When I first stepped into business, I made the same mistake many beginners make, I thought profit meant I could spend freely. Michael would laugh at me and say: "James, money is a servant, not a master. If you don't tell it where to go, it will go anywhere and leave you stranded."
In this chapter, I'll show you exactly how to structure your money so that even a small capital like ₦100,000 becomes the seed of growth. You'll see what percentage to reinvest, what to save, and how to discipline yourself so your business never starves.
The First Rule: Never Eat Your Seed
A farmer does not eat all his harvest. He sets aside seeds for the next planting. The same goes for business.
Many small businesses collapse because the owner spends everything once money comes in. Don't fall for that trap.
A Simple Money Handling Formula (With ₦100,000 Example)
Let's assume you start with ₦100,000. Here's a smart breakdown:
1. 60% (₦60,000) – Business Operations & Growth
Buy stock, materials, or pay for services directly tied to sales.
Pay for marketing (ads, flyers, promotions).
This is your engine room.
2. 20% (₦20,000) – Reinvestment/Expansion Fund
Every time profit comes in, reinvest this portion.
Example: if you make ₦50,000 profit, set aside ₦10,000 for adding new products, upgrading packaging, or improving tools.
This ensures your business keeps growing.
3. 10% (₦10,000) – Emergency/Buffer Savings
Business has unexpected costs: delivery issues, urgent repairs, client refunds.
This account saves you from debt.
4. 10% (₦10,000) – Personal Allowance (Your Reward)
Pay yourself a little, even if small.
But don't overspend. Your lifestyle should never be bigger than your business.
Profit Handling Rule
When profit starts flowing in, don't spend it all. Here's a golden principle used by many entrepreneurs:
50% of profit – Reinvest back into the business
30% of profit – Save for expansion/investments
10% of profit – Pay yourself
10% of profit – Emergency fund
So, if your profit in a month is ₦40,000:
₦20,000 goes back into stock, ads, or improvements.
₦12,000 saved for future expansion.
₦4,000 for your pocket.
₦4,000 emergency.
Why This Matters
Reinvestment builds momentum. Jeff Bezos once said: "Your margin is my opportunity." Amazon grew because he reinvested nearly all early profits back into the company.
Emergency funds protect you from panic. Businesses fail because one crisis wipes them out.
Paying yourself keeps you motivated. If you never touch a kobo, you'll lose interest. But keep it modest.
How Rich vs. Poor Think About Money
Poor mindset: Spend first, save later (if anything remains).
Rich mindset: Save and reinvest first, spend what remains.
This difference alone determines who builds lasting wealth.
Practical Tips for Beginners
1. Separate accounts –
Open a business account. Never mix personal money with business cash.
2. Use percentages, not emotions –
Always divide income based on the formula above, no matter how tempting.
3. Reinvest early profits –
For at least the first 12 months, live small. Let your business grow faster than your lifestyle.
4. Track everything –
Even if it's ₦500, write it down. "What gets measured gets managed." — Peter Drucker.
5. Think long term –
Money you reinvest today could become the reason you open a second branch tomorrow.
Final Word to you.
Money in business is like oxygen: without it, everything suffocates. Learn to control it before it controls you. Even if all you have is ₦100,000, manage it with discipline and reinvest consistently. Do this for 6–12 months, and your small capital will turn into a stable, growing business.
As Michael always told me:
"James, it's not how much money you start with, it's how much discipline you grow with."