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This Enterprises UP Expert Explains Why Start-Ups Really Fail

Too many young businesses fail because the entrepreneurs involved don’t focus on the basics early on. If you want your company to beat the start-up odds, you need to sweat the details.

GG van Rooyen

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  • Player: Dr Alex Antonites
  • Organisation: Enterprises University of Pretoria
  • Position: Professor in Entrepreneurship in the Department of Business Management at the University of Pretoria. Consults for Enterprises UP.
  • Established: 2000
  • Visit: enterprises.up.ac.za

As a lecturer at the University of Pretoria and a consultant to Enterprises UP, Dr Alex Antonites has dealt with a lot of new entrepreneurs. And one of the main reasons their young businesses go under is a failure to focus on the fundamentals.

Too many new entrepreneurs are so eager to get out there and sell, that they neglect important support functions until it is too late.

Related: Entrepreneur BB Moloi’s Inspiring Story of Rise To Success Through Grit And Hard Work

Here are Dr Antonites’ tips for getting the fundamentals right.

1. Do your research

“Many new businesses fail because the entrepreneurs involved simply don’t understand the market or the industry,” says Antonites.

“Before investing too much time and money into a business, you need to do research. There’s a lot of information out there these days, you just need to access it. Examine the nitty gritty of an industry. What are the rules and regulations involved? How saturated is the market? Who are the main players? What kind of capital do you need to set up this particular kind of business?

“You also need to do what is called customer discovery. Before launching a business, get out there and speak to people. Find out if there really is a market for what you’re selling before you invest too much time and money.”

2. Understand turnover

“When it comes to ascertaining the health of a business, we don’t actually pay much attention to turnover. It all depends on the industry you’re operating in and the margins you’re dealing with,” says Antonites.

“In an industry like mining, for example, you could have a massive turnover without really making much money. So, in order to be successful, you need to understand — and pay attention to — things like gross profit, net profit, debtors, creditors, etc.

“You need to know exactly what the financial situation of your business is at all times. You need to know what’s coming in and what’s going out every single day. You also need to be able to read a financial statement and know what’s going on. Some financial literacy is important. You don’t need to have a degree in accounting, but you need to understand the basics.”

Related: RocoMamas Founder Brian Altriche’s On Fabulous Failures And Visualising Success

3. Ask the experts

“When your business is new and you’re not really making a lot of money yet, employing a financial or legal consultant can seem like an unjustified expense. But getting an accountant to look at your books or a lawyer to examine your contracts is worth it. A lot of businesses bring in experts only when there’s a problem. That’s often too late. What you should do is bring in knowledgeable people early on. Many businesses make mistakes during the first year or two that they end up paying for long afterwards. This is especially true when it comes to contracts with clients, suppliers and employees. So a lawyer can end up saving you money in the long run,” says Antonites.

4. Spend as little as possible

“While some things, like getting an accountant or lawyer, might be justified, it’s still important to manage your expenses carefully,” says Antonites.

“Moving into expensive offices or hiring a lot of people can cripple a young business, so you want to keep your expenses as low as possible.

“Where a lot of small businesses end up losing money is in procurement. I had a student a while ago who was in the construction industry. His turnover was very decent, but he wasn’t making a profit. When I started questioning him about it, it became clear that he was purchasing his building supplies from a retail store, so he was paying R2,10 for a brick. Once we found a place where he could buy supplies at wholesale prices, he was suddenly only paying 90 cents a brick, which meant he was now making a solid profit.

“Even as a small business, you need to find ways of getting good deals from suppliers. Paying retail prices is not an option. One strategy that often works is setting up a buying cooperative. Teaming up with two or three other businesses can give you a much better bargaining position.”

Related: How Neil Robinson Is Saving The World 1 Bracelet At A Time

Take note

It’s tempting during the early days to neglect admin and financial controls in favour of getting out there and selling, but it’ll be detrimental to your business in the long run. A sustainable business establishes the right controls early on.

Company Posts

The Make Up of Makeup: How One Entrepreneur is Changing the Cosmetics Industry

Energetic, enthusiastic and fun are three words to describe Alina Lucía Imbeth Luna. But her favorite words are organic, vegan and cruelty free. They’re the backbone of her Medellin, Colombia-based cosmetics company, Pure Chemistry. Learn how this chemist and engineer is revolutionizing the cosmetics industry and read about her advice for future entrepreneurs.

FedEx

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This article originally appeared on FedEx Blog.

What is Pure Chemistry?

Pure Chemistry is a company that invents, manufactures and sells beauty products directly to the consumer. What makes us stand out is that we are certified organic, vegan, and cruelty-free.

Many companies say they do no testing on animals, but we go one step further. None of our processes or ingredients has any animal components. Ingredients from animals are common in the cosmetic industry but for us it is not an option.

If it’s common, how do you avoid using them?

For virtually any synthetic or animal ingredient, there is an organic, plant-based alternative.

Collagen, for example, is an animal protein that we don’t use because there are vegetable alternatives that give us better results.

As for honey, we don’t take honey away from bees, we use cane honey.

