Tuesday, October 01, 2024

by Dr. Shakeel Ahmed

In the world of entrepreneurship, it is considered the pinnacle of success to own your business. Be the King. Run the empire. While for the novice entrant in this world that may seem like a dream trip through life, in reality it is a land filled with missteps, mines and ambushes. The greatest threat to your success, however, comes from within. It is the slow bleed of failures in finances and rampant overhead that will be your denouement.

“ Heavy is the head that wears the crown”.

Michael Jordan said, “I’ve missed more than 9,000 shots in my career. I’ve lost almost 300 games. Twenty-six times, I’ve been trusted to take the game-winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed.” It bodes well for the novice to take the advice of people who have the wisdom of failures behind them. When CEOs like me “preach” about success, we don’t base it upon our successes. Rather, we are grounding it on all the times we fell and rose again from our failures. 

The ship needs to be well managed in order to success, period. Indeed, to ensure the prosperity of your new venture, a degree of sternness is necessary. Your business isn't a democracy; employees can't simply vote for pay increases, and swift, decisive action in the interest of the company is often required. Success in business is challenging, or else it would be a common achievement. 

Failure can stem from various factors, all metaphorically akin to the downfall of a kingdom. These include mismanaging finances, ineffective staffing, inadequate initial funding, legal issues, and insufficient marketing. Let's explore five critical areas that, if neglected, can derail your business:

1- Ineffective Staffing:

The Burden of Non-contributing Employees, or the lack thereof: The most common mistake a new business makes is to start with an overstretched team. The tensile strength of a new employee is very poor. Bend them too much, they break and bolt towards the door. In addition, identify and address employees who no longer contribute to the business's growth or who perform poorly. Maintaining a dedicated, honest, and customer-focused team is crucial for survival. Implement regular performance evaluations to ensure each employee contributes positively to the business. 

2- Initial Funding:

The Necessity of Financial Reserves: This is one of the most common mistakes I tend to see in startups. There is a prevalent belief, chalk it up to the concept of divine intervention or plain ignorance, that you can start with limited funds with the hopes of supporting yourself with incoming revenues. No. That will not happen. Adequate funding is crucial to cover expenses until the business becomes profitable. This involves a well-thought-out business model and sufficient initial capital to sustain the business during its early, unprofitable stages. The age-old financial theory of Free Cash Flow ( FCF) = Operating Cash Flow ( OCF) - Capital Expenditure ( CapEx) still holds true. You will have expenses. You will need a generous reserve fund to survive until you have reached a momentum of persistently positive cash flow. 

3- financial mismanagement:

Every new business faces startup costs, but survival hinges on generating revenue before funds deplete. Delayed payments from clients must be aggressively pursued to ensure cash flow. This includes following up on overdue accounts receivable with persistence and, when necessary, escalating the demands for payment. There is an old dictum that goes, “Take care of the Pennies, and the Pounds will take care of themselves”. It still holds true in every aspect of business management. 

4- Legal and Regulatory Compliance:

Ensuring compliance with legal and regulatory standards is essential to avoid fines and the costs associated with non-compliance. Effective legal counsel, whether through consultation or a retainer agreement, can help manage these risks. A simple misstep in following regulatory guidelines for establishing your business could lead to significant penalties or, worse, closure.

5- Proactive Marketing:

Your mom will always know what you are up to, including what you are doing in your work life. But, just your mom. Everyone else needs to be reached via google or Facebook marketing. Effective marketing from the start is critical for attracting customers from day one. In the digital age, traditional word-of-mouth must be supplemented with modern strategies like social media, SEO, and other digital marketing tactics to ensure visibility and success. 

By addressing these areas proactively, you can protect your business from common pitfalls that lead to financial instability and failure, ensuring a prosperous future for your "kingdom." I end on the sage words of Thomas Edison: “I have not failed. I’ve just found 10,000 ways that won’t work.”