Starting a business is good, but sustaining the business to profitability is the hardest albeit most rewarding part of the business endeavour. The early stage of SME forms the foundational structure the development and achievement of the startup.
As a matter of fact, findings show that about 20% of small businesses fail in their first year, 30% in their second year, and 50% after five years in business. While in Nigeria, the most populous country in Africa, about 80% small businesses fail within the first 5 years, amounting to 1 in every 5 startups, Mentor Nigeria reported.]
This is pointing to the fact that if you’re still running a successful business in Nigeria, one which is more than 5 years, you’re resilient, hardworking, smart and fully backed by Grace to be among the few 20%.
While many factors may be the causes of business failure in respective countries, the internal factors play a vital role in business sustainability and profitability.
My engagement with start-up projects and companies in recent time exposed some mistakes which can be avoided by start-ups towards breaking even in the business. Let’s talk about those mistakes to avoid.
- Never Start Your Business with a Loan: In a country with the interest rate at 11.5% for business loans as stipulated by the apex bank in Nigeria, the Central Bank of Nigeria (CBN), you will be hitting your business harder and deadlier if you apply for a loan to start your business in Nigeria. Rather than applying for a loan to start, save up your income to kickstart your business while searching for available grants in the country to apply. With grants from both government and private institutions in some sectors, you can support your business if well utilized for its purpose. Grants available in Nigeria to take advantage include but not limited to – The Lagos State Employment Trust Fund (LSETF), BOI Funds, Tony Elumelu Fund among others.
- Avoid Starting Big: You might have the capability to start your business venture on a larger scale and sustain it; though, it’s not a big deal but it can be detrimental to the development of the business. Scaling your business on a larger level can put you at the risk with competitors, market force, financial management, government policies and many more. It is advisable to start small with a well structured goal for growth projection, marketing strategy, development plan and so on. Start from home, start with yourself, or start with only one person, start with the resources you have right no… just start small with a big realistic projection. Aside from the fact that starting small is financially manageable, it also gives rooms for experimentation and analysis for better productivity and success in business ventures.
- Avoid Setting Unrealistic Goals: goal setting is one major deal in the planning process. But it might also be the undoing factor that may hinder the business from scaling to the next level if not realistic. Rather than working with unrealistic projections based on your instincts and market factors, while not dig deeper in the strength and weakness of the startup in relation to the opportunities and threats from the external factors to plan a smart and realistic goal. Why set to make 100,000 million in your first year of setting up a fashion business in the heart of Lagos because your major competitors are doing more than that; instead, understudy what your startup can turnout in a week, then monthly, quarterly and annually looking at all resources put in place before concluding on the annual projection. That will give you a realistic goal which can sustain your business over time.
- Don’t Build Bosses But Leaders: A brief definition of boss is a person who exercises control of power over workers. As a startup, it is advisable not to build a strict chain of control over your team to encourage team spirit and open source contributions from your team members. Relatively, build leaders of teams that work hand in hand to achieve the set goal of the organization. Leaders influence others towards taking action, they help everyone contribute to the goal of the business. In Brian Tracy and Peter Chee’s statement, “The average person in the workplace operates at less than 50% of capacity. Leaders are those who have developed the ability to draw that 30,40, or 50% of additional capacity out of the average person…”. For you to sail through the startup level, you need more than 100% from team members, and you will need to breed leaders who can instill that into your business culture.
- Never Shun Related Products/Services: While your small business is solely providing a particular product or service, give room for related ones within the industry to help your revenue increase in the business. You shouldn’t just be selling fabrics while ignoring to inject relative products such as towels, cotton materials, threads among others. Neither can you invest in event planning and not look into providing professional training in the field, setting up an event planning magazine featuring decorations, catering, lighting, sound management among others. Such service or product can serve as alternative means of income to sustain your main business as well as alternative means of challenging your competitors in the market. Even bigger brands venture into this strategy to scale up their sales – in the cola market, Coca-Cola and Pepsi are the major players, while they respectively focus on their top brands, they are also fighting on alternative brands like 7UP vs Sprite, Fanta VS Mirinda… Your small business needs to look into this to be successful.
- Don’t Just Sell, Nurture Customer Relationship: As a startup, customer experience is one major value your business needs to consistently deliver. Report shows that 86% of customers would pay more for a better customer experience. This experience is predicated by a well nurtured customer relations right from the awareness stage to the level of trusting your brand and being the brand loyalist, one which can be effectively managed with the increasing digital channels for automation and marketing. Gabriel Swain clearly pictured it with his viewpoint saying “when you deliver a great customer experience, customer satisfaction levels rise. If you maintain world-class levels of customer satisfaction, nurturing customer relationships will become much easier. And customer retention will naturally follow.” When your customers can proudly sell your brand or business to others, then you have won the trust; that will result in continuous buying from the customers.
- Don’t Skip Initial Needs for Promotion: The initial marketing strategy to adopt as a startup is creating more awareness for the business, for people to know your business exists rather than promoting your brand for sales when you hardly had relationship with your buyers. People do business with people they know, like, and trust, especially from recommendation and referral. Creating more awareness for your brand brings more people to connect with your brand and later encourage engagement, one which can result to building stronger relationship, trust and patronage from your customers. Therefore, your campaign should focus on creating more awareness using various promotional strategy such as social media ads to run an awareness ads, content marketing to inform, educate and entertain your audience, email marketing to nurture the relationship created among others.
In Conclusion, always remember the need to tailor every step you take, and every decision you make after the specifications of your business and its peculiar needs at a point in time. As you avoid these common mistakes that experts have discovered over the years, be dynamic in your peculiar way as one size may not always fit it all.