SMALL BUSINESS SPARK SEMINAR
‘WHY SMALL BUSINESSES FAIL … AND TO AVOID BEING ONE OF
THEM!’
Robert Warlow
Group Head of Risk
Fina Bank
OF ALL OF THE ISSUES WHICH SMALL BUSINESSES FACE THE
FEAR OF FAILURE IS ALWAYS AT THE BACK OF YOUR MIND.
YOU HAVE BUILT UP A BUSINESS, SPENT A BUCKET FULL OF
MONEY AND INVESTED A SIGNIFICANT AMOUNT OF YOUR TIME,
ALL WHICH CAN POTENTIALLY BE WASTED IF YOUR BUSINESS
COLLAPSED.
TODAY I’M GOING TO SHARE WITH YOU SOME OF THE MOST
COMMON REASONS AS TO WHY AND HOW SMALL BUSINESSES
FAIL. DURING MY TIME IN BANKING I HAVE SEEN GOOD
BUSINESSES FAIL AND I HAVE SEEN BAD BUSINESSES FAIL BUT
THERE ARE ALWAYS REASONS WHICH ARE COMMON TO ALL
AND IT IS THIS THAT I WANT TO SHARE WITH YOU TODAY.
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NOW MOST OF THESE REASONS FOR FAILURE YOU CAN PLAN FOR IN ORDER TO SIGNIFICIANTLY REDUCING THE POSSSIBILITY OF THEM HAPPEN. SOME OF THEM WILL BE BEYOND YOUR CONTROL BUT THERE ARE STILL SOME STEPS YOU CAN TAKE TODAY TO REDUCE THE RISK OF YOUR BUSINES FAILING.
THE FIGURES ON SMALL BUSINESS FAILURES MAKE QUITE DEPRESSING READING.
TO MY KNOWLEDGE THERE ARE NO KENYAN STATSTICS BUT I’M SURE THAT THE RESUTLS ARE COMMON. IN THE US 40% OF START UPS WILL HAVE CLOSED BY YEAR 2. BY YEAR 4 AT LEAST 60% OF THEM WILL HAVE CLOSED THEIR DOORS. SO IF YOU LOOK AROUND THIS ROOM AND WE BRING YOU ALL BACK HERE IN 4 YEARS TIME 60% OF YOU WILL NOT BE HERE!
SO LET’S HAVE A LOOK AT SOME THE REASONS I SEE AS TO WHY SMALL BUSINESSES FAIL AND WHAT SPECIFIC STEPS OR ACTIONS YOU CAN TAKE TO MAKE SURE YOU ARE NOT ONE OF THEM.
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NO DIRECTION, GOALS OR STRATEGY
FIRST OF ALL, THE VERY FOUNDATION OF BOTH PERSONAL
ANDBUSINESS SUCCESS – FORWARD PLANNING, KNOWING
WHERE YOU ARE GOING, YOUR GOALS.
THOSE OF YOU HAVE READ SELF-HELP AND PERSONAL
DEVELOPMENT BOOKS WILL HAVE HEARD ABOUT THE
IMPORTANCE OF GOAL SETTING. IT IS NOT SOMETHING WHICH
ONLY APPLIES TO YOUR PERSONAL LIFE; IT EQUALLY APPLIES
TO YOUR BUSINESS ALSO.
KNOWING WHERE YOU WANT YOUR BUSINESS TO BE, WHAT IT
LOOKS LIKE, IS ESSENTIAL IF YOUR BUSINESS IS TO SURVIVE. SO WHAT DO I MEAN BY SETTING A GOAL?
A GOAL IS AN ASPIRATION OR TARGET OR PICTURE OF WHAT
YOUR BUSINESS WILL LOOK LIKE WITHIN A CERTAIN PERIOD.
IDEALLY YOU SHOULD SET AMBITIOUS GOALS BASED ON 1
YEAR 3 YEAR AND 5 YEAR TIME PERIODS.
