Problems faced by new small businesses- and how to tackle
them
1.
Poor market research:
You have been looking for a job
for donkey years and decided to jump into business out of frustration. You see
your neigbour’s sachet water business flourishing and you decide to eat your
own national cake by opening a sachet water business. Your best friend and
family give you the thumbs up but wait! Not so fast dear. Before you invest
every single penny you have into this sachet water business or any business
idea for that matter you need to conduct a good market research
You need to answer questions like:
who are my potential customers? Who are my potential competitors? How much do I
need as initial or setup capital? What running costs is my business likely to
incur? ( for example a business that requires constant electricity requires a
generator and those machines don’t run on sawdust you know) how do I reach my
target market? Etc
A common problem for new
businesses is that they overestimate the size of their potential market. All
products and services have one or more target demographics. A Christian
Louboutin shoe wouldn’t sell well in low-income areas. Another costly mistake
is to underestimate the competition.
2.
Bad business plan
Your business plan should touch
the following areas:
1.
Problem statement
|
2.
Business Description
|
3.
Resume of business accomplishments
|
4.
Marketing plan
|
5.
Financial projections
|
6.
Personnel plan
|
7.
Specific business goals
|
8.
Plan summary
|
Too many entrepreneurs subscribe to the "paper
napkin" fantasy; all you need is an ingenious idea scribbled on a napkin,
and the millions start rolling in. The truth is that no new business has ever
succeeded without a detailed and thorough business plan
Writing a business plan will help you focus the
mission and scope of your business, figure out exactly how the business will
run and realistically project how much money the business will make
A common problem for new businesses is that they
rush a product or service to market without a clear focus. The result is that
the business owner ends up chasing too many potential markets and new products
thereby investing a lot of money and getting little returns. For example you
plan to and open a boutique for working class females, then suddenly add a few
more casual student pieces because a few students tickled in, then add a few
male pieces because you think male wears are good money spinners. Before long
you have a wild variety in male, working female, students and granny wears but
they lack taste and focus that’s why customers come in and go out without
picking anything or finding a single thing they like.
At the beginning, it's much more important to have
a single focus with a proven client base. If your boutique is for the working
class female, stick with that and get lovely pieces. Build a reputation in that
niche so everyone knows that the one place to get killer working outfits for
females is at your boutique. Then after building a strong reputation and
customer base expand into relating niches/areas like accessories, casual wears
for a working woman, and corporate wears for the working man.
All good business plans should include honest sales
projections based on solid market research and competitive analysis. If there's
another assorted meals fastfood joint in town, don't expect your sales to be
much higher. In fact, they'll probably be significantly lower at the beginning.
Think of your business plan as an investment in
your future. If you consider every detail now, there will be fewer surprises
later.
3.
Not enough start-up capital
The entepeurers of 19 out of 25 failed businesses
cite too little capital as the major cause of their failure. A common and
deadly mistake is to assume instant profitability. I spoke to a young man whose
sachet water business capsized a few months after startup and he said that he
had spent a most of his money procuring machines and didnt plan for consistent
running costs like generator fueling costs, transportation costs, security
costs but instead looked forward to instant sales and hot profits. Problem is
he had very few sales as most retailers already had sachet water distributors
and definitely no profits till his business went under.
The experts
recommend planning for the worst, meaning at least two years before turning a
profit. In your business plan, write up a detailed budget that will sustain you
through those lean times. Once you've figured out how much startup captital
you'll need in
the
bank, add 50
percent just to be safe.
4.
Charging too little
Now unless you are Shoprite, this doesn’t work for a brand new business.
Why? Larger, more established companies save money by purchasing on scale.
They've learned how to cut costs through longstanding relationships with
suppliers and through careful logistical planning. Shoprite, for example, can
offer low prices because it has exclusive contracts with suppliers. Suppliers
give Shoprite rock-bottom wholesale rates because they know the store giant is
going to buy 100 million units.
You on the other hand probably can’t buy 100 million units yet. So instead
of trying to beat the competition with rock-bottom prices that won’t earn you
any profits, try to price your goods or services at a fair market value and
beat the competition on high quality, customer service
and your "unique selling proposition," also known as marketing
5.
Poor marketing strategy
One of the most important determiners of a successful
business is its marketing strategy. Once you have a clearly defined target
customer, you need to design a marketing campaign that turns him or her into a
paying customer.
A common problem for new businesses is to rush into
newspaper ads, glossy brochures, billboards and radio commercials. The first
consideration should be the budget. You need to figure out how much each type
of advertising costs and how many of your potential customers it will reach.