So for whatever reason people have, be it religion, ethics or they just decide not to use a product that has ingredients that come from or are tested on animals, they can come to Pure Chemistry.

Related: Going The Extra Mile With Neil Robinson Of Relate Bracelets

Many companies use the word “organic,” but you are “certified organic.” How is that different?

We are proud to have the Ecocert certification. Ecocert is an international entity that has a standard for the definition of what’s considered organic cosmetics.

To get certified, ingredients need to come from renewable resources, manufacturing must be environmentally friendly, packaging must be biodegradable or recyclable so it’s not just about the product, it’s also the packaging and the production of all our ingredients.

Certification, for us, is very important. I could tell you right now that I am Hillary Clinton, but if I don’t show you an I.D., you won’t believe me, right?

That’s why it’s important to be certified.

How are your products tested?

Our products are tested on people because they are made for people.

We have a testing club at Pure Chemistry. Many are from our University and are chemists and physicists as well friends and customers who volunteer to test our products.

People call all the time about being in our new product test group and we pay no one for testing.  This is very important to us so people are honest about the product and their results.

What is your team like?

We are a company of women and everyone has their own expertise.We all have some authority roles over our own specialties but there are no hierarchies here. The business model is a circle. We all support each other.

We have no set schedule. Our team comes to work when they need to – at the time that they need to work. You don’t have to be sitting here doing nothing if, at that time, there is nothing to do. It works very well for us.

Our customers are also an important part of the Pure Chemistry team. Since 2015, many new product ideas have come from clients’ requests. They write to us, send us messages, and we keep a list.

People started requesting, “Please, we need a toothpaste,” and we said, “Let’s work on a toothpaste.”

Others wrote, “Please, we need a product in a size that can go in a carry on bag at the airport,” so we did.

We mean it when we tell our clients, “Your comment, message, suggestion won’t be in vain.”

How hard is it to develop your products?

As a child, you don’t think about having to make money to do this and that.

For me, product development is like that little girl inside me that wants to experiment.

It’s fun, but not easy. It took us almost six years to develop a shampoo to make sure it did not have sodium lauryl sulfate or sodium laureth sulfate, the quickest, fastest, and cheapest way to make shampoo. It took us that long to get a product that would comply with the organic certification and one that you could use on both babies and adults.

We also have to think ahead. When we started developing nail polish, we also needed an organic nail polish remover, one that was also not flammable so it can easily be shipped internationally. Now we have a patent pending water based nail polish remover.

We are always amazed and encouraged when something that we came up with is working for someone. They write things like “I love this product. I love this company. I love you guys.” It’s very heartwarming.

This is what makes me get up in the morning.

It’s creativity with a purpose.

What advice do you have for other women entrepreneurs?

 Don’t just make a business plan and wait. Entrepreneurship shouldn’t stay on paper.

There should be no excuses. Go for it. Be willing to make mistakes. As long as you are clear about where you want to go, there are many ways to get there.  You can make a mistake, you can fall, a million things can happen.

 Examine and redefine your goals as you learn from your mistakes.

Related: Funding And Financial Assistance For SA Women Entrepreneurs

What advice do you have for little girls?

I would tell any little girl or boy, “Start by writing it.” Write about what you want to do, what you dream about.

As years go by, look to see if that was just a kid thing, a whim, or if it was really a dream. As you grow up you forget that as a child you wanted many things, but if you write them down, it will give you something to look back on.

For me, I can say, “Look, I wanted to be a scientist, and I did it!”

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Communication Skills To Succeed In Business

Article by Nicky Lowe, Wits Plus Lecturer in Business Communication.

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A Scientific American blog about the role of luck in success mentions the popularity of magazines such as Success, Forbes, Inc., and Entrepreneur and argues that we can learn to be successful by reading about successful people:

There is a deep underlying assumption, however, that we can learn from them because it’s their personal characteristics – such as talent, skill, mental toughness, hard work, tenacity, optimism, growth mindset, and emotional intelligence – that got them where they are today. This assumption doesn’t only underlie success magazines, but also how we distribute resources in society, from work opportunities to fame to government grants to public policy decisions. We tend to give out resources to those who have a past history of success, and tend to ignore those who have been unsuccessful, assuming that the most successful are also the most competent.

While not discounting the role that luck, or family inheritance and reputation might have in success, consider the massive role that good communication skills play in success. For example, if you cannot express yourself well, your proposal will be unsuccessful. If your business plan is full of grammar errors, then even if the financials add up, and you can show a past history of success, you are less likely to get the funding you’re after.

Related: A Business Lens For Learning And Development

There are many daily examples where stronger communication skills would have made the difference between success and failure. If a junior data processor bypasses her line manager to ask another manager for help with entering a batch of data in a different format, but is not clear about the batch names, she is unlikely to be successful in getting her job done. Jumping ranks will not go down well in corporate hierarchies, for starters. Moreover, if she lacks the corporate know-how to avoid this faux pas once, she is likely to blunder several times, thus generating the impression that she is disloyal to her own line manager and not a valued team-player. On the other hand, the lack of clarity in her emails can very effectively be overcome by improving her business communication skills.

