By Ronke Odewumi
I am a serial entrepreneur. I have put my hands to various opportunities, from starting and running an online clothing store, to starting an online lottery company, to writing, publishing and selling a book, to running a Christmas decoration service, and a career and business advisory consultancy; all in addition to a day job. Many of these business ventures have succeeded while some I have had to learn from and then exit. Many of the things I have learnt in my entrepreneurial journey, I wish I had read of them or someone had told me before I learnt them the hard way.
As an entrepreneur, your driving force in addition to providing valuable service to your customers or clients is profitability. In order to be profitable your products or services must be sold at a price that exceeds the cost of creating them. Sounds simple right? Still, young entrepreneurs continue to make the mistake of taking their eyes off their costs (fixed and recurring costs).
When you take your eyes off your costs and they grow, you are forced to push up your prices to maintain your profitability; then you risk losing your fragile customer base to your competitors who are offering the same, similar or replacement product or service.
In a competitive market, you will be unable to push up your price to match your costs so you will simply lose profitability as your cost increases and you develop cashflow problems which then threaten the continuity of your business.
So the first lesson I learnt as an entrepreneur is this – keep an eye on your cost. How do you keep an eye on cost you wonder, how do you decide what to spend on and what not to spend on?
For me the secret to keeping your costs down is value chain – this is the second lesson.
Value chain strategy basically requires you to recognise what adds value to your customer in every step of your production process/service delivery.
What is important to your customer? What does your customer consider value? If you don’t know, ask your target customers.
You need to focus your costs more on activities that add value to your customer; if its not value adding to your customer, keep the cost as low as is possible without endangering the business.
For example, say you are a manufacturer of affordable shoes and your target market are young people between the ages of 18 and 25 years. Value for that age group is likely to be trendy, affordable shoes that offer some comfort; therefore, money spent on trend forecast, trend analysis and low-cost production material would enable you to service your target market efficiently.
Durable but expensive packaging for the shoes would add no value to your customer and so money spent on this would simply raise your costs without improving revenue or profit.
Put a structure in place
I have always been a fan of order and structure so this particular lesson is one I have never had to suffer the effect of, however I have watched start-ups I have advised (who didn’t listen) suffer the negative effect of not putting a structure in place and it can be hard to recover from a structure-less start.
Imagine you are building a house, and you just decide to lay the foundation as you like, then you continue to build up without any thought for where the doors and windows will go, drainage, bedrooms, electricity, the flow of traffic… you just build as you go. You will not end up with a house, you will end with a folly.
You need a plan and a structure in mind no matter how simple. So, when you want to start your business, write a business plan and write a plan for the first year of operation, broken down into monthly actions. A lot of young entrepreneurs are so fired up by their business ideas they can’t sit down to write a business plan and that is a problem. A business plan helps you scrutinise your idea logically, to answer questions like – how will you fund it, where will you base it, how will you operate it, what resources do you have, what are the gaps … if you are not able to answer or find answers to these questions, you are already headed for deep waters. Put a structure in place.
The Customer is King
Another lesson I have learnt is that the customer is king. You have probably heard this before and think this only means good customer service but it is a lot more than good customer service.
As an entrepreneur you need to constantly walk in your customer’s shoes; you must proactively anticipate what your customers desire and factor these into your service or product. I have learnt to listen to the customer in detail, I take copious notes when I have conversations with my customers, I ask questions, I play back my understanding; I work hard to ensure I understand my customer’s needs then I go ahead and fulfil it. If I need clarifications, I will return for them.
Your customer might not know what they want but if you understand their problems you can proffer a solution and when you have solutions that work, you become the brand everybody wants.
Your customer is king, research your customers, listen to your customers, know them, proffer solutions to their problems, fulfil their needs, treat them right and they will return again and again.
Under promise over deliver
Sometimes in the excitement of pleasing a customer, you make the mistake of over promising which then throws you into a stressful situation of trying to deliver what you have promised. If you don’t succeed and under deliver, you have probably lost that customer despite the stress you have gone through. Customers who receive service less than what they expected rarely return.
Perhaps you are not the one over promising, the customer has come to you with set expectations, you as an entrepreneur must then manage your customer’s expectations – be clear on what you can deliver and what you cannot. If you then end up over delivering, super! You have a return customer.
Don’t be the tailor that promises to sew 10 outfits in 2 days but delivers 2 outfits in 10 days… this kind of behaviour impacts your brand negatively and loses you the current customer and referral customers, you will be surprised how much business you can gain or lose by word of mouth.
Finally, persevere but have an exit plan.
This last advice sounds counterintuitive, how can you persevere and also have a getaway plan? I’ll tell you how – say you are starting an online business and you need to buy the domain name for your business idea, pay for a 2-year plan not a 10-year plan; at the end of the two years, you will get the chance to renew for 10 years or walk away. Persevere but have an exit plan.
Starting and running a business is hard work, very hard work. Being an entrepreneur has been glamourized more than it deserves, it is a hard, lonely path and is not paved with gold especially in the first few years. Think of your business as a child, it will have teething problems, it will cry, it will annoy and frustrate you but with gentle loving care, with good diet, with attention, it will grow big, strong and powerful and make you very proud…
I salute your courage on this journey.
Phot Credit: Pexels
Ronke Odewumi is a chartered accountant and management consultant. She also provides advice to start ups and budding entrepreneurs. Ronke lives in the UK with her husband and children.