The statistics of new businesses failing all over the world are alarming. Small businesses are mostly affected. We are told three in five small businesses will close shop before their fifth year and another half of those that survive beyond the five-year mark will not make it past the tenth year.
You may be interested in 14 small business ideas.
The numbers of small businesses failing vary slightly depending on whose survey you are reading. The underlining fact is that it is hard for a small business to crack the success code. One can imagine that if the numbers are this bad in developed countries where entrepreneurship is given all necessary technical, financial, and advisory support, how bad would it be in a country like ours where a lot still needs to be done for small businesses?
It is a slight wonder then why people still get involved with entrepreneurship if the failure rate is so high. I identified three reasons why, despite the odds, many still brace up for the challenge.
See Also: 35 Booming business ideas and step-by-step guides to start them.
The Three Reasons
The entrepreneur never thinks he is going to fail. He sees all the failure figures and in a characteristically optimistic manner assumes he cannot be part of the statistics. This type of mindset is not just good but is vital to the survival of any small business. Once he gives room for doubt and fear to rule, he is going to fail anyway.
People also take up entrepreneurship because they are tired of their nine-to-fives or they cannot be bothered to go work for someone else or, indeed, they see a gap in the market and jump in to cash in on the business opportunity.
The third and, probably, the most significant reason why entrepreneurship is embraced is that it remains the fastest route to wealth creation.
I have identified five practices that, when done, will increase the chances of success for the small business owner. I say increase because success is never always guaranteed – and not forever.
Kodak dominated the photography business for ages but not anymore. Blockbuster dominated movie rentals in the USA for a long time and eventually lost out to new entrants, Netflix. Research in Motion (makers of BlackBerry), who dominated the smartphone market with a near 70% market share at a point probably doesn’t control as much as 10% today.
See Also: How to start a real estate business in Nigeria.
Practices That Increase Success For Small Businesses
1.Begin With The End In Mind
Every kid gets asked every now and then what they want to be when they grow up? A pilot, a doctor, a footballer, etc. I personally wanted to be anything but a doctor. Kids are always sure of what they want to be.
Ask yourself what kind of business you want to do. Don’t think of your business simply as an entity merely selling a product or service. Think more broadly, in terms of value delivered to the customer.
If twenty-five years ago, your end game was to be the largest typewriter-selling company in the world, you won’t have a business today. But if your end game has always been to provide small businesses with tools that enhance productivity, then your business won’t get stuck selling typewriters. It would transition to selling computers or any other product or service that increases productivity.
Having an end game built around value delivered to customers allows your small business to grow beyond trends, fads, economic downtimes, and industry changes. Your vision and mission statements, culture, and value propositions all draw meaning from how you see your business when it is grown up.
See Also: Design business ideas you can start now in Nigeria.
2. Study The Role Models
Very few businesses thread paths that have not been threaded before. Whatever you are trying to achieve has been done before. Studying models, businesses, and entrepreneurs that have effectively done what you are attempting to do saves you from mistakes and accelerates your small business progress.
When businesses scale rapidly, it comes down to measuring and tracking just a few financial and non-financial indices. Financial indices include revenue, operating expenses, cash flow, etc.; non-financial indices include culture, leadership, candor, staff turnover, etc.
Keep your eyes on the indices and guard closely against anything that allows your numbers run negative.
3. Document And Measure
Most small businesses start out with the owner and maybe another team member. Adrenaline levels are high, the atmosphere is electrified and everyone does everything necessary to keep the business going. Whatever work needs to be done gets done.
As the business grows and more customers are added, cracks begin to show. Someone didn’t reply to a customer’s email, someone ordered a wrong set of company materials, another gave more discount than was reasonable, and details of a soon-to-be-delivered order cannot be found.
Step back for a minute and go back to your drawing board. Imagine the business when it is wholly done. What kind of structure would you have? Consider the kind of reporting system you would like to have. What are the specific functions of each office? How will job performance be measured?
You might ask how to get around doing these things when you are busy putting out fires every day. I am asking you to build a fireproof system or a year from now you will still be putting out fires. If you are yet to face these kinds of challenges in your small business, eventually you will and the best time to get an umbrella is when it isn’t raining.
See Also: How to choose a business idea that’s right for you.
4. Follow The Trend
Conventional business wisdom today says to be different, to do more, faster, better, cheaper, etc. and I agree with these. When I talk about flowing with the trend, I mean you should observe carefully how the dynamics in an industry are changing.
Your small business gains nothing by being different when the fundamentals of an entire industry are changing. Small businesses (and big players as well) that don’t respond quickly enough and follow the trend eventually lose out.
Nokia lost out in the mobile phone market when that industry went smart with the proliferation of apps. They stuck with the hardware functions of phones. They eventually did respond but not after losing significant market share.
Blockbuster lost out in the movie rental business as DVDs got obsolete and online streaming and downloads changed the industry. They paid the price as they filed for bankruptcy a few years ago.
Beyond following the trend, it helps if you spot a trend and position yourself or your business to profit from it long before the trend goes mainstream. Apple spotted the trend of music purchases going from CDs to digital downloads and continues to profit from it today.
Beyond studying your industry, look across other industries and see what is going on. You may be able to borrow a few concepts which when applied to your business may be the edge you need to scale up.
5 Cash Is King
This is simple enough. All small businesses that scaled quickly had some cash to do so. You can’t grow rapidly on a shoestring budget. The dynamics of interactions within your business require the oil of cash to constantly lubricate the wheels of growth.
The importance of cash cannot be overemphasised and you should have some cash on the ground to grow the business. It’s hard enough scaling a business and you would have several things that would fight for your attention every day. You don’t plan for many of these events but you can plan to have the cash issue taken care of upfront even before you require it.
Let’s create visibility for your brand and put your business on the world map. Contact us today to make your brand the preferred choice for our audience of entrepreneurs and business leaders.
To keep track of our activities, follow us on Instagram.
Photo Credit: Mishawilson.com