According the Moneyweb’s Marc Ashton, the reality is that success in a small business often comes down to luck and timing, but there is no harm in playing it safe as well.
Certain ongoing problems and discussions amongst entrepreneurs should be addressed as they keep repeating themselves regularly.
Here is his very own mental checklist, which addresses these issues, that Ashton suggests entrepreneurs should go through every few months:
1. Do you understand the concept of return on capital employed (ROCE)?
This is a harsh one for the entrepreneur who pours every spare cent and every waking hour into their business, but at some point they need an external set of eyes to remind them of Einstein’s definition of insanity: doing the same thing over and over again and expecting a different result.
2. Do you have paying customers?
This is one of the most useful questions to ask. Many will quickly respond that so-and-so is “interested” or they have a ton of proposals out in the market, but is somebody buying what they are selling?
US billionaire Mark Cuban has an excellent quote: “Customers want to see that you have other customers”. If they are not obsessed with providing a product or service that somebody wants and needs, then they are on a hiding to nothing. When the entrepreneur is rattling off everything they could do, you know that they don’t know what it is that they do.
3. What is it you do?
As an entrepreneur, this is a great question to ask yourself every single day because it focuses you in a way that no other question will. When the entrepreneurs is rattling off everything they ‘could’ do, you know that they don’t know what it is that they ‘do’. I didn’t realise it at the time but when I joined my dad’s software company shortly after leaving school, I learnt a really good lesson.
We used to spend a lot of time building bespoke software for a variety of projects and the ultimate return wasn’t great. In time we realised that our area of expertise was “building recipe handling software that interfaced to manual scales”. We could roll the same solution out to the food, pharmaceutical and even panelbeating industries. We could define what we did in 58 characters – can you?
4. Will marketing money help?
As an entrepreneur who makes a profit encouraging people to take out advertising, it is probably a bit self-defeating to say a red flag goes up when I hear people saying that they need to raise money to “market their brand”. A couple of us recently spoke at an entrepreneur’s forum and there were two great stories told.
One was by an entrepreneur from Limpopo who kick-started his business simply by hanging around Transnet tender briefings and bizarrely got his first deal supplying screws and bolts (which he knew nothing about) simply because he was the only person to rock up to the briefing.
If the entrepreneurs themselves are not the best marketing tool then no amount of marketing money in the world is likely to be the answer.
5. Can you add skills without spending much more?
This is always an interesting one because the debate tends to circle why their business needs capital to employ more people in the hope of drumming up additional business.
In all the years I have chatted to entrepreneurs, I can only recall one business where they needed an additional body and they ticked both the ROCE and paying customers boxes.
Interestingly the young lady who ran that business could quite easily have solved a lot of her problems by offering unpaid internships. Ergo no capital outlay. Remember these brilliant words from Amazon founder Jeff Bezos: “If you can’t feed a team with two pizzas, it’s too large.” -Originally posted on Moneyweb