BY. Tunji Adegbite
Starting a business is becoming a common alternative for many people. This drive for business ownership /entrepreneurship is noble, especially as SMEs constitute one of the backbones of economies globally and are pivotal to economic development, job creation, and poverty reduction. According to the World Bank, SMEs contribute up to 40per cent of GDP in emerging economies. In Nigeria, they account for about 50per cent of GDP and 80per cent of employment, according to the NBS.
However, starting a business does not on its own guarantee success or the longevity of the venture. Industry experts estimate that Nigerian SMEs have a failure rate of up to 80per cent within the first 5 years of operation due to a combination of internal and external factors, among which are poor management expertise, dearth of skilled labor, lack of preparation & inadequate market analysis, limited access to finance, poor accounting and book-keeping, minimal or no quality control, poor customer relations and inadequate infrastructure (power, roads, and supportive policies).
A number of these factors can be grouped into three interconnected categories: People, Customers, and Systems. These factors directly impact the future of any business and must operate seamlessly for a business to truly be a successful enterprise.
People are one of the most important assets of any company and form an essential part of the day-to-day running of a successful business operation. Hiring and retaining the right people are some of the main tools for building a lasting and profitable business. Businesses must define their values and determine what type of culture they want to build. Cultural fit combined with skill and knowledge fit should then be the basis upon which team members are recruited.
After hiring, training and continuous development are the next priority. To ensure efficient operations, business owners need to invest in regular technical training, provide them with timely, constructive feedback while supporting them when they miss the mark. Studies have demonstrated that investment in staff is directly proportional to increased revenue. This investment also builds staff loyalty and contributes towards the retention of quality staff.
Training should not just be focused on individual operational functions but also team development. Cohesive teams enable businesses to make the most of each team member’s strengths, minimize the impacts of their weaknesses, adapt more quickly to ever-changing market conditions, and implement business operations seamlessly.
Although the common saying in management practice is ‘people do not quit their jobs; they quit their manager’, recent studies have shown that this is only one factor in employee retention.
A positive culture and environment of learning, teamwork, remuneration, and growth opportunities are other important factors. Ultimately, a business that focuses on its people is on the right path to success.
‘Customer is king’ and no business can survive without customers irrespective of what sector the business plays in. Prioritizing customer experiences involves understanding and anticipating their needs in other to deliver exceptional customer service every time. This is important to retaining customers, building loyalty, and increasing profits.
In this digital era, consumers have an overwhelming number of options to choose from both local and international for every need perceivable, and often a positive customer experience is a distinguishing factor. Global companies like Amazon have captured market share by developing their business around a customer-centric strategy. Increasingly, customer experience influences purchasing decisions, and businesses that focus on improving their customer experience have better revenues than their competition.
Customer loyalty is fragile, and a single negative experience not handled properly may be enough to entirely blacklist a business in a customer’s mind.
Unsatisfied customers are also more likely to go a step further to de-market a business to others within their network or leave a negative review. In contrast, positive customer experiences add up to build a desirable perception of a business, quality of service or goods purchased, secure lasting customer loyalty, and positive word of mouth referrals.
Some of the easiest and most important ways of improving sales are increasing customer loyalty and referrals. A study conducted by Bain & Company showed that a 5per cent increase in customer retention can increase profitability by 75per cent. Other studies have also demonstrated that the cost of retaining an existing customer is less than acquiring a new one. The value of a business prioritizing delightful customer experiences cannot be overstated.
Systems and Processes
Organisations need a methodical process of solving or automating a repeated business task effortlessly. This should be a clearly defined and written Standard Operating Procedure (SOP) that outlines how specific tasks are carried out in a business.
Let’s consider the example of a retail business. At its leanest, day-to-day operations require a cashier, a merchandiser to stock the shelves and assist customers, a manager, and security personnel. If the merchandiser suddenly had to take a few days off, without systems in place, the rest of the team would struggle to find items in the store, restock the shelves as often as required or before an absence is brought to their notice by a customer.
This would result in a substantial disruption of business until the merchandiser returns or a makeshift system is put in place.
This example is a simplified look at systems. In practice, there are more elements at play in a business requiring systems such as marketing, sales, fulfillment, and administrative systems. Efficient systems are one critical differentiating factor between lasting businesses and those that will likely fail.
Most small businesses revolve around their owners and do not grow to function beyond being micromanaged. Successful lasting business requires systems, without which one is simply running a hustle, where the owner is the business.
In developing systems and outlining process, it is important to address the following:
· What is the task?
· Who is going to carry out the task?
· How are they going to do it?
· When & where are they going to do it?
Although challenging, efforts directed towards these essential areas lead to business growth. The future belongs to SMEs that master them.
•Adegbite, founder of Naspire, is a thought leader in Strategy and Supply Chain. He can be reached via firstname.lastname@example.org