What a small business retailer must never do
My grandmother was a lovable woman who was always happy and excited to see me each time I came around to visit her at home. She had this dream of fending for herself and not depending on the children for her daily needs hence we decided to pool together some funds up a small business that cost N80,000 for her to start a provision store business. That was 1997 and the economy was still buoyant with prices of goods and services affordable in Nigeria.
What you MUST NEVER do
The business did not last more than a year before it packed up all of a sudden. It was an unfortunate turn of events that made me wonder what had happened? The facts and figures were clear for all to see. She was fond of overspending her business capital and profit from the provision business. There was no distinction made between working capital, profit and personal funds. She kept all her daily sales, profit and running capital in the same place and was always picking from there, without replacement.
-It was an error that had a devastating impact on the business. Every small business retailer must be able to draw out an expenditure list which must highlight some basic items that would be needed to run the business effectively, without going beyond specified budget. When a business income and expenditure cash flow is undefined, the temptation to overspend becomes inevitable. There are several drainpipes that must be closed to avoid overspending and putting your small business in jeopardy.
Marketing of your small retail business should be scaled down to the barest minimum to avoid overspending. A little budget should be appropriated for marketing, rather than carrying out a bogus marketing campaign that will end up eating up a chunk of your capital and even profit for the year.
Mrs Peace Obam, an business retailer based in Delta state Nigeria who was dealing on kitchen utensils and small gift items in a store located in the heart of one of the biggest towns in Delta state had this to say about overspending: “When I started my small retail business in 2012 October to be precise, I made a mistake of not calculating my projected income and expenditure before making a decision on renting my first shop. This proved to be decisive as I discovered that I was paying N6,000 monthly on the shop, while my profit margin was less than N10,000 monthly. It was one of the problems that eventually cost me dearly and made me change location of my business”. Like Peace, there are thousands of small business owners overspending on shops, rental or office space on a daily basis. More than 60% of their profit goes into financing the cost of offsetting shop rent. That to me must be avoided by all means.
-So often we see small business owners who start off their dream business and in no distant time start employing dozens of office and field workers. Am not against that, but the question is this: “Has your business starting making sufficient profit to become self sustaining?” If the answer is No, what it implies is that you are overspending in a bid to retain workers you never needed in the first instance. Hiring of employees during initial startup must be treated with caution.
-Small business retailers always make the mistake of trying to go solo, rather than network with others of like minds. It is not about partnering with your competitors, but joining forces with those that can help you succeed as a small business owner. Businesses don’t work in isolation, but in collaboration. You must involve others. Family, friends, church members, financial partners and even potential investors must be involved. The world has become a global village and staying in isolation can do more harm than good to your small business.
-Eight years ago, a serious blunder while creating an information product. It was assumed from onset without doing much market survey and analysis that the product will fly upon launching. You can imagine the shock when we launched the information product and sales were so abysmal that I had to return back to the drawing board to have a more detailed marketing plan.
Before launching your small business, find out how strong the demand for your product or service is in the open market. Online survey, questionnaire, mini test run and pilot launch can help determine your product or service acceptability in the open market.
–Small business retailers sometimes enter into the market without arming themselves with the necessary tools for success. A farmer who goes to the farm without a sharpened cutlass or hoe must be prepared to work with hard labor. The business world is not about exerting so much energy; it is about creating a competitive advantage that will give you an edge. Without a well defined competitive advantage, its tough to compete in an ever challenging market place that places high premium on high tech tools for effective service delivery.
-Small business retailers may most times tend go into the business arena without considering profitability. They are just carried away with the beauty of the products or services they are offering. Every small business owner must think profit before launching out to avoid hiccups along the way. Define your business model and also create a profit or revenue model alongside. If a business is good but not profitable, what’s the wisdom in starting?
-I once had a boss who never believed in the power of the social media. He once had an android phone, but when it got stolen, he quickly erased any thought of keying into the awesome potential of the internet. He has a lot of clients, but unfortunately he did not have an email account, twitter handle, facebook page, neither did he carry out mobile or internet banking. Small business retailers must never ignore the power of the internet in expanding their business and giving themselves a more robust platform to communicate with their present and future clients.
You can never discard the use of a laptop because you are too familiar with a typewriter. Life is evolving and so are small businesses across Africa. Don’t be left behind in the schemes of things.