YOUR GOALS CAN BE VERY SPECIFIC AS TO HOW YOU DEFINE
THAT EMOTIVE WORD SUCCESS. SO WHAT DOES SUCCESS
MEAN TO YOU? WILL YOU DEFINE YOUR MEASURE OF
ATTAINING SUCCESS AS:
? ACHIEVING A CERTAIN LEVEL OF TURNOVER – KSH 50M
BY YEAR 1; KSH75M BY YEAR 2?
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? EARNING A CERTAIN AMOUNT OF PROFIT – KSH10M BY
YEAR 1; KSH 25M BY YEAR 3?
? THE NUMBER OF OUTLETS YOU WILL HAVE IN YEAR 1,
YEAR 3 AND YEAR 5
YOU MUST HAVE A DIRECTION TO WORK TOWARDS. YOUR
GOAL WILL DICTATE ALL THE ACTIONS AND STEPS YOU WILL
TAKE.
WITH NO END GAME PLAN IN SIGHT OPPORTUNITIES WHICH
ARE PRESENTED TO YOU WILL NOT BE SEEN.
THINK OF IT THIS WAY … YOU ARE PLANNING TO BUY A NEW
CAR; YOU HAVE DECIDED ON THE MODEL AND COLOUR;
SUDDENLY EVERYWHERE YOU LOOK YOU START SEEING THAT
EXACT MODEL AND COLOUR! HAS THAT HAPPENED TO YOU?
YOU HAVE ACTIVATED WHAT IS CALLED YOUR RETICULAR
ACTIVATION SYSTEM. THIS IS THE PART OF THE BRAIN
THOUGHT TO CONTROL EMOTIONS AND MOTIVATION. WHEN
YOU SET YOUR MIND TO LOOK FOR SOMETHING YOUR
RETICULAR ACTIVATION SYSTEM STARTS LOOKING.
WITHOUT DECIDING WHAT YOU WANT IN LIFE OR BUSINESS
ALL THE UNSEEN OPPORTUNITIES AND CHOICES PASS US BY
BECAUSE WE MENTALLY FILTER THEM OUT – OUR BRAINS
DECIDE WHAT THEY HAVE SEEN IS IRRELEVANT TO YOU AND
SO DOES NOT PASS IT ON TO YOUR CONSICIOUS MIND.
THIS IS WHERE GOAL SETTING AND STRATEGY COMES IN –
YOU’RE LITERALLY INSTRUCTING YOUR BRAIN TO SEEK OUT
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OPPORTUNITIES IN ORDER TO ACHIEVE YOUR GOAL; THOSE
OPPORTUNITIES WHICH WOULD HAVE BYPASSED YOU WILL
NOW JUMP OUT AT YOU!
BY OUR VERY NATURE HUMANS BEING ARE TARGET SEEKING –
EVERYTHING WE DO HAS AN END MOTIVATION – SO SET YOUR
GOALS AND BE A TARGET SEEEKING ENTREPRENEUR.
IS ALL VERY WELL SPOTTING THE OPPORTUNITIES BUT YOU
HAVE TO TAKE ACTION! NO ACTION, NO RESULTS. WE CAN ALL
FINDS REASONS TO PROCRASTINATE BUT AS ENTREPRENEURS
YOU CANNOT AFFORD TO SIT BACK AND DO NOTHING.
TO BE A SUCCESS IN BUSINESS YOU HAVE TO BE PRO-ACTION!
SO GET OUT THERE AND DO IT!
NOT LISTENING OR GETTING FEEDBACK FROM YOUR
CUSTOMERS
THE NEXT REASON FOR FAILURE IS NOT LISTENING TO WHAT
YOUR CLIENTS ARE TELLING YOU OR GETTING FEEDBACK
FROM THEM.
THERE IS A SAYING: ‘FEEDBACK IS THE BREAKFAST OF
CHAMPIONS’
YOUR CUSTOMERS ARE THE VERY REASON YOU EXIST. IN
MANY CASES THEY KNOW YOUR BUSINESS BETTER THAN YOU
DO!
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THIS IS BECAUSE THEY ARE AT THE SHARP END – THEY ARE
EXPERIECNING THE QUALITY OF YOUR PRODUCT; THEY ARE
EXPERIENCING THE POOR SERVICE THEY GET FROM YOUR
EMPLOYEES; THEY ARE THE ONES WHO ARE INCONVENIENCED
BY YOUR OPENING HOURS.
