Pitfalls we make in business and how to stay afloat

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In Summary

• The following mistakes are common in various sectors, including agribusiness

By PAULINE KAIRU
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Making mistakes in any business is part of the learning process, according to Dr David Wang’ombe, the Dean, Strathmore School of Management and Commerce.

However, Wang’ombe is quick to add that entrepreneurs should strive to avoid mistakes, some that result into huge losses.

He identifies the following mistakes common in various sectors, including agribusiness.

1. Use of bad business model: This is often as a result of “me too” syndrome.  It involves starting a business based on rumours about its success as it happened with quail farming. After hearing stories about the success of certain business, one should carry out a SWOT (strength, weakness, opportunities and threats) analysis before venturing into the trade.
2. Failure to check the maths: This happens when there is no enough demand for the product or service at a price that will produce a profit for the company. It includes a start-up trying to compete against established firms.
3. The perfectionists: Such businesspersons are stubborn and risk averse, which means they need to be liked by everyone. They may be greedy, self-righteous, paranoid, indignant or insecure. Sadly, they do not realise they are the problem and they will continue to make the same mistakes over and over again.
4. Allowing growth to get out-of-control: Growth is good, but a successful business may be ruined by over-expansion. This would include moving into markets that are not as profitable, thus experiencing growing pains that damage the business, or borrowing too much money in an attempt to keep growth at a particular rate.
5. Lack of proper accounting records: Losing control of an enterprise happens when one does not know what is going on in that business financially. With poor accounting records, or no records at all, a business is flying blind, and it happens all the time.
6. Poor cash flow management: Business is cyclic and surprises may and will happen over time. Not collecting debts on time, overstocking, diverting business cash to personal use are things that stress business finances. If that business is already out of cash and out of borrowing potential, it may not be able to recover from cash shocks.
7. Operational inefficiencies: Paying too much for rent, labour and materials. Not having the tenacity to negotiate terms that are reflective of today’s economy may leave a company uncompetitive.
8. Dysfunctional management: This entails lack of focus, vision, planning, coordination and standards. Throw fighting partners or unhappy relatives into the mix and you have a disaster.
9. The lack of a succession plan: Here, we’re talking about nepotism, power struggles and significant players being replaced by people who are connected with the business owners. This is the reason many family businesses do not make it to the next generation.
10. No growth plan: Some businesses fail to grow because they have no intention to grow. If you do not intend to grow, then you can’t grow.