Starting
any business venture is a big step. Do not take it lightly. Research shows that
80% of new businesses fail within the first two years. Yes, scary statistic,
and true, but one has to prepare themselves for that eventuality. Not everyone
or everything succeeds, and that’s OK. Failure is OK; as with every setback we
learn valuable lessons for the future.
Flipside;
there are things that we can do to improve our prospects. Lets ask why 80% of
these businesses fail? Is it because the entrepreneur’s idea was a failure?
Probably not. Is it because the entrepreneurs product was not wanted by the
market? Probably not. What it is more likely to be linked to is a deeper
understanding of the role of the entrepreneur within the business and its
broader environment.
Many
entrepreneurs have great ideas. Sparking with endless passion, the entrepreneur
knows their product (or service, or design, or whatever) extremely well –
better than anyone else. That’s great. But: this knowledge is only one small
part of the entrepreneurial equation.
Suddenly,
you have a business. Staff that need to be paid. Accounts that need to be kept.
Sales that need to be made. An office that needs to be coordinated. Information
floods in; but our entrepreneur is still there with his/her great idea. A lack
of broader business processes is what leads the charge to failure.
When
starting out, it’s important to gain financial literacy. Understand the sales
numbers, cost of sales, proportion of overheads to total revenue; and make
intelligent decisions from that. Don’t over-borrow to fund your new business –
it has to be paid back. Maybe a silent partner or an angel investor – great
news, but they will be expecting you to be on top of the numbers too, if not
more so than the minimum.
Financial
illiteracy is one of the biggest causes of business failure. Accountants,
auditors, professional managers undertake years of study and on-the-job
experience to learn their way around numbers – you have about a month! It’s a
challenge, but the end result will be an entrepreneur who is well able to make
informed decisions based on real facts. As much as the passion is important,
this is counter-weighted by reality, and the need to see a return on
investment, either for the entrepreneur, or their investors.
Likewise,
developing interpersonal and human resources skills become essential. Starting
out on a low budget often means asking friends, or worse, family, to work for
us. A big NO-NO-NO! This is dangerous to the friendship, and hard to be an
objective manager over people we know on a social level. Or, we can hire staff.
But, we are a start-up – not that attractive to job-seekers. You don’t have a
Google or Yahoo office; and are therefore less attractive to potential
employees. Ultimately, top echelon staff are hired in more established
businesses (or simply become our entrepreneurial competitors), and we are left
with a resource pool that is not as ideal as desired.
We
have to accept compromises, we may pay a little less; but at the same time, are
we ensuring our team is performing to their best available outcomes? Managing
people is often a big challenge for new entrepreneurs. It’s not only managing
people who understand your offering on the technical level, but others too, on
the operational level, such as sales, or accounts. We need to motivate each and
every team member.
Moreover,
we need to develop our own skills to work with our team – handling leave
scheduling, holiday pay, sick leave, EFP and SOCSO, writing contracts (that
aren’t going to get us into trouble), and most of all, ensuring our cash flow
is in on time to ensure our team get paid on time. The biggest responsibility
an entrepreneur has as an employer to ensure their team members are paid on
time, so that they can meet their own obligations. Much like the captain goes
down with the ship, the entrepreneur should never get paid until the team does.
Another
new challenge is marketing. Knowing your consumer, how to reach them, and how
to position your offering. Marketing can at times be the biggest shock for
entrepreneurs. With such an indepth knowledge of their product, it often
becomes difficult to separate out what they need to be telling others, from what
they actually tell others. Simple things are taken for granted, and our
communication efforts to potential customers might go awry.
Ultimately,
an entrepreneur needs a crash course in business. It’s not important to master
everything, but a successful entrepreneur understands broad basics, and has a
handle on many of the issues that may face the business. And, they learn the
ropes fast as the business progresses. This will put them ahead of their game,
as they will understand more about what influences their venture than just
their own product.
This
is where both community and government have to play their part; offering
accessible resources for entrepreneurs to develop their craft and gain new
appreciation for all things business. Something that we here at Metanoia will
move into next year, as the start-up scene in Malaysia is expending
tremendously – but the success rate is not changing.
Image Source:
(1)
companyincorporationsg.com
(2)
learninggrank.com
(3)
entrepreneur.com
(4)
tomo360.com
Craig J Selby | Craig is a long-time proponent of structured and measured change. His early career saw him teaching marketing and management at a variety of Universities and PTE’s in his native New Zealand, where he quickly climbed the management ladder to head several private sector institutes. Needing to do that little bit extra, Craig formed his own consultancy firm and was engaged by many in the sector as a trouble-shooter - responsible for internal auditing, restructuring and redevelopment of many departments and institutes in order to remain competitive in a highly contested market. This involvement motivated him to branch out and work with other industries - focussing on change and development as a core theme in business survival. When Craig moved to Malaysia, he went back into the Education sector to share his ideas with local private sector educational facilities. In 2009 Craig co-founded Orchan Consulting Asia, an award-winning Public Relations agency. His areas of specialisation are Crisis Management Communications and Change Management.
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