Maintaining a business requires strategic planning, adaptability, and in-depth market knowledge.
A report by the Manufacturers Association of Nigeria stated that unfavourable economic conditions, capital scarcity, and subpar business practices cause about 80% of Small and Medium Enterprises to fail before their fifth anniversary. These factors have also impeded the expansion and evolution of micro-businesses.
The factors are not limited to:
– Strategic planning and efficient finance management: These are crucial if you want your company to stay out of the 80 percent of SMEs that fail before their fifth anniversary.
Strategic planning entails setting clear objectives, developing a vision for the future, and regularly reviewing and adjusting plans to align with market trends and business goals. Financial management, on the other hand, focuses on budgeting, forecasting, and maintaining a healthy cash flow to avoid potential financial pitfalls and ensure profitability.
– Effective customer relationship management: This is another essential element of business sustainability.
For recurring business and favourable word-of-mouth to flourish, strong relationships with clients must be established and maintained. Sustaining business success is largely dependent on customer satisfaction and loyalty, which are fostered by providing exceptional service and understanding consumer wants. Businesses can maintain their competitiveness and adaptability to market needs by adopting a customer-centric approach.
– Innovation and Adaptability: Companies need to constantly innovate to stay relevant in the ever-changing commercial world. This entails making improvements to goods and services, adopting new technology, and being flexible.
Adaptable businesses can take advantage of new possibilities and react quickly to changes in the market, which helps them stay resilient and competitive.
– Operational Efficiency: Maintaining a business also heavily depends on operational efficiency. To sustain high production and profitability, processes must be streamlined to increase efficiency and cut costs.
Process optimisation, technological investment, and ongoing staff training can all help achieve this. Businesses can prosper in highly competitive markets by implementing efficient procedures, which not only boost productivity but also improve profit margins.
– Effective Risk Management: keeping a business afloat requires effective risk management. Businesses can overcome uncertainty by identifying potential risks and putting contingency plans in place.
This entails keeping emergency money on hand, diversified revenue sources, and regulatory compliance. Long-term sustainability is supported by organisations that can limit negative impacts and preserve stability through effective risk management.
Understand Your Business
Seun Alley, the CEO of Fez Delivery, recently spoke about recognising the clear purpose and goals of your business at a panel discussion on business financing at the ‘Grow with Renny Conference: Maximising your twenties’.
According to her, “What even makes a business viable? Do you understand the business? Do you think that if you give this business another three years then, you will start making a profit? What are you selling because the business may be viable, but may not be viable for you?.”
Alley went further to say, “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, and 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. Then you come there and experience something completely different from what you have planned,” she added.
As per her assertion, it is vital to initially comprehend the nature of the enterprise and the particular issue it aims to resolve.
She disclosed, “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
Abayomi Molehin, the Group Head of Strategy and Business Transformation at Continental Reinsurance supported Alley’s assertions with examples from his own life.
According to him, “In the first three years, of 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.”
He pointed out that having additional sources of income is necessary for people to develop sustainable businesses.
Continuing, he said, “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 them. You need to give time. Businesses take time,” he added.
Building client confidence and trust in your company is no easy task, according to him.
Molehin said: “This is why you find when businesses start, they do a lot of freebies. All these businesses that raise funds in the form of dollars that you find, the first year or even longer, 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,” he added.
To assess the profitability of a firm, he emphasised the necessity to take a step back and consider skill sets.
To him, “All factors are equal, you are excellent, your customer service is good. The industry has prospects for growth, I think what you 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 or Google. Sometimes, they had places, a garage somewhere, where they were not paying rent. Steve Jobs, and Bill Gates, 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,” he added.
Speaking on access to opportunities, Molehin discussed awareness as a tool to maximise opportunities and highlighted how business owners may better position themselves for success.
He stated, “The first thing is to be aware of the available opportunities. There was a conversation I was having last year where it was mentioned that the Bank of Industry had access to loans for women at single digits. If I survey the room now, how many of the ladies are aware that there is a special loan available for women through the Bank of Industry at single digits?
