How to be a successful entrepreneur

Last updated on 5th December, 2018 at 02:38 pm

Running your own business and being your own boss may sound appealing but it takes blood, sweat and tears to be successful.

In the current tough business environment, where retrenchments are the order of the day, more and more former employees, young and old, have to fend for themselves and their families by setting up their own businesses. So what do you need to become a successful business owner?

Create a business plan

“Thorough planning is the key to success, so you should begin by drawing up a sound business plan,” advises Jannie Rossouw, Head: Sanlam Business Market. “No matter how small or how large your business, you’ve got to proactively plan the work — and then aggressively work the plan,” he says.

Before you can start a business, you must be reasonably sure that the business is feasible. You also need to be certain of the resources required to start the business, and continue managing the business profitably. “It is crucial to limit the debt of a fledgling business, so you should avoid borrowing money to start your business at all costs,” warns Rossouw. “Instead, if possible, use your savings.”

If you have to borrow money, bear in mind that personal surety comes into play, which, in turn, requires insurance to prevent a claim against your estate should you become disabled or pass away.

Implement what you learn

You can teach yourself habits that will improve your chances of business success, but if you cannot implement what you’ve learnt, it simply remains theory, says Rossouw. At the same time, you need to work on your business, not in your business. When you work in your business, you limit yourself to being the central node around which everything revolves.

A successful business is one that can function normally irrespective of your physical presence. This said, when you start a business, you unfortunately are chief cook and bottle washer – until such time when the cash flow is healthy and you can appoint people to help you manage the business.

Set goals and a target market

While setting clear goals is crucial to achieve business success, you also need to measure performance regularly against these goals so that, if and when necessary, you can make the required adjustments.

Likewise, it is important to clearly define your target market. Too often budding entrepreneurs reckon the entire market is the target for their product or service. “Unfortunately, this is not the case,” says Rossouw. “Owners of smaller enterprises, which have performed well over the short term, are those who from the outset identified opportunities in a niche market.”

Avoid the pitfalls

Alas, the road to business success is paved with pitfalls. Lacking a clear, meticulously monitored and regularly updated business plan, as well as the lack of sound business processes and structures, may very well lead to failure. Likewise, you need to be adept at managing cash flow and understanding financials. “Equipping yourself with the basic principles of accounting practice in a business is a cardinal rule for self-development,” stresses Rossouw.

Business owners should also acknowledge their own ‘blind spots’ and get the right people to assist. Likewise, by failing to delegate some of the work, a business owner may all too soon find himself tied in a knot. So, beware of the egocentrism that often comes with entrepreneurship.

Treating customers with disrespect or not keeping your promises is a sure way of harming your business by word of mouth or a negative viral marketing campaign.

Don’t keep too much cash tied up in debtors and stock. This reduces the cash available for meeting the company’s operational expenses. It is sometimes advisable to offer settlement discounts for cash payments and to collect your debtors timeously or even sell a part of the debtors book (also referred to as debtors factoring). This will avoid cash being tied up in debtors instead of being available for use via your bank account.

Unrealistic expectations of success may also bring a rude awakening. “People tend to think business is easy. While it may be simplistic, it’s not easy,” warns Rossouw. “It requires time and tenacity. In the meantime you must survive and meet the business’ cash flow requirements.”

Cash flow is crucial

Right from the outset, the pricing strategy and cost calculation need to be correct to ensure that people will buy your product or service. It’s also crucially important to keep a hawk’s eye on expenses. As cash flow is a result of turnover, and turnover is necessary to generate profit, not only cash flow but also turnover and profit, need to be carefully monitored.

If possible, also avoid a debtors book and carefully consider creditors’ payment terms. Often business owners pay too early, or too much, in terms of interest, so try to negotiate the most favourable terms with creditors, advises Rossouw. Thirty days payment after statement should attract a settlement discount; alternatively, payment should be 60 days net or longer. Purchases should be made as early as possible in the month to maximise the number of days in which payment must be made.

Do you fit the bill?

People often wonder if they fit the bill to become a successful entrepreneur. Rightly so, says Rossouw, for anybody who wants to venture out as an entrepreneur and achieve success, needs the right armour.

Don’t be complacent – managing your own business demands far longer hours and more skills than pursuing a career as an employee. So, besides staying power and believing in yourself, your product and your service, you should have sufficient experience in that particular field or industry. Are you able to handle stressful situations with a positive and realistic attitude? Will you be self-motivated to do tasks that you don’t particularly enjoy, be organised and set priorities to optimise your efficiency? Can you set realistic goals and work to achieve them?

These are just a few of the characteristics and skills that will set you on the right path towards being a successful entrepreneur.

By Wilma de Bruin