The odds are not in your favour. My least favourite statistic is the amount of businesses that fail within three years, which is estimated to be about 90% of businesses. It continues to get worse as of the 10% that remain, only 10% of these business last for another 3 years. Well I am glad to say that I have been running my business for five years and have defied the odds. There are several contributing factors that cause a business to fail. I refer to these factors as the “risk factors”, and I believe that if you address these risk factors in your business you can survive the warfare of commerce.
1. Skills and knowledge.
I have worked with several incubators, MBA professors and entrepreneurs and have asked them all what they believe is the biggest reasons businesses fail, and they all come to the same conclusion – businesses fail because they do not have the necessary skills to start and run a successful business. Therefore it is important that you are a continuous learner and take it upon yourself to learn as much as you can about your industry and business sector .Fortunately we live in the digital era and information is at our fingertips. We can gain access through audible (books) , listen to podcasts and do online courses to fill in our knowledge gaps.
Here are some of my favourites and top recommendations for every entrepreneur:
My favourite books :
1. The Hard thing to know about Hard things.
2. Rich Dad and Poor Dad.
3. Zero to One.
4. The $100 Startup.
5. Think and Grow Rich.
My favourite podcasts:
1. Start-up by Gimlet Media
2. Pitch by Gimlet Media
3. Business Schooled by Alexis Ohanian
4. Rise and Grind by Daymond John
5. The $100 MBA.
The best platforms to learn are extra skills are :
4. Kukura Capital
2. Know the numbers
You have to know the numbers of your business. You cannot compromise on your knowledge about the numbers. You need to know your costs, your margins, your burn rate, the cost of customer acquisition, you over head, your break even … every cent counts. I am personally unapologetic when it comes to the numbers. If you do not know the numbers that shape and define your business you are destined to fail. Every cent counts is not an exaggeration. Companies pay consultants extremely high fees to reduce there cost by 1/8th of a cent. This is the difference between a business that lasts and a business that fails.
There are lot of people who tell me that they do not want to deal with the “business side ” of their business, that they do not like worrying about the money aspects of the business. I have a real problem with this, because the premise of the business is to make a profit, and in order to do that you need to understand the numbers. Yes, there is the premises that entrepreneurs are equally motivated by the aspiration to change the world – but your business cannot change the world if it has to file for bankruptcy. You need to know how long your business can run without making a profit and what you can do to raise capital, also you need to know how you can generate profits for your business as well as improve the margins of your business so you have a sustainable and growing business.
3. Contracts and records
Along long time ago, a mans word was everything, if you shook on an agreement you concluded a contract. Now even contracts are disputed, so imagine having a dispute between yourself a client or supplier without a contract. You do not want to be in that position. Therefore keep records of everything and have all agreements in writing so if a dispute arises you have evidence to protect yourself. All payments and agreements should be well saved and recorded in a file.
4. Money management
This relates to the first point that I made. Once you have knowledge of the numbers you need to make will informed decisions based on your financial circumstances. This would be managing debt taken out by the business, managing the cash flow of the business and deciding how to re-invest the profits of the business.
5. Have access to legal council
Ideally you will have a lawyer who assist you with the agreements and primarily the taxes due by your business. Particularly relating to your taxes, in my personal opinion a lawyer is better suited to advise you on the most effective way to arrange your taxes. Other than for the purposes of tax advise, you may also need a lawyer to help you enforce agreements. I wish you never have to experience the misfortune of not getting paid for a service you have rendered , or not getting goods that you paid for. In such a instance you will need a lawyer to assist you to issue the necessary summons that will initiate the process that will allow you to enforce the terms of the contract.
If you cannot afford the services of a lawyer you should consider visiting a law clinic that is part of all university structures. These law clinics are mandated to help clients that are unable to afford certain legal services.
The above mentioned components are just some of things the that you can do and implement in your business in order to mitigate the risk of running a business.