GET SOME OF THESE THINGS WRONG AND SLOWLY YOUR
CLIENT BASE WILL FALL AWAY AND TAKE THEIR BUSINESS TO
YOUR COMPETITIORS.
IT WON’T HAPPEN OVERNIGHT BUT BIT BY BIT THEY WILL
DRIFT AWAY LEAVING YOU WITH NOTHING.
AS THE OWNER OF YOUR BUSINESS YOU MUST MAKE IT YOUR
BUSINESS TO FIND OUT WHAT YOUR CUSTOMERS ARE
THINKING.
WHAT IS ANNOYING THEM ABOUT THE WAY YOU CONDUCT
BUSINESS? WHAT IS ANNOYING THEM ABOUT THE WAY YOUR
STAFF INTERACT WITH THEM? HOW COULD YOU MAKE YOUR
PRODUCT EVEN BETTER?
YOU HAVE TO ASK THESE QUESTIONS. HOW?
? A FORMAL SURVEY CARRIED OUT WITH A
QUESTIONNAIRE
? YOU RAMDOMLY VISIT YOUR CLIENTS, NOT TO SELL
THEM ANYTING BUT JUST TO TALK ABOUT THEIR
PROBLEMS
? CALL THEM UP
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? TAKE YOUR KEY CLIENTS OUT TO DINNER ONE NIGHT
DO NOT BE THE AROGGANT BUSINESS OWNER WHO SAYS HE
KNOWS EVERYTHING. YOU CAN NEVER KNOW IT ALL. IF
SOMEONE SAYS HE KNOWS IT ALL HE IS EITHER STUPID OR A
LYER … OR PROBABLY BOTH!
SO PUT YOURSELF IN FRONT OF YOUR CLIENT TO FIND OUT
WHAT HE REAL THINKS … AND TAKE ACTION ON IT!
NOT KNOWING WHAT YOU DON’T KNOW
THIS IS LINKED IN A WAY TO THE PREVIOUS POINT BUT THIS
TIME FROM THE ANGLE OF SPECIFIC SKILLS YOU MAY HAVE.
THE VAST MAJORITY OF YOU STARTED A BUSINESS BECAUSE
YOU HAD A GREAT IDEA. THAT WAS IT; YOU SPOTTED A GAP IN
THE MARKET, YOU TOOK ACTION AND HERE YOU ARE.
BUT LET ME BE BRUTALLY HONEST … MOST OF YOU ARE NOT
FIT TO RUN YOUR OWN BUSINESS! MOST OF YOU SHOULDN’T
BE WITHIN 10 FEET OF A SMALL BUSINESS LET ALONE RUN ONE!
HARSH I KNOW BUT TRUE! SO WHAT DO I MEAN? AS I SAID YOU
HAVE THE IDEA, YOU WERE MOTIVATED AND YOU TOOK
ACTION. ALL GOOD STUFF BUT RUNNING A SUCCESSFUL
BUSINESS NEEDS MORE THAN THAT.
YOU MUST BE HONEST WITH YOURSELF AND REGONISE THE
SKILLS YOU DO NOT HAVE.
TO BE A GOOD ENTREPRENUR YOU NEED:
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? FINANCE SKILLS
? SALES SKILLS
? MARKETING SKILLS
? HUMAN RESOURCES SKILLS
? NEGOTIATING SKILLS
? BUSINESS DEVELOPMENT SKILLS
? ADMINSTRATION SKILLS
JUST HAVING A GOOD IDEA IS NOT ENOUGH IN TODAY’S MARKET!
I SAID MOST OF YOU ARE NOT FIT TO RUN A BUSINESS BUT
THAT’S NOT TRUE … BY BEING HERE TODAY AND GIVING UP
YOUR TIME YOU HAVE DEMONSTRATED YOUR DESIRE TO
LEARN. YOU HAVE STUCK YOUR HAND UP IN THE AIR AND SAID
YOU DON’T KNOW. IN FACT LET’S DO THAT... ALL OF YOU PUT YOUR HAND IN AIR AND SAY AFTER ME ‘I DON’T KNOW EVERYTHING!’
