I was recently invited as a panelist to the Oman SME Summit as well as a speaker in a Business Networking event in Kampala, Uganda. In both cases I have summarised 5 crucial points that each entrepreneurs should know by heart. I consider the following 5 as the most important criteria to establish the success of any business.
Some businesses sound extremely exciting until we are presented with the numbers needed to get started. Recently I was pitched a couple of great ideas that I was unable to venture into due to the enormous capital to be invested. This is my first criteria in assessing the business feasibility. Often I interrupt entrepreneurs in their pitch by asking them: “How much is needed?” or “Who is going to make the investment?”. If they freeze, I am out. Dreaming is free of charge, but eventually someone has to pay for a dream to become true. Small businesses can evolve quickly even from a small capital.
Tip: If you are planning to start your company, refrain from asking for large loans and try to find out how far you can go with your own capabilities.
2) Running cost (or Overhead)
Some business are affordable to start, but hard to maintain. I have come across entrepreneurs tempted by the idea of a “cheap” franchising, forgetting how expensive can get to rent stores and hire manpower. Some businesses are so expensive to run that they may generate a loss by the end of each month.
Tip: If you are planning your launch, refrain from having top business location when you yet have to build your clients base. Do so only if location is a crucial factor and you have plenty of capital or cashflow to support months of loss before reaching breakeven.
This may be a true business-killer. I have learned my lesson while trying to start a new business idea in Muscat a couple of years ago. Such business area was not yet regulated by the authorities in the Sultanate, but I trusted that soon it would have been. Being innovative and visionary is great, however when we “cross-check with planet earth” sometimes we find ourself having pushed our imagination too far without studying current rules and regulations. Recently a friend pitched me yet another home delivery business, only to find out that hiring Omani drivers (as per regulations) would have drastically increased his running cost and snatched the profit away.
Tip: Double and triple check all the rules and regulations applied to the business that you intend to run. It is better to take it slow and at times giving up on the idea, rather than getting burned after having already invested.
4) Desirable product or service
Some products are just not appealing. There is nothing wrong with them, but for a reason or another they fail to impress. We live in an era of plentiful, where we have too much of everything. Do we really need another device or more clothes? Do we need another coffee shop or a new restaurants, given that even the largest among us can hardly chew more than 3 meals per day? The bottom line is: ensure that you are selling products or services that people need or want.
Tip: Do not rush into buying what you or your family likes. You might be a small sample of the real market. The truth often shows that what you thought was a great idea, maybe it was not.
One of the main reason why some good businesses cease to grow is the inability to replicate the system. This phenomena can be observed in almost every industry. For instance the owner of a great restaurant operating for a number of year decides to open a second restaurant. As outcome the first one reduces the number of clients and the second one struggles to pick up. Why? Simple. The first restaurant was iconic and became memorable over the years. The replication take time and sometimes does not repeat at all. Another classic is in the service industry. A company performs great as long as the lead salesperson is on board. Any other sales representative does not even get close to the performance of their leader.
Tip: If you are the superstar in your business, stop thinking that all depends on your performance and start delegating responsibilities to your team. Remember that you have only 24 hours per day, but you can hire as many people as you want to replicate what you are already doing great.
With the goal of 150 country to be visited before 2025, Stefano Virgilli is an avid traveller and expert connoisseur of the cultures of the world.