Ten tips to survive the entrepreneurial experience

By Charles Pittaway, Managing Director of Netcash

Doing business in 2012 is as challenging as ever, especially with the on-going recessionary influences in South Africa and abroad. Added to this, those setting out to start a new business are faced with the ever-rising cost of fuel as well as energy and raw materials and the tightening purse-strings of possible investors.  If one were to review the reasons for a failed business, mistakes in marketing, finance and employment are hardly ever the primary factors. Many companies go under despite a solid product offering, skilled resources and detailed financial plans:

1. Agreeing the terms of engagement

A lot of businesses are started by two friends or colleagues who agree to split the equity and the decision making. Unfortunately, these deals have a history of falling apart, usually painfully and expensively.  Sooner or later one partner begins to feel their own contribution is more valuable than the others.  And if there is no mechanism for handling these differences, you’re in trouble.  It’s a good idea to workout out a buy-sell agreement at the start if the business to govern what will happen in the event of a stalemate. If you can’t agree on the terms of a buyout while you’re still friends, how can you hope to do so when the relationship has soured?

2. Ignoring signs of trouble

Failures of judgment at the top have killed more small businesses than lack of money, talent and information combined. As entrepreneurs we’re often influenced by our sentiments to act in ways that actually put our businesses at risk.  It’s absolutely essential to put aside regular time to step back, take a good cold look at what is going on and check whether it still adds up. When you do that, you need to trust the numbers: don’t let your attachment to the business blind you to warning signs of trouble.

3. No back-up plan

Of course you believe your business will succeed, or you wouldn’t be doing it. But failing to put a backup plan in place is suicidal. What if your product takes twice as long to develop as you thought, or customers buy only half as much?  It often takes twice as much time or three times as much money to get going as you predict.

4. Excess cash

Oddly enough, too much money can be as much of a curse as too little. It can tempt you to hire people you don’t need, approach problems in ways that don’t focus on the value to your customer, take your eye off the market and weave dangerous inefficiencies into your business. Don’t ever get too comfortable.

5. Accountability

I love working in flat organisations without lots of structure and hierarchy – it’s one of the reasons I started Netcash. But it would be naïve to think we could survive without some structures and channels for making decisions.  When people start looking for direction, they need to know where it’s coming from.
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