Killer Challenges To Overcome Or Lose Your Small Business

Tips For Small Business Survival In Nigeria

Small businesses face tough challenges in every part of the globe, given their limited resources, size constraint and generally weaker systems. However, starting and running a business can be an immensely rewarding experience, as success will bring fulfillment and financial security.

Building a business to success is considerably demanding. In our peculiar environment where exceptional problems are pervasive, the challenge of nurturing a business becomes accentuated. Should that scare and discourage you? No, because you can't win if you are unwilling to get uncomfortable. Besides, the reward of success is a commensurate compensation for the burden of business-building. The expectation of success becomes the tonic to sustain your drive in battling the hazards.

To boost your chance of surviving, it's important you effectively deal with the following identified killer problems which can scuttle your effort:

1. Poor Power Supply:
For most small businesses, the acute power shortage is the first killer-punch. The decay of the power generation and distribution system stemmed from past years of military (mis)rule. The government is currently working hard to restore meaningful supply, but significant results are not expected until several months down the road. Generating your own power becomes an imperative you must face and deal with, for now. Given the rising cost of fuel, this could make or mar your business. Except your business is not electricity-dependent, which is rare, you must work out a solution to your power supply requirement.

What To Do?
First, recognise the enormity of the problem and plan for it. In certain lines of business, power-sharing seems an attractive proposition, but strangely, businesses have failed to explore it. The trend has been for each business unit to acquire its own power-generation equipment, which is not cost-efficient. Can't a few small businesses jointly acquire and run a generating set which has the capacity to carry their load? We suggest you explore sharing this asset with one or more businesses, especially if required consumption for each party is moderate. If you can't, buying one becomes a necessity, if you desire stable operations. If you can't readily fund it, you may consider the various product-finance schemes currently offered by a number of banks. A lease finance by a leasing company may also be an option. Just get their offers and compare the terms.

A more cost-efficient option may be to buy an inverter. A power inverter stores power when the public supply is up and powers your system when the public supply goes off. No running cost is incurred (no fuel, no oil, no serious servicing), it's clean (no noise pollution, no messy oil-leakages) and offers convenience (automatic ones switch between mains and inverter modes automatically as public supply comes and goes). Also, the system can be in any corner of your room as it occupies only little space and requires no carrying about, thus eliminating worries about portability or security. Above all, they are relatively affordable.

The bottom-line is that your business plan must deal with how to meet your power supply requirement before you can hope to have a running business. Until power supply improves substantially, you have to unfortunately live with this reality.

2. High Cost of Doing Business
The high cost of doing business is the direct effect of a weak infrastructural base. Again, some effort is currently directed by the government at some of these accumulated problems. However, until much progress is recorded, your business has to bear the brunt. The road network is in disrepair and translates to high transportation cost which could affect your business if haulage or significant movement is involved. Though the advent of GSM telecom service has provided access, the cost remains prohibitive for business. The multiple taxes imposed by the various tiers of government and the crudity of enforcement could be a nightmare to the small business owner. Inflation and interest rates are other high cost elements that adversely impact on your business. In all, if you are not able to generate adequate revenue and reasonable margins to absorb these costs, your survival in business may not be assured.

What To Do?
To survive, you must get creative and work out ways to manage your costs and achieve a low cost-profile. Be practical. For instance, while GSM phones are the norm today, do you realise you will substantially cut your phone bill by using the fixed wireless option as well? Starcomms, MTS First, Multilinks, etc, offer mobile and fixed lines you can run more cheaply. Why would you make a N48/minute call, if you can make the same call at N6 or even less? Yet, the former is what most businesses use today. For me, the GSM line is the back-up. Explore smart ways to cut costs in what you do, otherwise your margins may just be eaten up by overhead.

3. Dearth of Micro-credit And SME Finance
Funding is a problem to small businesses everywhere in the world, but it becomes a dizzying nightmare in an environment where you can hardly access funds for a small business. Don't ask me about the Bank of Industry or other agencies of government. The SMEIS scheme? Commercial loans from banks? On paper, these are options. In reality, it's still like squeezing water out of stone for any small business. And if you do, the cost will probably crush the business. Near 20% interest rate is not easy to recover and make a profit.

What To Do?
If you are in employment and might want to start a business, the wisdom is to plan ahead and build your seed capital. Your personal savings will remain your best bet for starting off. Set a target now, based on the projected future requirement and begin to muster a take-off fund. The alternative is to seek help from relatives and friends, if they have the capacity and willingness to support you. If these options can't work for you and your business idea is bright and viable, gear up for the harsh reality of a protracted hunt in the financial system. Check out our article on Nigeria's new micro finance policy - The Micro Finance challenge: New Policy, Fresh Hope- for a perspective on future prospects.

