By hannover-web.com In light of the challenges faced by young entrepreneurs, we sat down with Li Hao, a 95-born college student from Wuhan, to gain insight into his tumultuous six-year journey in the world of startups.
Li Hao ventured into the e-commerce sector during his junior year, seizing the opportunity of short video marketing. Along with a few classmates, he managed to sell over 10 million yuan of kitchen and home goods online within just three months. At the peak of his project, he hired more than 30 staff members to keep up with demand.
However, his initial success was short-lived. Financial mismanagement led to conflicts within his team, and as competition intensified, the core group of partners began to fracture. Ultimately, the original seven partners dwindled down to just two, prompting Li Hao to change directions and seek new partnerships in Zhongshan, Guangdong, before starting afresh in Wuhan.
Wuhan, with its population of over 1.3 million students, has become a hotbed for young entrepreneurs. With a booming logistics network and a national push for innovation, student startups are emerging rapidly.
During a recent investigation, reporters from China Youth Daily discovered that Li Hao’s experience is not unique. Many startups fail to establish clear financial practices, often merging personal and business accounts, leading to confusion and disputes. Some teams lack adequate financial oversight, and without a strong legal framework, they are susceptible to embezzlement. The challenge of balancing equity incentives with personal relationships further complicates matters for these freshly graduated entrepreneurs.
“When starting out, I was always in ‘battle mode’ and didn’t prioritize financial management,” Li Hao reflected. A graduate of a private university, he founded a company during his freshman year primarily for campus marketing. Within two years, his team generated nearly a million yuan in revenue, mostly flowing through personal accounts without proper oversight.
“In those early days, we thought spending time and money on bookkeeping was less valuable than making more sales to keep the business alive,” he admitted.
To streamline financial management, Li Hao enacted a “money-account separation” strategy, assigning one person to handle finances and another to account for the books. Yet discrepancies persisted, as neither was a dedicated financial professional. On one occasion, a single night was spent cross-referencing transactions to reconcile accounts, and the tension bore a heavy emotional toll on the team.
“Many startup founders I’ve spoken to prefer investing in market expansion over proper financial oversight,” he noted. He shared that in Wuhan, hiring a full-time accountant can cost 8,000 yuan monthly, whereas outsourcing accounting services only runs about 4,000 yuan a year. As a result, many young companies focus solely on large transactions while neglecting the minutiae.
But is leveraging an outsourced accounting firm a panacea for financial woes? Upon visiting several such firms, reporters found that they typically only handle bookkeeping based on provided receipts and do not engage in comprehensive business management, leading to inaccuracies.
Wu Jie, a master’s student from Wuhan University, founded a health education platform after graduating. Her startup initially partnered with an accounting firm as well, and while they faced no immediate financial chaos, having a core founder with prior finance experience proved invaluable. As the business grew, Wu’s team hired a set of dedicated financial staff to ensure stability.
Financial management is a meticulous task, challenging even for seasoned entrepreneurs. Wang Qi, who graduated from North China University of Water Resources and Electric Power, experienced this firsthand after launching a tech company in 2018. Lacking formal financial training, he faced setbacks when developing a project for a state-owned enterprise without a budget, leading to wasted resources and delays.
“It’s common for tech-driven entrepreneurs to focus solely on their technical strengths. Before starting, I had no financial management knowledge, and after commencing, I struggled to devote time to it. Over time, this could become a liability for the company’s growth,” Wang observed.
In contrast, fellow 90s entrepreneur Deng Yuan faced an even graver setback. He started a campus recruitment exhibition company with a high school friend, achieving impressive revenue in just one semester. However, placing complete trust in his partner to manage finances led to a dispute when funds went missing, resulting in the dissolution of their friendship and business.
A revealing case from China’s judiciary archives highlights this risk. A master’s student mismanaged a jewelry startup’s finances, embezzling a significant sum for personal use until discrepancies were finally uncovered.
The nature of financial partnerships can test both character and ethics, as well as prompt conflicts between personal and structural management approaches. Zhou Cheng, another young entrepreneur, emphasized the importance of establishing a clear financial agreement upfront, outlining the rights and responsibilities of each party to prevent future conflicts.
Misallocating profits initially might seem fair, but can lead to significant internal strife when it’s time for payouts. A graduate, He Hui, lost both his partner and a substantial share of his customers after overly trusting a business associate with operational control.
With these experiences in mind, it’s clear that young entrepreneurs require robust financial education and mentorship. Although many universities offer courses in financial management, the real challenge lies in the application of this knowledge.
To address this, the Hubei Youth Innovation Park was established to provide comprehensive services to young entrepreneurs. The general manager highlighted the importance of identifying mentors who can guide students through the complexities of financial management by using real-world examples to highlight risks and establishing foundational financial protocols for new ventures.
As a renowned professor remarked, “Capital is the lifeblood of a business, and proper financial management ensures its circulation.” He urged that the importance of financial literacy goes beyond mere bookkeeping, advocating for improved resource allocation and sound decision-making support to bolster successful entrepreneurship.
In conclusion, as the new generation of entrepreneurs navigates their way through the complexities of starting a business, a proactive approach to financial management, coupled with experienced mentorship, stands as the foundation for sustainable growth and success.
