With 70% of small businesses in South Africa failing in their first year it is important to know why. What causes entrepreneurs to fail and how can you overcome the hurdles to exceed your expectations. Here are six points to consider to help keep your business afloat.
1. Mismanaging funds
The mismanagement of funds can quickly spiral your business into oblivion. It is important to have a tight grip on your funds and use them to grow your business. Ensure that you only spend your business’ money on items which will help it to grow or are income-generating. If you spend all your profits on wealth symbols your business will not survive. The best advice is to put yourself on a reasonable salary and put the rest of the profit back into the business.
Ensure that your business finances and personal finances are kept separate. This will not only help during tax season but it will ensure that you do not spend your business finances on personal expenses.
2. Do not be money hungry
When you consider going into business, it is important that you add value to your target customers rather than wanting to just extract money out of them. If your clients are aware that you genuinely want to add value to their lives, they will be more willing to depart with their hard earned cash.
3. Remain humble and continue to learn
Some small businesses fail because the owners become too confident and forget to learn each day about their industry. It is important to always remain humble and be aware that there are new things to learn each day about your chosen business field. By having a curious attitude, you may stumble on ways to improve your offering and you could become the leader of the pack.
If you do not know something, then make sure you learn about it. It is a big mistake to think that you know everything. There are many free opportunities online to learn about the ins and outs of business.
4. Not having or having a flimsy business plan
There is a popular quote which says “failing to plan is planning to fail” and this holds true for business. By not having a comprehensive business plan, you will not be able to guide your business when you hit rough times. By creating a business plan, you will be asked questions which will ensure that your business has staying power to grow into an empire, so ensure that you create a good business plan for your business. Furthermore, you can use your business plan to apply for financing from various lending institutions.
5. The market is unsustainable or non-existent
It is very important to do a thorough market study to ensure that there are enough customers with buying power to purchase the product you wish to sell. If there are no customers or the buying power doesn’t exist, then your business will struggle to remain afloat.
6. Expanding happens too quickly
Growing a business is every entrepreneur’s dream but you have to be certain that you do it in a sustainable way. If you expand too quickly, you may not have the human resources to ensure that you are still offering a quality product and you could lose the competitive advantage you had. Therefore, when you consider expanding ensure that you have access to all the resources you need should your business explode on to the market.
By keeping these concerns in mind when you run your business, you will be able to navigate your business through tough times. Remember that running a business is not always easy but it is very rewarding.