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As a new year begins, many aspiring entrepreneurs will flirt with the idea of leaving their full time employment and starting their own businesses. However, the current slowdown in economic growth and uncertainty will be enough to discourage even the most determined people from taking a leap of faith.
The reality is that times are tough. Therefore, entrepreneurs that are strong-willed to forge ahead with their business ideas will have to tread cautiously and be prepared to deal with the many risks and challenges associated with starting a new business.
A question I often get from entrepreneurs is — when is it a good time to start a business? The simple answer is that there is never a perfect time to start a business. Once startup capital has been secured, it is a matter of finding a gap in the market, having a unique and innovative idea, acquiring the right expertise and coming up with a solution that will satisfy market needs.
Even when the economy is doing well, we still see about 70% of all start up businesses in South Africa failing during their first year of inception. If the value proposition is strong enough, a new business will still strive even in the toughest economic conditions.
It is common in the business world for large corporates to limit investment and take fewer risks during times of economic difficulty. This provides the perfect opportunity for entrepreneurs to introduce innovative ideas and provide goods and services that are cost-effective and appeal to consumers.
Furthermore, when the economy is not doing well, consumers often have less income at their disposal. So, during this time consumers are looking for value for money, and will not think twice about supporting any business that offers value.
Starting and operating a business when times are tough can often benefit the entrepreneur in the long-term, as it places the business in a good position to thrive when the economy recovers.
Below are a few tips for entrepreneurs that want to start businesses in 2016:
- Industry and competitor research — before going into business, it is important to do thorough and comprehensive research about the industry and your competitors. Failure to do proper research is one of the reasons why most start-ups fail in the early stages.
- Business plan — a water-tight business plan which has been scrutinised to the finest detail is essential when starting a business in tough times. You simply cannot afford to let anything slip.
- Capital — before starting a business make sure that you have enough capital to cover basic and unplanned business expenses. If things don’t go according to plan, you will find yourself in financial difficulties.
- Outsource — many new entrepreneurs often make the mistake of wanting to tackle everything on their own, at the expense of the business. Is it essential to outsource whenever possible. For example, you cannot be an accountant, fleet manager, events specialists, data capturer and managing director at the same time.
- Risk management — when starting a business it is essential to take all possible risks into consideration and be prepared to adequately deal with them. The first step is to compile a risk management plan.
- Cash Flow management — properly managing cash coming and going out of the business can often determine its success. Therefore, implementing good cash flow management principles from the onset is essential.
- Customer needs — identifying a customer problem that requires solving and creating a customer centric solution is absolutely key. Customers must accept that the problem they are experiencing needs solving, and that your solution is the one they want.
Pursuing transformative purposes — entrepreneurs should attempt to solve problems that resonate with them, which are important enough for them to focus their efforts on, and continue to pursue, even when the going turns rough.
If you are planning to start a business this year, do your homework and have confidence in your value proposition, don’t let tough economic conditions stop you from succeeding.
Image by WOCinTech Chat via Flickr