Effective business emails need to be short and to the point, with very specific detail, especially if a request or instruction is given. The reader cannot be expected to do anything if they do not know what is actually being requested. It may be a simple case of giving the label names of the data batches, as in this example, but often managers grumble about staff being incompetent or lazy when the problem is their own poor communication skills and inability to use email effectively.

The best part of this solution is that it does not rely on luck. We all have the innate ability to improve our own communication skills. For those who want to improve their communication skills mindfully, there are short courses that take only a few hours a week for a couple of months that will give them insights into well researched theories and techniques so that they can apply these strategically in their personal and professional lives.

Related: Personalised Learning Is Optimised For Your Needs

In the reading about luck, talent is defined as “whatever set of personal characteristics allow a person to exploit lucky opportunities” and talent includes “intelligence, skill, motivation, determination, creative thinking, emotional intelligence”. These skills are highlighted in the Wits Plus Effective Business Communication short course to equip our students to make the most of opportunities. Studies have shown that the most talented people are not the most successful in life, but that luck and opportunity may play an unseen role in that success. Excellent communication skills are key to making the most of opportunities and breaking through to success!

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Lessons Learnt

Author Of The Little Book of Inspiration Gives Great Advice On Having Direction And Courage

If you can keep learning along each step of the start-up journey, you’ll continue to grow, and your business will be a success, says entrepreneur and author, Matshona Dhliwayo.

Nadine Todd

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  • Player: Matshona Dhliwayo
  • About: Matshona Dhliwayo is a Zimbabwean-born and Canadian-based philosopher, entrepreneur, and author of books such as The Little Book of Inspiration, 100 Lessons Every Great Man Wants You to Know, and Lalibela’s Wise Man.
  • Twitter: @MatshonaD

What is the difference between a ‘learn it all’ entrepreneur, and a ‘know it all’ entrepreneur, and why is it imperative that a start-up strives to be the former?

A ‘learn it all’ is one who is driven by the desire to learn and a ‘know it all’ is one who is driven by the desire to prove how much he knows. It’s imperative that you focus on the former because, in life, we are only as successful as what we know. Knowledge is more than power, knowledge is wealth.

How can someone go about being a ‘learn it all’? First, be humble; humility allows you to learn from others. A humble student is better than a proud scholar.

Related: Relax Spas Founder Noli Mini Shares Her Insights On Building A Business Of Value

Energy is a great thing, but it needs direction. How can a start-up entrepreneur calm down, focus, and find their direction?

You find direction from having well-defined goals in a business plan. You keep a tab on those goals by using a daily planner to help you steadfastly execute your objectives. In good times, be cautious; in bad times, be hopeful; and in busy times, be level-headed, never taking your eyes off your goals.

Why is it important to have direction?

road-directionA chariot can’t travel in two directions, and when you know where you’re going it’s easier to get there. When you lose direction you lose opportunities, and when you lose opportunities you lose rewards.

What are the pitfalls and limitations of ego?

Ego is an inflated sense of self and is therefore no different from arrogance. The pitfalls of conceit, which shouldn’t be confused with confidence, are endless. You start thinking you are better than others and the moment you do, this means you can’t learn from them.

If you don’t learn you don’t grow, and if you don’t grow, you die. Most experienced entrepreneurs understand the importance of being humble because people buy from people they like, and people don’t like egotistical personalities. Humility opens people up to you, but arrogance drives them away. And the more people an entrepreneur draws the more people he can serve, and the more people he can serve, the more money he can make.

That said, a degree of arrogance allows you to push through the hardships. Where is the balance, and how do entrepreneurs find that balance without getting discouraged?

Only a few people in history like Julius Caesar and Nebuchadnezzar II rose to great heights with arrogance, but their very egotism destroyed them in the end. I prefer courage, not pride, because it rises from conviction; and also faith, not ego, because it rises from hope. These two have helped the weakest of men and women achieve the greatest feats. An entrepreneur must be filled with courage daily and emptied of hubris incessantly. The higher you rise with ego, the lower you will also descend in the end because of it.

Related: How To Build A Disruptive Attitude

Why should you never, ever feel threatened by someone smarter or with more skills than you? In fact, why should you be partnering, hiring or learning from these people?

I am never threatened by people who are smarter and better than me because I see them as gifts, and not as competition. I view them as assets, not threats, so I allow them to do what they do best, thereby benefiting from it. It also frees me so I can do what I do best. We can be Jacks of all trades but we can’t be masters of all disciplines. Partnering with people who are cleverer than you elevates you.

Many entrepreneurs trust the wrong people. Why does this happen, and what is the solution?

People are complex creatures. The best of us can’t always predict human behaviour. Entrepreneurs, like everyone else, make mistakes. What they should shy away from are the avoidable ones. My advice: Take time to get to know people. Do your due diligence. Ignorance is your opponent, fear is your enemy, vice is your adversary, virtue is your friend, and wisdom is your helper.

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