts and money into opening the business and he is worried whether his business will perform according to his expectations and be a viable venture or not.

Adriano is almost ready to start setting up his dance teaching business, however, there is still one more issue he is concerned about. Adriano will be investing a significant amount of time, effort and money into opening the business. He is worried that the business might not perform to his expectations and he knows that there are many risks involved with starting your own business. He is also uncertain if he has sufficient funds to start the business.

3) Adriano is considering discussing his business idea with a professional advisor. What do you think are the most critical financial issues that he should find out more about?

Explanation / Answer

Most important financial issues Adriano needs to consider while doing business are as below:

1. Budgeting: The first and foremost, financial issue an individual need to consider is to plan his budgeting appropriately. Wrong budgeting may lead to huge problems in business. Underestimating the cost and over estimating the profit ends up with disaster.

2. Funds: Adriano need to check his source of funds, be it a bank loan, Angel funding, funds through private organisations or fundraising through any other methods. Interest for the borrowed amount, the repayment time, and other costs has to be checked thoroughly in order to avoid debt risks.

3. Assumptions: Unrealistic financial assumptions and cost calculated on this basis would be at risk. Hence assumptions has to be made with reliable past data.

4, Wrong pricing: Adriano has to make a through analysis on how much dance schools in the same locality charge as fees, their competitive advantage and what competitive prices can Adriano come up with etc. Wrong pricing may lead to loss in business.

5. Cash flow : Finally it is the cash flow which stabilises a business. Hence total income and exact expenses has to be brought in rightly.

6. Financial Management: Financial risks can be avoided by managing it effectively through accounting systems.

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