4. Quality Control: Regulatory Weakness
For long term business success, you possibly will aim to deliver quality products to the market. The big problem is that the market easily gets flooded with sub-standard, low-priced product versions. So you may have some difficulty selling your stuff, in the face of the cheaper, poor quality versions. If you differentiate and your product proves successful, trust that cheaper clones will soon flood the market to drive you out. Though NAFDAC, the food and drug control agency, has wedged a vigorous war to sanitize the food and drug sector, it's still far from victory. Meanwhile, other sectors remain largely unchecked. So, depending on what you are bringing to the market, this factor may be critical to your survival.

What To Do?
This is really difficult, but one important step is to provide proper legal protection to your business. Are there trademark, patent or copyright issues that are relevant to your business? Check with an expert and ensure you have documented rights over product design, names, and all intellectual property. Also, stay formal and register your business. Product registration and certification will help to confer a stamp of approval on your product, which is good for your business. If you detect any infringement on you proprietary rights, agencies like NAFDAC, the Copyright Commission and the Standards Organisation may be able to help you reign in on the culprits.

5. Lack Of Institutional Support
Countries that recognize the importance of small enterprises in employment-creation and economic growth establish various support-agencies to nurture and assist small businesses. In Canada, USA and major European centres you will be talking of countless support agencies that deliver visible and measurable results. The small business sector gets tonnes of help in: generating and refining business ideas, setting up a business and walking it through its early stages, funding to start and grow the business, training for owner and staff and a whole range of hand-holding to ensure success. In contrast, here, as the saying goes, 'you are on your own'. Not much help is available. SMEDAN, the small business agency of government, has had very limited impact as it is yet to build its capacity. NAPEP seems more of propaganda stuff. Business associations like the business chambers and trade groups are yet to pay attention to building a support base for startups and small operators. Fate Foundation, an NGO, is doing a great job, but has very limited capacity.

What To Do?
Recognize that you need information and knowledge to successfully start and run your business. Don't be discouraged by the local absence of a support base. You can always comb beyond these shores. The internet is of much help here to provide lots of ideas from across the globe. More importantly, convince yourself of your commitment to success, in spite of all deficiencies and odds. If you make up your mind to succeed, you probably just need to work harder and get more resourceful than those who are privileged to get lots of help.

6. High Default Rate
You may want to be patriotic and gloss over this, but the reality is that the average person you transact with may be slack in discharging his part of the bargain. The integrity factor is low and often a problem. Take some examples. The person you commission to fabricate your equipment and pay 60% mobilization is likely to: delay the job with tonnes of excuses, roll out a poor quality job or completely fail to perform. The person you supply products to on credit is likely to drag the payment or totally renege. The cheque you receive from your customer has a high chance of bouncing. These things are so because enforcement is difficult, if not impossible. A situation where an action in court could take several years to dispose of can only embolden a defaulting party!

What To Do?
Be warned! Approach every transaction with eyes wide open and ensure your terms are clearly spelt out and properly documented. Accessing the services of trusted professionals (an attorney, accountant, etc) will always help your business by providing advice and scrutinizing documents, when necessary. A 'prevention-is-better-than-cure' approach will help ensure your continued stay in business. Also be careful in selecting those you contract to execute jobs and be sure you get reliable references. If you will grant credit, have a fallback. In summary, don't assume that all will be well: disappointments are rampant and can prove costly if you have no protection.

7. Difficulty of Assembling a Good Team
This can be a problem anywhere. It is however accentuated here, knowing that most employees available to small businesses may be unskilled and ill-trained. You may also be disappointed at the poor level of commitment to goals. Getting employees to buy into your vision and work for the growth of the business will be a tough challenge. The drive for quick money will also mean a high tendency to defraud the business.

What To Do?
Do your best to select well during recruitment and ensure strict compliance with company rules as to discipline, honesty and hard work. Insist on responsible guarantors when you recruit. Training your staff will immensely benefit your business even if you lose some after training. Also, be fair and remunerate workers adequately. For more on recruiting a good team, consider reading our article

These are some of the tough issues you will have to deal with to successfully start and run a business. They may challenge you but shouldn't overwhelm you. Many business people have been able to contain them and make a success of their business ventures. You have no reason to fail. It's however important you do your homework and design strategies to beat these drawbacks. If you get it right, your success is in a matter of time.

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