Opt for the marketing strategy that gives you the most bang for your money.
I would advice promoting your business freely on facebook,
twitter, linkedIn, youtube and using email marketing at first as extremely
cost-effective and productive ventures. Companies like collectibles,
namywedding have used social media extensively to boost their customer base.
Progress to newspapers, billboards and radio as your capital base increases and
you now desire to create a household image/ brand name of your business.
6.
Trying to do too much by yourself
You are the manager, the accountant, legal advisor, business development
executive, customer relationship officer and the cleaner. This "one-man
band" strategy might be a great way to keep costs low at first, but it's
not the smartest way to ensure long-term success.
As your business grows you might need a sales girl, a
dedicated customer care officer, one or two artisans or technicians etc. be
sure to employ only exactly what you need and not more. In fact employ people
that can multitask due to the number of skills they possess. Example, a friend
of mine that has been running an IT firm has a junior staff that does customer
care, attends to most technical issues like fueling and servicing the generator
and still does some IT duties. Good employees are one of the most important
investments you can make in your business.
Another mistake is to employ relatives. That is a big no-no.
Sentiments should always be separated from business. Its hard enough to query,
sanction or fire a stranger let alone your favorite aunt’s daughter or your own
brother. Though there are exceptions to this rule, its better not to hire
relatives while still a startup.
7.
Starting big?
We all want our businesses to have office complexes in
high-income area, official cars, uniformed drivers, in fact the works. But in
reality, only established businesses can afford these luxuries. Not all startup
businesses need an office to begin with. Most can take off from the home. Example
a dry cleaning service, boutiques, a plumbing service etc. minimize your
start-up costs and use your residential house till you are buoyant and
established enough to expand to an office space. I know a furniture maker that
started his workshop at his backyard. There he built even his showroom and his
business is really growing to a point that he is beginning to think of
expanding and having showrooms in another city. But he first started small- at
his backyard.
8.
Spending too much time prospecting/ not enough
time in a day.
This is common among many small scale businesspeople. You
want to do this and that, you prospect and groan that there is not enough time
to carry out all your business plans. Why not start with something- one thing
and dedicate time to that one thing. it might take lots of time and effort but
a dedicated time of like 8 hrs each day to a single prospect will reap results
over time ( in as short as 3 months in fact)
Then as you see success in one venture, move on to another
prospect. It’s a gradual process. You cant do twenty things at the same time.
You will find that you will be confused and reap discouraging results.
9.
Most callers are price shoppers
That’s normal. But at least your phone is ringing off the
hook. Your email is jammed full of questions about your product/services from
people. These people are potential customers. Your manner of response to them
and your prompt response to their mails determine if you can turn them to
paying customers.
Build credibility with these leads by giving compelling
reviews of your product/services, tell them why you are better than the
competition, and be courteous and nice even if you receive rude comments from a
very grumpy customer. You want to swindle the money in his pocket off him and
not win a law suit on fairness and how people should talk to others.
10.
Off-season periods
Most small businesses go through dry spells called
off-season periods. A way to tackle this is to advertise heavily on facebook,
twitter and use email marketing to let people know about products you can sell
during off-peak periods. For example, you are an exclusive school outfits
tailor. During peak season let parents know of our 30% discount on church
wears, party wears for kids you intend to start sewing during off-peak periods
like March, April or August. You will definitely be busy during that period.
So that’s it. If you have any problems as a business
start-up let us know by sending an email to
inspiredtosuccess@gmail.com. It
will be our joy to help you on the path to financial success by solving little
challenges you encounter today.
Your business plan should touch
the following areas:
You are the manager, the accountant, legal advisor, business development
executive, customer relationship officer and the cleaner. This "one-man
band" strategy might be a great way to keep costs low at first, but it's
not the smartest way to ensure long-term success.
This is common among many small scale businesspeople. You
want to do this and that, you prospect and groan that there is not enough time
to carry out all your business plans. Why not start with something- one thing
and dedicate time to that one thing. it might take lots of time and effort but
a dedicated time of like 8 hrs each day to a single prospect will reap results
over time ( in as short as 3 months in fact)
That’s normal. But at least your phone is ringing off the
hook. Your email is jammed full of questions about your product/services from
people. These people are potential customers. Your manner of response to them
and your prompt response to their mails determine if you can turn them to
paying customers. 
A job search can be frustrating, paralyzing
and enough to make you want to go back to bed. A job search can also be
exciting, validating and a way to develop opportunities you never imagined.
There are a lot of factors in play, but the biggest factor is you. How you feed
your mind during this time of transition can make a huge difference in your results.