By Derek Mutiso
Some time back, I partnered up with a friend to start a juice bar in the neighborhood, not too far from where we lived. We found a vacant shop and rented it. It was a simple setup, with two blenders, a deep freezer, shelves on either side of the shop, and some kitchen tables. Every week, we’d stock up the shelves with fresh fruit, and blend fresh juice for our customers. They’d usually start streaming in after 10 am. We didn’t really have a plan for the business, we just wanted to earn some cash before joining university. We got off to a good start initially; there was steady demand for fresh juice in the area we set up, and soon, we were even selling snacks so people could have them along with juice.
Our business didn’t have a solid model. Whenever we would go to the market for supplies, we would buy a little extra produce, to sell at a profit; so, our store was selling juice, snacks, vegetables, fruit, and whatever else we thought could earn us some extra cash. We hadn’t figured out what our core business was. Some of our customers started making special orders, they’d ask us to do a special blend of fruits, and we would, all for the same price – to make them happy. What we should’ve done was to put pen to paper and calculate how much these special orders cost, then factor it into our final price.
The operating hours were quite long. Most days, we ended up working for more than 12 hours straight. If either of us had an errand to run, and we didn’t open for business, we’d notice a drop in sales the next day. Consistency is key in any business. Close to a year later, after working so hard, and with little to show in the way of profits, we’d burned out. The onset of the rainy season in September was a slap in the face. Nobody wanted cold juice when it was cold and rainy outside. We had failed to study the market and grow our product line in preparation for the cold season.
When we closed shop, I realized the challenges we had faced were only the tip of the iceberg. I’d received a first-hand tutorial on running a small business, but there was so much more I needed to learn. There weren’t too many statistics available on startups in Kenya at the time. It was hard to tell what percentage of them were successful. An article in The Nation newspaper placed the figure at 30%, which would mean that 70% of new businesses fail. There’s a whole load of factors that lead businesses to the SME graveyard, both external and external.
In his memoirs, Marcus Aurelius famously mused that – as a leader, you should “Recognize what you can and cannot control.” As a business owner, your sphere of influence is what goes on inside your business. It’s what will either make it or break it. I set about reading different books, articles, and magazines to figure out why so many businesses fail in the first 1-5 years of operations. Failure in business obviously isn’t just limited to Kenya. It’s something that happens the world over, largely for the same reasons.
Through my research, I identified several common factors that contribute to the downfall of many businesses, regardless of location. Online, I’ve found that YouTube has several channels that can be useful to both budding entrepreneurs and seasoned business moguls.
James, founder and CEO of the Partyman Group of Companies, transitioned from a successful entertainment career to building a business empire that generates £40 million annually. His ventures include leisure, childcare, outdoor attractions, commercial property, arts and crafts, as well as ownership of a historic hotel, Party Pieces, and Rossi ice cream.
Sinclair also runs a popular YouTube channel and hosts the Business Broadcast podcast, where he supports entrepreneurs, consistently ranking among the top in the “Entrepreneurship” category. Because of his wealth of experience in different businesses, he’s got some pretty sound advice. I’ve gathered some tips from his channel, and other sources as well.
Embrace Self-Improvement
One of the harshest truths is that your business can only be as good as you are. To reach the top, you need to constantly improve yourself. Entrepreneurs must be willing to seek out new skills, whether in accounting, leadership, or market analysis. The better you are as an individual, the better your business will perform. Instead of seeking convenience, revel in the challenges of growth.
Be a “penny pincher”
Success comes from being frugal in day-to-day operations, allowing you to invest heavily in key areas like growth, innovation, and acquisition. Lean operations create the capital necessary for strategic investments that move the business forward.
Choose the Right Business Model
Some business models are set up for success, while others are destined for struggle. For example, starting a restaurant is notoriously difficult, while investing in commercial real estate can be much more predictable and profitable. Before launching or expanding your business, research profitable models and ensure you choose a path that allows you to maximize revenue streams. Sometimes tweaking your existing model can make the difference between a “good” business and a “great” one.
Avoid Customer Dependency
Having one major client may seem like a blessing, but it’s a significant risk. If more than 10% of your revenue comes from a single customer, you are at risk of collapse should they leave. Diversify your customer base to ensure that no single relationship holds too much power over your business.
Manage Cash Flow Wisely
Cash flow problems are the number one killer of businesses. Even profitable companies can go under if their money isn’t managed well. Establish multiple revenue streams that generate cash daily. You should also be proactive in securing funding well before you face cash flow problems, so you have resources available when needed.
Know Your Funding Options
Many entrepreneurs overlook the many options available to raise capital. Beyond private equity or venture capital, consider alternative financing options such as peer-to-peer lending or bank loans. Having a solid understanding of how to access funds can make or break your business during challenging times. Employing a skilled accountant early on can be crucial for managing both cash flow and funding sources.
Innovate Constantly
You must innovate or risk being left behind. Markets are constantly evolving, and businesses need to stay ahead of trends. Even if your business is doing well, you should be innovating to ensure future growth. Steve Jobs’ relentless pursuit of innovation took Apple to unprecedented heights, proving that resting on your laurels is never an option.
Master Direct Response Marketing
Successful entrepreneurs are expert marketers. They understand how to get customers, generate interest, and convert leads into sales. Focusing on direct response marketing, which emphasizes clear calls to action and immediate sales, can give you a competitive edge. Remember, marketing isn’t just about brand awareness; it’s about generating tangible results.
Prioritize Growth Over Operations
Many business owners get bogged down in daily operations, spending too much time on administrative tasks. Once you’ve got a good system in place, your focus should shift to growth—marketing, customer acquisition, and looking out for new opportunities. Delegate operational tasks so you can concentrate on revenue-generating activities.
In reflecting on my experience with the juice bar, and subsequent businesses that I’ve ventured into, I am apprehensive of the fact that passion and hard work alone, aren’t enough to sustain a business. Without a solid business model, clear pricing strategies, or market foresight, even the most enthusiastic efforts can falter. The only way to grow, is to be thirsty for knowledge. Businesses, whether in Kenya or elsewhere, face many challenges in their early years. However, success often hinges on factors within an owner’s control. True entrepreneurs thrive on the process of learning. For many, the excitement of new challenges is greater than the satisfaction of success, which is why continuous learning, and persistence are key to both personal and business growth.
The author is a business writer and project coordinator, Omeriye Foundation