“At least, less than 10 percent, how many women are aware of this? So, sometimes, you may not be aware of the opportunities that exist,” he nailed it.
Embracing tech
Forbes claims that one of the main factors causing change in the modern marketplace is technology.
Stating, “Tools like artificial intelligence are allowing marketing and PR firms to operate faster and at lower operating costs. Companies that don’t embrace technology risk falling behind their competitors. By embracing technology and automation, agencies can streamline operations, improve efficiency, free up creative resources, and enhance client service delivery.
“According to one survey, over 90 percent of businesses are pursuing some form of digital transformation. For this reason, agencies should dedicate resources to identifying and implementing technology innovation in the organisation,” the report shows.
Make data-driven decisions
According to the Forbes analysis, in today’s economy, utilising data analytics’ power is crucial.
Admonishing, reads: “By collecting and analysing customer and industry data, your business can gain valuable insights to stay ahead of market trends, understand customer preferences, design new revenue streams, and track performance metrics.
“These data points can provide the information you need as a business owner to make well-informed and growth-focused decisions about the future of your business,” it added.
On networking, utilising one’s network is essential for both survival and business success, Alley says. Join a community, since sometimes you can have all the information you need at your fingertips and still miss out on chances.
Alley remarked: “So we all want to do tech, but we all cannot be developers. However, there are other opportunities in that space that we are not talking about, for example, a tech Human resource person, or tech fitness expert and you are just catering to people in that industry. Try to explore as well and be open-minded.”
Business KPI
Businesses have measuring instruments to assess viability, just as jobs have a key performance index.
Samuel Jegede, the founder of Fruity Life said: “There are instruments to check if a business is viable to solve a problem.”
Continuing, “People will pay you a million dollars to solve COVID issues. I know someone who bought houses with basic knowledge of diagnostics or something. And so he did a mixture and everybody treated and they were paying about N550,000 and they kept referring to people. That was urgent, there was urgency. We are talking about the market size, nothing can reveal a bad market. You may be very smart with the best team but a bad market is a bad market.”
He further stated that price potential, value delivery costs, customer attribution, and uniqueness as essential indicators for managing your company.
Stating: “These are some of the things to ask yourself. What is the pricing potential, what is my uniqueness? What is the upfront investment? What is your vision about the business? Those are some of the things to measure in the business before you say it is viable or not viable. And to declare profit, Amazon did not declare profit because it kept reflowing back.”
Regarding business comparison, he issued a warning, saying that it was not a useful metric for determining viability.
“If you do not have the opportunity to ball like your friends, it does not mean that your business is not profitable. So, it is not about saying your business is not viable, what instruments do you use to measure its viability? Are we pragmatic enough?”
he added.
The intrinsic value your product or service offers in solving client issues or challenges is the primary factor in determining business viability. Notwithstanding statistics about failure rates, a company has a good possibility of being great and lasting when it continuously provides solutions that satisfy customers’ wants. As this is the foundation of consumer happiness and loyalty, it is important to concentrate on providing true value.
Use the abundance of knowledge on the internet to create strong and resilient company models rather than letting the alarming failure rates depress you. Continuous learning, trend adaptation, and strategy refinement based on real-time information are all parts of this proactive approach. Businesses that do this will be better able to withstand market pressure, become more flexible, and have a higher chance of long-term success.
Furthering, creates a culture of forward-thinking since it might be difficult to grow a firm in a world that is changing quickly. To spot new development prospects and keep ahead of market disruptors, your staff as a whole will need to put in some work.
To future-proof your agency, company owners and entrepreneurs must embrace innovation, change, and forward-thinking tactics.
Thinking creatively will be necessary to deliver progress. A business coach can be a valuable asset in assisting your company in managing the challenges of change in today’s fast-paced business environment. Of course, there are other ways to get ahead and maintain it.