Running start-up business profitably

July 8, 2013 by Ademola Alawiye 

   

| credits:

A lot of businesses have failed as a result of poor entrepreneurial skills of the owners. ADEMOLA ALAWIYE highlights important steps in running a business successfully

Statistics by experts show that about 50 per cent of first-time businesses fail within their first five years of operation. To run a business successfully, they say it’s important to keep your eye on the basics, as well as the bigger picture, and you will avoid many of the pitfalls that cause enterprises to fail.

There are countless variables you have no control over that can spell failure or success for your company, and there are variables you can control. Running a business successfully, according to them, is more than just having a good product, a good location and a smile.

For any modern business, success comes down to regularly attending nearly a dozen facets of the enterprise. Entrepreneurs are every bit as diverse as the businesses they run.

Many business owners are passionate about the products or services they offer but regard the day-to-day fundamentals, essential to each and every business, as necessary but uninspiring chores.

The experts say the following are necessary steps in achieving great success in business

Plan for success

Analyse every area of your business, from service or product development through to after-sales care. Document precisely how you propose to make your money, what it will cost you to produce and deliver the product or service and how much profit you expect to achieve. Produce operational plans and financial forecasts. Put together a formal business plan. This should include a statement of your business objectives, a brief history if you are already trading, a description of your product or service, the names, roles and credentials of your management team, a market analysis and details of your resource and finance needs. Also include sales and profit projections, a cash-flow forecast and a projected balance sheet.

Find start-up money        

To start a business, you must invest in the business. The journey of finding start up funds will be different for each individual. Some start ups such as consulting, requires a few thousand to get a website and business cards whereas a retail store could need millions of naira or more. Finding the money you need may come for a source you never thought of or may just end up being the frugal bootstrap method.

Control your finances

Set budgets and monitor performance against plan. Keep tight reins on expenditure and reconcile your bank account on a weekly or even daily basis. Optimise your cash flow. Pay bills on time, but pay early only when doing so obtains you discounts. Chase any late payments from your customer with timely reminder letters and, if necessary, follow-up telephone calls. Implement a procedure for handling delinquent accounts, making sure you conform to prevailing legislation. Bank all income straight away.

Monitor sales revenues and margins

If sales or margins fall short of expectations, take remedial action and review your profit forecasts. Regularly reassess your break-even point and determine the impact of falling sales or reduced prices. Beware of chasing business by engaging in price wars, because large volumes of low-margin business can have a devastating effect on your bottom line.

Evaluate your market

Keep up to date with changes in your market sector and assess how these impact your business. Watch your competitors and monitor developments in products and technology. Be ready to adapt to market changes.

Manage and motivate your employees

If you own a small business, avoid becoming “best buddies” with members of your team. Retain — and get the best out of — your staff by providing realistic remuneration packages, appropriate training and development opportunities, and a safe and comfortable environment.

Comply with legislation

Comply with all relevant legislation governing your premises, employees, financial reporting and contracts. Keep up with emerging legislation and regulations, particularly those specific to the product or service you provide.

Conduct ongoing risk assessments and identify areas of vulnerability

Consider political, economic, social and environmental factors that may threaten your business success, and take steps to minimise their impact. Examine operational risks — such as product obsolescence or over-reliance on a single sector, supplier or customer — and take the required remedial action.

Care for your customers

A satisfied customer is an asset to your business, but a dissatisfied client can immeasurably damage your reputation. Implement first-class after-sales care policies to achieve both repeat business and client recommendations.

Avoid complacency

Your sales and profits are on target, your workforce is happy and your bank manager loves you — but things can change. Maintain a marketing effort and remain constantly alert to changing opportunities. Be prepared to push your business forward or move it in another direction should the need or opportunity arise.

Delegate task

Delegate when necessary, and know your limitations. As a business owner, you may be tempted to handle too much of the detail. Focus on your strengths, and either delegate or subcontract matters that others could perform. For example, if finance takes too much of your time and energy, recruit or engage an accountant and call for regular progress reports.

Get your business license and permits

Starting a small business requires the mundane, yet necessary, paperwork and regulations. Depending on your chosen business structure, may need to register your business with the state authorities. Setting up your small business may require that you register with the Corporate Affair Commission.

Get business insurance             

As a new small business owner, you have the responsibility to manage the risks associated with your business. Don’t put your new start-up at risk without getting the proper small business insurance to protect your company in the event of disaster or litigation.

Create an accounting system                     

Unless you’re a number person, the accounting and bookkeeping aspect of running your business can’t be avoided. Setting up your accounting will help you understand the financials of running a business and help you advert failure.

Build a business plan                   

For any start-ups, a business plan allows you to gain a better understanding of your industry structure, competitive landscape, and the capital requirements of starting a small business. A study mentioned in “Business Plans For Dummies” by Paul Tiffany states that companies with a business plan have 50 per cent more profits and revenue than non-planning businesses. Writing a business plan just makes good business sense.