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Why Small Businesses Fail - Welcome to Fina Bank

By Karen Harper,2014-07-10 13:31
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Why Small Businesses Fail - Welcome to Fina Bank ...

    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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