NOW THAT YOU HAVE ADMITTED THAT TO YOURSELF TAKE
SOME TIME OUT AND DECIDE WHERE YOUR WEAK AREAS ARE
AND THEN DO SOMETHING ABOUT IT.
FIND A BOOK, GO ON A COURSE, FIND SOMEONE WHO HAS
THAT SKILL AND LEARN FROM HIM.
DO WHATEVER YOU CAN TO UPSKILL YOURSELF.
BELIEVING
YOU ARE THE BUSINESS
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WHEN YOU STARTED OUT IN BUSINESS IT WAS PROBABLY YOU
AND ONLY YOU. YOU DID ALL THE JOBS BUT THEN YOU TOOK
ON SOMEONE TO HELP OUT BUT YOU STILL DID ALL THE KEY
JOBS... AND I BET THOSE OF YOU WHO ARE RUNNING LARGER
BUSINESSES ARE STILL INVOLVED IN DOING ALL THE JOBS:
? YOU DO THE MAREKTING
? YOU FIND NEW CUSTOMERS
? YOU MAKE SURE THE ORDERS GO OUT
? YOU MAKE SURE THAT THE INVOICES GO OUT
? YOU RECRUIT NEW STAFF YOU ARE JUST DOING, DOING, DOING. HOW MANY OF YOU
WOULD SAY THAT YOU SPEND YOUR TIME DOING, DOING, AND
DOING?
THEN I HAVE NEWS FOR YOU … YOU ARE NOT AN
ENTREPRENEUR OR A SMALL BUSINESS OWNER, YOU ARE AN
EMPLOYEE. THE BUSINESS IS EMPLOYING YOU AND YOU ARE
DOING A JOB.
THIS IS EXACTLY WHAT YOU WERE TRYING TO AVOID BY
SETTING UP YOUR BUSINESS AND YET THIS IS WHAT YOU HAVE
BECOME.
YOU CAN ONLY BE A TRUE ENTREPRENUR WHEN YOU STOP
DOING, DOING, DOING AND YOU CAN WALK AWAY AND DO
BIGGER AND BETTER THINGS.
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AS THE BUSINESS OWNER YOU SHOULD BE STRATEGISING,
THINKING OF NEW IDEAS AND WAYS TO DO BUSINESS,
CHECKING ON YOUR CUSTOMERS, MAKING NEW CONTACTS – NOT BEING INVOLVED IN THE DAY-TO-DAY MUNDANE TASKS – THAT’S FOR THE EMPLOYEES OR WAGE SLAVES, NOT YOU!
NOW THERE ARE TWO THINGS THAT ARE STOPPING MOST OF
YOU FROM TAKING THIS LEAP:
? FIRST FINANCIAL - YES, I CAN HEAR YOU SAY IT, ‘BUT I
CAN’T AFFORD TO TAKE SOMEONE ON.’ I’M SORRY, BUT
YOU CAN’T AFFORD NOT TO! THERE HAS TO COME A TIME
FOR ALL BUSINESSES WHERE YOU HAVE TO LET GO
OTHERWISE THE BUSINESS WILL NOT GROW
‘TO GROW … LET GO.’ FIND THE MONEY! YOU WILL ALSO
FIND THAT FREEING YOUR SELF FROM THE DAY TO DAY
ROUTINE WILL ALLOW YOU TO GENERATE ENOUGH NEW
BUSINESS TO PAY FOR THAT EMPLOYEE – THE MONEY
WILL COME
? SECONDLY – HUMAN NATURE – WE HAVE A NEED TO BE
NEEDED; WE NEED TO FEEL WANTED AND LOVED. IT IS
AGAINST OUR NATURE TO WALK AWAY FROM
SOMETHING WE HAVE BUILT. FOR A SHIP TO DEPART TO
NEW SHORES IT HAS TO THROW OFF THE ROPES KEEPING
IT TIED TO THE DOCK. YOU HAVE TO DO THE SAME – TO
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