WHITE COLLAR | ISSUE 009
businesses rarely, if ever, make money in the first 4 to 5 years of operation. By this I mean, breaking even, let alone generating a substantial profit. A lot of people go into business expecting solid returns within the first year of operation. When the reality of business hits and they see that the returns are not what they expected, most people give up and go back to formal employment.
revenues in excess of 10 million dollars annually. “I wouldn’t say I’m an entrepreneur, an entrepreneur is someone who uses business to solve an existing problem that has an impact on hundreds of thousands of people. I’d feel better defining myself as a businessman, someone who is simply plying his trade” said Farhan. “After working for about 5 years as an auditor at a leading firm, I noticed there was a huge finance services gap for small and medium sized enterprises (SMEs). Almost the entire market was focused on providing auditing and finance services to the industry leaders. And I struck out on my own to address this SME niche” started Farhan. Being in operation for over 7 years in Kenya’s business climate is an impressive feat in its own right especially given that only 4 per cent of businesses make it past the first year of operation. “Over time I’ve noticed a certain trend with business in that, growth happens
exponentially when the company makes it past the four/five year mark. I’ve seen cases where some companies went from making 3 million a year to 3 million in just a month and I have been trying to figure out why this is the case” continued Farhan. At White Collar we’re constantly trying to figure out how to help more businesses survive. A big part of this would be finding out how to help these businesses make it to the 5 year mark. Farhan takes us through what to look out for and what to do.
So what are the reasons behind why local businesses/start-ups, fail? I’ll start by saying one thing, over the period I’ve been consulting for businesses, I’ve been involved in the day to day management of finances and that affords me a lot of insight on how many different businesses handle their cash-flows. I noticed that
A MAGAZINE FOR THE CAREER-PERSON AND ENTREPRENEUR
You should also realise that when you start a business, for the following period of time you’ll be playing catch-up to the existing players. This will put you at a disadvantage. You may be competing with organizations that are more experienced and more efficient when it comes to service/product delivery. This makes them a good alternative for better quality customers. If you don’t adapt to this by finding a niche that works for you and your company then you won’t be around for very long. Another thing to also look out for as a business person is ‘financial shocks’. Look at a scenario where the client you were depending on to pay defers payment because of cash-flow problems for the next 3 or 6 months. As a young business or start-up do you have enough of a financial cushion to guard against such a shock? Most young businesses do not and if a similar event happened 3 or 4 more times they end up closing shop.
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