How to sustain your business

The 2022 Nigeria MSME report by Kippa states that majority of small businesses die within the first five years.

It adds that about 80 per cent under Micro, Small and Medium Enterprises in Africa fail within the first five years of their existence despite recording the highest entrepreneurship rate in the world, As an entrepreneur, you might have heard of these failure rates more than the success rates in recent times especially when venturing into markets that seem unconventional.

What do you do with all these information and how should it impact your overall short and long term decisions towards your business?

You might also have questions on what determines the success rate of any business and how do you know that your business would not join the bandwagon of failure rates in the next survey report on failures?

Instinctively, these questions have led experts in the business finance space to highlight key hacks to employ to determine business viability.

Viability in business generally borders on the survival rate over a protracted period of time. It is defined as a business with potential to be successful. To balance a viable business is profitable, which means it has more revenue coming in than it is spending on the costs of running the business. Viability is closely linked to profit as well as solvency and liquidity.

Entrepreneurs should be vigilant to take these hacks into consideration to understand and ensure maximisation of the potential for success in business.

Know your business and solve a problem

Speaking during a panel session recently on business finance at the ‘Grow with Renny Conference: Maximising your twenties’, the Chief Executive Officer, FezDelivery, Mrs Seun Alley, spoke on understanding the cogent purpose and goals of your business.

She says, “What even makes a business viable? Do you really understand the business? Do you think that if you give this business another three years then, you will start making profit? What are you selling because the business may be viable, but may not be viable for you.”

Citing the logistic industry as an example, Alley describes the expectations people have towards thriving industries. She notes the lack of in-depth knowledge about problem solving products and services.

She says, “I will use my industry as an example. I work in the logistics space, we have over 1,000 delivery companies in Lagos alone and a lot of us are free to come into that market for different reasons. It is logistics and the real deal one, then I am going in there. Not because you are coming into that space to solve a problem, but because you think there will be money there.”

This kind of mindset leads to failed expectations and shutdown of businesses largely fuelled by frustration due to poor assessment of the market.

She says, “Then you come there and experience something completely different from what you have planned.

Understand that business first and the problem you are solving. Establish that there is a market for you. Then understand that it will take time. Business and excellence take time, so build and plan for 12 months. Have another plan for three years. If after five years that business that seems very viable is not possible, then that business is not for you. Maybe you should try something else.”

Extra income

The Group Head, Strategy and Business Transformation at Continental Reinsurance, Abayomi Molehin, cited instances in his personal life to corroborate Alleys claims.

She says, “In the first three years, my wife’s business, I would not say it was so profitable at first but it was just barely raking in but she kept at it.”

Shee adds that to build sustainability in business, individuals must have extra income sources.

According to her, “What helps you to keep at it, when a business is not profitable is your survival source.

You sustenance, maybe the business is a side hustle or you have a career.

“So that time she had a job but she was also starting and running a business gradually. What happens sometimes is that people abruptly start a business and expect that within the next three months the business will start feeding and sustaining you. You need to give time. Businesses take time.”

According to him, building trust and confidence in your business with customers is no walk in the park. “That’s why you find when businesses start, they do a lot of freebies, all these businesses that raise funds in form of dollars that you find today-the first years times even longer they give a lot of freebies.

“And they give no charges on the transfer just to capture customers. During those years of giving discounts, you will need to still survive. If you do not have something else that sustains you, you start thinking that the business is not a profitable venture.

Molehin advocates for taking a sit back to take account of skill sets in order to gauge on business viability She says, “All factors are equal, you are excellent, your customer service is good. The industry has prospects for growth, I think what you really need during that phase is to understand that there is a phase where things will not just happen at the snap of your fingers.

“Some people start businesses in their father’s house, Facebook, Google. Sometimes they had places, a garage somewhere, where they were not paying rent. Steve Jobs, Bill Gates, they were not paying rent. They just had a place where their parents could still cater to them and they were building their business. You need to understand these contexts when you are starting and running a business.

Opportunities

Expatiating on leveraging emerging opportunities and how business entrepreneurs can better position themselves for success and ease, Molehin prescribes awareness as a tool to make the most out of opportunities.