VENTURES AFRICA – As of today, this ambitious column, without dragging itself into the egotistical realms of ungratefulness, and never much in two minds, will hijack the opportunity whilst in a celebratory mood to acknowledge its readers; words fail me when it comes to describing your efforts. Thanks to the readers, the resident entrepreneurship column is growing in leaps and bounds; hopefully, it will grow to enjoy one of the most constructive, well informed, and educative comment threads. And before we start, once again, i must salute the readers for their amazing job of making sense of my random bad and atrocious examples, which do not always make any meaningful sense at the least.
Are you ready to take the plunge? While there’s never a guarantee of success, more often than not, there are about as many mistakes to be made as there are entrepreneurs to make them. Which brings us back to something i posted some time ago- business in Africa is riddled with a sad reality, that for every successful entrepreneur, there are thousand others, not so successful young entrepreneurs, who daily have to face the brunt of the realities of entrepreneurship. The African business landscape has experienced a steady growth in numbers of business ventures appearing on the scene, but unfortunately few have grown to behemoth proportions.
In all fairness, and with this in mind, especially to those despite their hectic schedules, who find it within themselves to make time to- at the least, browse through some of the weekly dosage of musings provided consistently, by your resident serial-writer, on this your favourite resident column, which is an icon of objective business journalism; confers upon us the responsibility to inform them of some of the glaringly apparent common mistakes entrepreneurs make.
From past experiences and education, i will share some hard-earned experiences, and insights gained from lapses in judgement in the development of enterprises. I know, in summary, for the benefit of those who have jumped onto the groovy train too late; despite the availability of many sources to search for entrepreneurship knowledge, i would recommend our only official prescribed source, which is earlier archived Diary Of An Under 30 CEO articles, for expansive explanations for some of the issues covered in this most comprehensive two-part article.
Obsession with the Unattainable Elusive Perfect Product
To tell you the truth, since time immemorial, there has been an unwritten and over-emphasized basic business golden rule, and this phrase serves as a buzzword, the customer is king. Furthermore, sales are the lifeblood of any business, regardless of how perfect or pathetic your products are. Therefore, it goes without mention, that understanding your customers’ wants and needs, are key to business success, and should be your number one priority, after all, they are the best source of ideas and inspiration available to you.
Basically, even if your product is the best thing ever produced, with definitive characteristics that include flawless, better, or stronger than the competition’s, for as long as it’s not what the customers like or need, your efforts to sell it will be futile, they won’t buy it, and would rather find another company that is more responsive to their needs. It’s a cruel fact, but it’s as simple as that. Many entrepreneurs have become victims of their obsession to create the unattainable elusive perfect product. The price of trying too hard to create the perfect product is that the market will change, and eventually the product will become perfect when it has already been rendered obsolete, this is a cutthroat and dynamic business environment, after all.
Honestly, the most important thing is to get the less-than-perfect product onto the market as soon as possible, and if necessary improve it whilst it is available on the market. It’s absolutely a no-brainer to focus all your energies on providing quality products while doing less about marketing them. Your customers’ purchasing behaviour of your products is the only realistic yardstick of truly letting you know how great or perfect your product is , otherwise, the sooner you realize that there is nothing perfect, the better for you. Actually, it’s far more important to face criticism from customers, because this same criticism could be a catalyst that leads you to innovations that can assist your business corner the market, as you develop your product in a way that no one else in the marketplace has done.
It’s noteworthy that it is of paramount importance to spend more time and give your best on making your product the best, however, it’s not worthwhile if the product can’t be sold. Spending more time on developing a product, and less time on selling it, amounts to treachery, for any business enterprise. In fact, to get results every product, no matter how great it is, needs to be marketed. From a personal perspective, i would advocate you to focus 50 percent of your time on your product, and the other 50% on marketing it. It’s suicidal for any entrepreneurial venture to spend 90 percent of the time developing quality products, and 10% on marketing them. If you are unwilling or unable to invest the time and money on marketing, you will lose ground to your competition.
Be certain to listen to the most vocal minority customers. Don’t create a product that has to work on finding a market. Says Rosalind Resnick, founder and CEO of Axxess Business Consulting Inc., a consulting firm,” While it’s hard to build a great company without a great product, entrepreneurs who spend too much time tinkering may lose customers to a competitor with a stronger sales organization.”
“You also need to understand the fundamentals of money, how it works and how you can make it work for you because it is a scarce commodity, yet crucial to entrepreneurial success,” says Kenyan entrepreneur, Mike Macharia.
Another undisputed business golden rule is that cash is king. It suffices to state that, whilst you may have a booming business with many customers, you can’t pay for your operating overheads without cash. More importantly, money that you are owed only makes it easier for forecasting future cash inflows. Furthermore, let me hastily state that, a business can be profitable without cash, for how long this situation can be allowed to prevail before the business goes bust, is a subject for debate on another day.
Cash is king, at whatever stage of business development. The prerequisite for any capitalist entrepreneur, is to always think carefully before spending and remain focused on the bottom line, after all, business is all about the bottom line. Even with all these corporate social responsibility initiatives, the main objective at the end of the day is the bottom line; forget how otherwise, we are made to believe that it’s for the benefit of the community. The most fundamental purpose for cash in any enterprise is for business-building processes, such as marketing, product research and development etc., and not to be overspent on overheads or fund the lifestyles of your customers.
Until it’s certain that your profits can support the costs, retain humble office space, and furniture, because a quest for a high life, usually lets your expenditure to inflate more than your revenue, which is a no-brainer, since you will suffer a financial crunch. In addition, before profits justify the expense, spend money that is necessary to achieve the company’s objectives.
Another problematic entrepreneurial mistake is the myth about raising capital. Most entrepreneurs waste a valuable chunk of their energy seeking investors not customers through their relentless pursuit of capital and not revenue. In as much as the pursuit of capital can’t be downplayed, it is advisable to work on strengthening your revenue streams, through focusing on customer acquisition which should be part of any funding strategy. Your customers are the best place for your business to get funding, even more dependable than banks or venture capitalists. Strong revenues improve valuation and help reduce financial pressures, never place investors before customers.
Some entrepreneurs raise capital easily, and then afterwards, start thinking of ways to spend the money. Once you are facing this dilemma, you are in a bad space, because every fund-raising initiative should be for a specific purpose. For instance, when you sell part of the company it’s either you want to raise finance to increase your production levels, through purchase of new machinery or equipment, or to purchase new larger premises, therefore, you should not deliberate on how to spend, after you have already raised the finance, there should be an objective behind the need for more finance. Remember, owning the business outright is the best case scenario; don’t sell a stake to fund your lifestyle. At this juncture, let me mention that bootstrapping has its advantage, because too much cash can make you complacent and careless. Over-funded companies tend to get big and bloated too soon, before they can make concrete plans about how to spend their cash.