If you knew the business you are starting was bound to fail, would you start it anyway? Would it be better to know that your business will have at least a fighting chance and possibly even thrive? The challenge with most business people is that they don’t care to know before-hand. We tend to believe that our responsibility is to start and then God will chaperon it to success. Well, God may help. But the reality of the matter is that 46% of the businesses set up will die in the first year of establishment, 15% within the second year, 10% within the 3rd year and very few manage to celebrate their 5th year birthday. A good number of our entrepreneurs hardly think long term. It’s mostly always about the next deal, the next sale. Make as much profit as possible now and the future will take care of itself. The reasons that lead to business failure are both external and internal. External are largely beyond the control of one person since they affect the business environment. But internal reasons are usually within the scope of control of the entrepreneur. Here we look at a few of these;
The Entrepreneur’s Characteristics
As you imagine, it takes a special characteristic of a person to be successful at anything. In trainings when we ask this questions you get all manner of adjectives thrown around; trust worthy, determined, persevering, risk taking etc. There is no running away from these characters. Most make you a better person even before you become a business person. But the key one is the resolved decision to venture into business. If you are getting in then you have to get in ndaani! Ndaani!! Ndaani!!! Be committed to it. Business will require your money, your time, your sweat, your tears and blood. Are you willing to pay the price? Most of us get into business with the picture of the final product in mind and assume that everything will be auto pilot until we get there. We are not well attuned to how much sacrifice it will require. And please, you get into business, forget carrying your CV alone in the hope that you will land employment. Because you will always then give it half your heart. Finally, you will need also to reconcile your childhood dreams with your present reality. Forget the lawyer, doctor and pilot dreams. Commit to the reality now and let it shine on better than those childhood dreams.
Focus the Business
A successful entrepreneur will essentially need to have some level of greed. Yeah! That wanting a little more. More today than yesterday and yes, even more than everyone else. The challenge is when you do not know how to regulate that desire for more. Some businesses fail because the entrepreneur is having so much in their mind. They are addressing many different markets, at different levels and also engaging in different industries and sectors together with all the attendant competition. The reason we do family planning is that we want to have a sizeable family and give them quality life. Why then do we think it is better to have a retail shop, a farming business, a transport business, a hotel business and a school business? All at the same time. All at the same starting levels. It is quite a handful and what happens next is that all those ventures fail. Simply because you only have so much time to divide among all the ventures. You can only learn so much from each business venture, you can only have so much money for each business and your skill is also limited. Focus on one business. Learn it best. Invest in it. Once it grows. Maybe and just maybe you may want to diversify. Same applies to your products. You can’t make and sell everything. Just identify a few flagship products. Maybe 3 if you have to do many but not more than 5. Otherwise, you will deal with many products. But only 3 will bring in the money. The others will tie it down and worst still burn it.
The average person will not accept that they are failing or have failed. We tend to fixate our minds to something and even when it is not working we pretend that all is well. Come on, we even do it in our relationships. When we mention the 46% of businesses dying during the first year it might sound alarming. But maybe it’s a good thing. Some businesses have to die. Before they kill us. If you are in a business and you find that you aren’t going as per plan. Stop and re-evaluate. If it looks bleak. Kill it. Don’t let it gobble all your money. Close it up and then divest and start something else that makes market sense. When the Boda Boda market is flooded you don’t have to stick in there. Refit your Boda and convert it to one for carrying goods. If you notice customers want Ugali don’t insist on serving them Pizza.
Do you remember when growing up in the village? Can you remember that guy who owned a shop? Has it changed over time? Maybe no. There are guys who still do the same thing same way they did it 5 or 10 years ago. You have to swim with change. Any business that doesn’t change is doomed to fail. Innovation can be that you have a most brilliant idea that is completely new or just an idea on how to make small improvement on your products or service or, how your business is organized or, your processes in the business and even how the business creates and delivers value. Look always to renew yourself. Shed old things and get new ones.
Some businesses make money, but they also lose a lot of money. A business that discovers how to keep the cost of production low will succeed. Any shilling saved in procurement/purchasing goes straight into profit. So you need to know how to source the best quality material at the lowest possible costs. Manage your debtors so that you do not keep a lot of your money out there and for too long. Do not rush for the easy way to compete, price reduction. Don’t rush to lose money in short. Think and be certain of the need to spend each coin you have to. Do not take rushed risks. Anytime I have had to make rush decisions on money I have always ended up making loses. So please don’t make those loses.
Ever realized that each time you go to hospital you start with the nurses to check your temperature, weight, pressure, height etc? It’s because those figures are important. They tell a story. Ask a driver how tricky it is to drive a vehicle or motorcycle whose dash board isn’t functional? You can’t know the condition of your vehicle, fuel level, speed, etc. If you find yourself in a situation when you can’t be certain that you are safe then danger looms ahead. Stop and check. Records tell us the health of our business. Figures show us the condition of our business and then we are able to make better decision in managing it. Show me a business that does not keep updated quality records and I show you a business on its way down. What records? Income statements, balance sheets, cash flow projections etc
They are Fun
How would it feel waking up, dressing up to go to a job you don’t like? Not good. If you quit your job most likely is because it reached a point where it wasn’t exciting to do it anymore. So don’t make your business boring. Most thriving business are fun to run and to work at. In fact, if you make the business exciting the suppliers and other stakeholders will be excited to deal with you too. Above all, your customers will be excited to come to your business and do business with you.
There are many other factors that make a business successful. Please feel free to give us your ideas in the comments section below.
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The political environment counts for a lot in the success of your business. That is why it is always advisable to do all that is possible to play good politics and maintain peace. Make love and make peace