What is the single most important thing in your business? Is it the profit you reap every day, your customers or your brand reputation? Well all those things are important and you should always work hard to achieve them. However, it is even more important to be mindful of these 4 other things for they can make or break your small business.
1.Your ignorance of local rules and regulations
While you may have a strong marketing or product development background, you also need to ensure you have a good grasp on the legal side of the business. Even if you plan to hire a lawyer, as the owner of the firm you still need a basic understanding of legal and regulatory matters in order to make informed decisions. For instance, you need to brush up your knowledge on matters of:
(a)Business registration
(b)Intellectual property registration
(c) Local government or county government by-laws
(d)Taxation laws
Being on the wrong side of the law could be the difference between survival and demise of your business. So make sure you at least have a clue on what’s happening around you in legal terms.
2.Your choice of location
Landlords will always want to convince you to lease their premises and so they’ll sell the positives of the location, hardly mentioning the negatives. Be very careful when you pick a location.
Oftentimes, it happens that entrepreneurs rush to sign contracts and move in only to discover that the premises are not suitable. Now imagine you’ve signed a 5 year lease agreement only to discover that the location isn’t favorable to your business and you only have two options either to vacate the premises and lose the money or to survive until the expiry date.
Besides matters of leasing, always take note of the following:
(a)Rent should not exceed 35% of the overhead expenses of your business
(b)Some landlords in busy shopping centers will request for Goodwill payment. However most stall owners in less developed parts of shopping centers don’t.
(c)Remember renting your own space isn’t the only option. Some small businesses are finding it more effective to rent communally so departments like reception, machinery, utilities etc are split between tenants.
(3)Cashflow
Cashflow basically means the flow of cash throughout the business. For example let’s say you start a business with Ksh50,000 and use all of it to supply your two of your clients (let’s call them A and B). For some reason A delays to make the payment and B, instead of paying, makes an additional order. Where do you get the money to supply B? You can’t force A to pay and you don’t want to disappoint B.
This is a common scenario in small businesses where capital is scarce. And because cash flow can make or break your business we recommend finding ways to structure your finances. Decide whether you’re prepared to sell on credit. Also, make sure you create a good relationship with a bank, microfinance or SACCO so you can borrow additional finance to improve cash flow in case of a cash crunch.
(4)Your ability to sell
Sales are the life-blood of the business and this is why it is important to have strong sales skills. Yet there is no sales team in the world that will do the job with as much passion as you (the owner). So before you think about dishing out commissions to your new salesman think about what you can do to save your skin when the going gets tough.
Sign up for short courses to improve your sales skills. If you can’t afford courses, find a mentor or read online articles. Whatever it takes, make sure you know how to sell before you get into any business.
In Summary;
Adjust to new surroundings, make the best of every situation, take charge and always keep in mind that success is like a roller coaster ride – you may reach a high point, but moments later gravity may pull you right down.
