Over the years as an Accountant, I have come into contact with stories of small businesses barely surviving due to financial trouble either directly or through stories that other people told. I have also encountered very successful businesses.
Times are hard and business is also difficult and not everyone’s cup of tea but while some businesses suffer due to hard economic times, some just overlook a few things that may land them in serious trouble. It would be my joy not to have you make these same mistakes after today.
Failing to Conduct Proper Research of the Industry
I am sure you have at some point encountered somebody who said, “I would like to take a loan and do something as a side hustle.” Or perhaps someone has come to you and said, “This job is not that good, it does not have security maybe we should put some money together and do something.” Do not get me wrong, these are not bad statements; in fact, I am sure plenty of big successful businesses started with these kinds of statements.
The problem is that a majority of people say this and think nothing of it and then maybe people started getting laid off at their workplace or they just feel threatened. They go into panic mode somehow they hear someone say they started an M-Pesa shop or a Wines and Spirits and that it does very well.
What do they do?
They take a loan or use their savings and put one up just because apparently, it worked for somebody else with no background research.
What are the chances that the business will do well? Very close to zero. When choosing to start a business, one should find out about the industry
- What are the requirements for entry in terms of licenses or registrations?
- Are there any location restrictions legally or otherwise?
- Are there barriers to entry of any kind?
- What is the average incubation period for startups in the industry?
Are just but a few questions one should ask before venturing into a business
2. Giving No Thought To Market Analysis
From the previous example, the owner of the new business did not have any background on what they were starting. There could be instances where people actually do have some background in the industry they plan to get into but may not necessarily know the market.
The market is dependent on several factors the most important being the location. It would be ludicrous to a point for one to, for example, start a bar in a Mormon neighborhood. The business may not take off let alone survive whereas it may have done better in a college neighborhood where different backgrounds come together and mischief and adventure are an everyday thing. First of all, find out;
- Do you have a market? If a product or service is new one will need to first create a market and will need to know where to find it.
- You now have a market, what are the demographics of the market. If your market is, for example, predominantly young you will need to find a way to connect with young people otherwise nothing
3. Giving Marketing a Back Seat
So now you know your market, you need to reach out to it. There are people me included who swear that marketing is not their thing maybe because of their personality or because they just do not like it. If you are doing business and you are in this category I have some very bad news for you, you will fail.
When I talk about starting a small business, I mean you may not have the funds to have a bad ass marketing team, you may not even afford to have one marketer in the beginning and so you will have to be the business brand ambassador. Nobody will buy your goods and services if they do not know you exist, you will just have to suck it up and put yourself out there if you have any intention of succeeding.
You will have to source for clients, talk your throat dry about your business and of course offer stellar service. The best marketing is the word of mouth of a satisfied customer. In today’s world we are lucky because you get to also advertise on the internet that is cheaper than conventional methods so take advantage of it.
It may be overwhelming at first so start small. Tell all your friends and family members what you do, you can even create business cards for them. When you tell someone for the first time
4. Asking for help from the wrong people
Too often new business people may not go to experts per se but will just talk to their friends who have no expertise in the areas they choose to go into business in. The business may fail to take off correctly not because it is a bad idea but because it was set up as a result of a collection of hearsay.
Instead of just talking to your friends ask them if they know someone who knows about the business who you could talk to. You could also find a business consultant in your area of business. There is also the option of making google your trusted companion in your journey. You can also talk to your bank manager about it, they tend to have a lot of information about businesses because they fund them on a daily basis.
5. Having too much faith in the business financially at the onset
Okay so nobody starts a business to see it fail, true, but just like a child cannot walk on day one, a young business also needs to be nurtured to maturity before it can earn enough to sustain itself. This being the case, you need to have a nest egg to carry the business forward for sometime before you begin to earn substantial returns.
Believing that a business will turn profitable immediately is a myth except of course if you peddle drugs in a corner for which you pay no rent, licenses, utilities and all the good stuff business owners have to pay for. Even if you are working from home, you should be able to pay your bills right?
6. Spending cash on capital items too early
While you have to purchase capital items like machinery, you should not be totally dependent on the young business to purchase these things. They should either be factored in when deciding on the amount you need to start the business or they should be purchased on credit.
Credit payments are spread over a period of time. Without the spread, the business may find itself in a situation where it will struggle to meet its operating expenses. You may have to come up with strategies that will help you better manage your cash flow problems.
7. The Kiosk mentality
When doing the introduction to business, there is a topic on sole proprietorship where there is really no legal difference between the business owner and the business itself, they are one and the same.
To become a successful business person you will have to totally forget that definition. Legally it may be viable but for your success, you will have to separate yourself from the business.
You will have to maintain the business books and only take from the profit. You will have to know how your business is doing by ensuring that its money is not yours and you will have to make an effort in order to earn from it.
Investing in basic book-keeping services will ensure you make astute financial decisions from the onset. You may not afford a book-keeper but you can enroll for a finance for non-financial mangers class.
8. Lack of Patience
Business, as mentioned earlier, is not easy and it may not be rosy for a long long time but you have all heard the saying, nothing good comes easy. If you lack patience, then business is not for you because you will quit even before you begin.
There will be good days and bad days and flat out nasty ones my advice? Stick it out, surround yourself with positive people, do your best and involve God. There will be some, No a lot of blood, sweat, and tears but eventually, there will be the success.
Starting and running a business is not child’s play. it requires a lot of hard work determination and strategy. There will need to be a lot of diligence on the part of the small business owner for their business to flourish begin to give you that income that every one desires. Hopefully, these eight tips will give you an idea on how to go about it.
Feel free to comment and add your own tips in the comment section. Wishing you all a fruitful endeavor. Cheers.