Adaptability, strategic planning, and a deep understanding of the market are crucial for sustaining a business, JOSEPHINE OGUNDEJI, writes

About 80 per cent of Small and Medium Enterprises fail before their fifth anniversary due to harsh economic environments, lack of access to capital, and poor business practices, which have stunted the growth and transition of micro-businesses, a report by the Manufacturers Association of Nigeria has stated.

To avoid your business being among the 80 per cent of SMEs that fail before their fifth anniversary, strategic planning and effective financial management are essential.

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.

Another critical component of sustaining a business is strong customer relationship management. Building and maintaining solid relationships with customers is essential for repeat business and positive word-of-mouth. Understanding and meeting customer needs through excellent service fosters loyalty and satisfaction, which are key drivers of sustained business growth. This customer-centric approach helps businesses remain competitive and responsive to market demands.

Innovation and adaptability are also crucial for business sustainability. The business landscape is ever-changing, and companies must continuously innovate to stay relevant. This includes updating products or services, embracing new technologies, and being open to change. Adaptability allows businesses to respond swiftly to market shifts and capitalise on emerging opportunities, ensuring they remain competitive and resilient.

Operational efficiency plays a significant role in sustaining a business as well. Streamlining operations to improve efficiency and reduce costs is vital for maintaining high productivity and profitability. This can be achieved through process optimisation, investment in technology, and continuous employee training. Efficient operations not only enhance productivity but also contribute to better profit margins, enabling businesses to thrive in competitive environments.

Finally, risk management is an essential aspect of sustaining a business. Identifying potential risks and having contingency plans in place help businesses navigate uncertainties. This includes diversifying revenue streams, maintaining emergency funds, and ensuring regulatory compliance. Effective risk management enables businesses to mitigate adverse impacts and maintain stability, thereby supporting long-term sustainability.

Know your business

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

She said, “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?”

“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.”

According to her, it is essential to first understand the business itself and the specific problem it is designed to solve.

She added, “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 of Strategy and Business Transformation at Continental Reinsurance, Abayomi Molehin, cited instances in his personal life to corroborate Alley’s claims.

He said, “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 noted that to build sustainability in business, individuals must have extra income sources.

He added, “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.”

According to Molehin, building trust and confidence in your business with customers is no walk in the park.

“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 further stressed the need to sit back to take into account skill sets to gauge business viability

He said, “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.”

Opportunities

Highlighting how business entrepreneurs could better position themselves for success, Molehin described awareness as a tool to make the most out of opportunities.

He remarked, “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 per cent, how many women are aware of this? So, sometimes, you may not be aware of the opportunities that exist.”

Embracing tech

According to Forbes, technology is one of the major forces that is driving change in today’s marketplace.

It stated, “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 per cent 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.”

Make data-driven decisions

The Forbes report asserted that harnessing the power of data analytics was essential in today’s market.

It advised, “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.”

Networking

Alley added that leveraging one’s network was crucial to survival and business success.

According to her, be a part of a community, because sometimes you can have all the information at your fingertips and still lose out on the opportunities that exist.

She asserted, “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

Just like jobs have a key performance index, businesses also have measuring tools to gauge viability.

“There are instruments to check if a business is viable to solve a problem,” The founder of Fruity Life, Samuel Jegede, explained.

“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.”

Jegede highlighted the cost of value delivery, customer attribution, price potential and uniqueness as core metrics to run your businesses.

He said, “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.”

He cautioned on business comparison, stating that it was not a yardstick to measure viability.

He added, “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?”

Measuring business viability fundamentally revolves around the inherent value your product or service provides in addressing customer problems or challenges. When a business consistently offers solutions that meet customer needs effectively, it stands a strong chance of achieving greatness and long-term sustainability, irrespective of failure rate statistics. The key is to focus on delivering genuine value, as this is the cornerstone of customer satisfaction and loyalty.

Instead of being discouraged by daunting failure rates, leverage the wealth of information available online to build robust and resilient business models. This proactive approach involves continuous learning, adapting to market trends, and refining strategies based on real-time insights. By doing so, businesses can strengthen their foundation, enhance their adaptability, and increase their chances of sustained success in a competitive marketplace.

In addition, fosters a forward-thinking culture because growing a business in a rapidly changing environment can be challenging. It will require effort from everyone on your team to identify emerging opportunities for growth and stay ahead of industry disruptors.

Future-proofing your agency relies on business owners and entrepreneurs to embrace change, innovation, and forward-thinking strategies.

Delivering growth will require thinking outside of the box. Having a business coach in your corner is a great resource to help your business navigate the complexities of change in the dynamic marketplace. Of course, this is just one way to get and stay ahead.