As someone who has been in financial consultancy over several years, I’ve had more than my fair share of experience start-up enterprises, turning around underperforming businesses or re-vamping operations.
During this time, I’ve learnt a thing or two about some critical factors you absolutely need to know before you jump into the proverbial entrepreneurial waters. In the majority of cases, start-up success or failure is all about knowing both the how and the why of taking action, and always being clear about which steps to take next.
However, I will suggest a few parameters, which will benefit a start-up business to succeed.
Proper personal financial management: most start-ups business are mostly run by the founders, thus decision made directly affects the business growth and sustainability. This calls for the best personal financial management involves being able to use the money wisely by setting both business and personal financial goals, making a budget before spending and keeping records.
Prepare a budget before spending: it is advisable for you to plan before spending. Budgeting guides you to make informed planning choices and prioritise what to buy for your business.
Always take records of your income and expenditures:
Most of the start-up business do not take records of their revenue and expenditure.
This poor record keeping makes it hard for them to monitor the true value of their business. Keeping proper books of accounts — statement of income statement, cash flow and statement of financial position — will assist you in better manage your business.
This does not require a lot of professionalism, but as long as you have gone to school and can write you ought to keep records, for bigger business you need to employ qualified accountants and auditors.
Bookkeeping may look like wastage of time and money to most small business owners but is one factor that can either make or break your enterprise. Most businesses collapse after the death of the founders due to a lack of records.
For any serious business person to understand how their business runs, they must have records from which they can evaluate it.
Decision-making in many times is based on what the records show.
Know existing services financial institutions offer: There are many financial service providers. Before getting their services to visit them and learn about their services and consult widely before choosing any of their offers.
Always save some of the profits received: Many business owners get excited from their first profits and end up spending on luxuries. It is crucial to re-invest and save some of the profits for the growth and sustainability of your business.
Insure the business: In Kenya, most of the businesses are very reluctant to use insurance services as a platform to protect their assets.
Many small business owners lost a lot of their assets and money during the 2007/8 post-election violence.
Similarly, many businesses time after time lose their assets in Gikomba Market to frequent fires.
Through insurance, you can protect business risks, such as these and more.
Focus on continuous improvement and innovation: Generally, the business strategy adopted must enable you to identify those things that you are strong at and things that you are weak at through SWOT analysis, emphasis on the lines in order to seek and sustain competitive advantage.
Use of technology: Automation of your business through customised software management systems will greatly improve your productivity, cut cost as well as increase efficiency.
Persistence and patience: Every day, businesses close because the owners lack the spirit to withstand hard times and patience to see their business grow.
People, especially the youth want to make quick profits. So, they end up closing their business prematurely, when the buyers start to learn about and appreciate their products or services.
Commitment and passion: Having capital does not guarantee success. No business can grow without commitment and passion. When you start a business you are promising to serve clients and give them the required quality. Commitment means keeping that promise to a client to deliver the service, no matter what.
Kenyans have been known for being great entrepreneurs but their businesses do not last five years if you follow the above parameters your business will run for generations to come.