Though big things they say start small and today’s inventions were yesterday’s ideas, research has shown that 90% percent of small scale businesses in Nigeria fail in the first year. If this is the case, how do we to raise the next generation of businesss tycoons? This is a question in the minds of young entrepreneurs.
The private sector’s commitment to Africa’s development through long-term investment in strategic sectors of the economy that create economic prosperity and social wealth will move Africa forward. The role of startups and entrepreneurship in achieving this can’t be overemphasized.
Wikipedia defines business failure as a company ceasing operations following its inability to make a profit or to bring in enough revenue to cover its expenses. A profitable business can fail if it does not generate adequate cash flow to meet expenses.
More attention should be paid to small and medium scale enterprises in Nigeria for the role they play in the realization of the objectives of development. Presently, running and maintaining a small scale business is even more challenging than starting the business thereby drastically reducing the rate of survival. From power to recurrent expenses, high interest rates, marketing and much more, the bills just keep coming.
Even though it’s tough and very challenging, the steps highlighted below can increase profitability and survival rate.
Embrace the small startup
There is absolutely nothing wrong with starting small. Embrace and enjoy every moment because if things are done the right way, your business will not only survive but will be big one day.
Set Yearly Budget
Budgets usually represent a detailed analysis of how a company intends to spend money in future time periods. Both small scale and big businesses need this. With a well-planned budget you can limit expenditures, plan for future growth and create financial roadmap, thereby increasing your chance of survival.
Report the Variance
It is not enough to set a budget. Reporting the variance is complementary to the budget system. It should be automated to produce a comparison of actual results against budget and should report monthly and year-to-date totals by line item. The report should indicate trouble areas to take action upon.
Adjust to Harsh Government Fiscal, Economic and Monetary Policy
As an entrepreneur, whether for small, medium or large businesses, you must be on guard to shield your business from the ever changing government economic and monetary policies. Since you cannot influence or alter government’s decisions, you must be ever prepared to swiftly adjust your business to prevent it from being hit by the adverse effect of unfavorable government policies. Instances of such government policies you must be on guard against are business taxes, duties and levies, inflation, exchange rates and so on.
Avoid conventional methods
There is nothing wrong with following the advice of many experts and starting your business the conventional way. But many people with a will to own a successful business just don’t have the resources to be conventional.
Ask for advance payments
You need cash and you don’t have the luxury of 60 or 90 days before you can get paid for services that have already been rendered or products already provided. So get your advance, deliver excellently on time and get your balance payment.
Avoid Bad Debt
A business that is owed so much as a result of free credit line to customers is bound to fail. One key role of an entrepreneur is to keep an eagle eye on the cash flow.
Finally, you will have competitors in your industry or line of business, so you would have to be innovative. Those who render the same services or sell the same products. They might even have more experience and capital, so you have to be very smart. Research and analyze, stay informed on new trends. A simple price slash by a bigger competitor can kill your business.
Other basic building blocks of for a business include:
- An Organizational Chart
- Job Descriptions
- Task and Duty Lists
- An objective Job Performance Evaluation System
- Information Guidelines