Global Entrepreneurial Monitor’s 2013-14 findings show the difficulties entrepreneurs face around the world. The report, now in its fifteenth anniversary, covers 70 countries, including developing, semi-developed, and developed economies (e.g., The word is referred to as Factor-Driven, Efficiency-Driven, and Innovation-driven. Source: Global Entrepreneurship Monitor (GEM), 2014 by Jose Ernesto Amoros and Niels Bosma.
GEM has been around for fifteen years, and one thing has been repeated: the vast majority (or early-stage entrepreneurs) of the nascent entrepreneurs involved in starting a business fail. This means that they do not become the owner-manager or owner-manager of a new business after 3.5 years.
This finding raises the question: Why is it so hard to start a business and become an owner-manager of an existing business?
GEM report includes reasons as commented by entrepreneurs! The business owner sees it as a decision between starting and stopping a business. This is due to financial problems, unprofitability, and personal reasons. In most economies, the main reason for business termination is economic issues.
The lack of finance is easily understood. High levels of poverty are expected in Sub-Saharan African economies, where the rate of business dissolution is high.
Extrapolating from GEM findings, in some – mainly-innovation-driven economies – a significant share of entrepreneurs who discontinued owning and managing their business did so for reasons such as selling the company as it had value, the opportunity to get a good job; and for some, an improvement in their personal situation.
A lot of entrepreneurs who have managed to keep their businesses afloat tell prospective owners that they are trying hard to make sure they survive each day. They also agreed on the amount of energy required to manage a business that requires them to work late at night and early in the morning.
Experienced entrepreneurs warn against not learning as you move through the business lifecycle.
It is essential to work hard and be innovative. Small businesses are not able to afford highly skilled staff. This forces the business owner to be multi-skilled.
These are the critical functions of an owner-manager that a potential or going entrepreneur must perform from a knowledge and skills perspective.
A holistic approach to managing a small business requires at least the following.
Administration
The administration is often overlooked. The main types of administration (which excludes the sometimes cumbersome inherent tasks to each) include bookkeeping and other financial management, cost accounting, finance and credit administration, as well as payroll administration production administration.
Other administrations include costing administration and quoting administration.
These administrative tasks are relevant to your industry and type of business. Others may not be as relevant.
As you plan for your venture, it is a good idea to find a way of learning more about administration skills and knowledge.
Communication
You’ll find yourself communicating with many types of people. Customers, bank managers, suppliers, creditors, debtors, and other people will all be part of your audience.
You need to be able to communicate clearly and compile documentation. The daily operation of a business involves answering phones, making presentations to customers, negotiating with bank managers to extend overdrafts, negotiating with creditors to get more time, and dealing with debtors to settle outstanding invoices. It is essential to have good writing, presentation, and oral skills.
As you plan for your venture, it is a good idea to find a way of learning more about business communication skills and knowledge.
Financial
Failing to manage a business’ finances could lead to the venture being unable or unwilling to grow. If they have the means to pay one, many business owners hire an accountant and financial manager. The accountant can be a valuable resource of advice, but entrepreneurs should also learn how to make financial decisions based upon economic data.
Most entrepreneurs don’t have any formal training in basic bookkeeping or financial management. Even managing finances at a basic level can be complicated.
You would be a successful entrepreneur if you could master the following: Profit planning and costing products and services, revenue planning (revenue), balancing it against expenses and possible taxes. General ledger, accounts receivable ledger, accounts payable ledger, general journal: sales book, cash book (or equivalents), and regular accounts books.
Accounting professionals would consolidate all financial information at the end of each financial year and present financial statements to the business owner in order to allow the submission of tax returns.
It is a good idea to learn basic accounting and manage finances before you start your own business.
Human-resources
If a business owner survives difficult times and wants to grow, he or she will have a few employees. Once an entrepreneur reaches that stage, he/she will need to manage people. This includes employee contracts and their role description, training for workers, fair discipline, how to deal with disobedience, high production levels, recruitment and selection, staff benefits, staff planning, and general staff planning.
Entrepreneurs can learn more about these tasks to prepare for when they need them. You can find a lot of information on the internet and many examples of human resource management in small businesses.
This brings one to a crucial skill, information technology!
Info-technology
Entrepreneurs are living in an age where information is everywhere. To manage the data coming in from outside, entrepreneurs need tools.
Every aspect of business has a connection to information and technology. The first and most crucial issue is computer skills and the use of software programs (as many as possible, always relevant for your business).
Entrepreneurs can still be equally skilled in using technology if they have the means to hire a personal assistant who will take care of computer tasks.
Many business owners spend hours at the computer after their assistants have gone home.
To run a business more efficiently, entrepreneurs should learn how to use computers and software.
Legal
As legal assistance and advice are expensive, entrepreneurs will find it increasingly difficult to learn about the legal aspects of their business.
Entrepreneurs will encounter at least these issues related to the laws in the country they are located: Registration of your company with the relevant authorities (unless it is a sole proprietorship), Income tax registration, company taxes, and registration with relevant Labour authorities.
The following legal areas have an impact on your business: Income Tax Acts; Labour legislation Acts; Trade licenses; product liability Acts; standards for products and service; Usury Acts; information Acts. Consumer Acts
Contracts are an additional topic. An entrepreneur should be able to read, understand and analyze contracts. It is crucial to identify potential pitfalls. It is essential to identify potential pitfalls.
An entrepreneur could learn how to create basic agreements. Consider legal help if a business deal is complex.
Experienced business owners will advise against not having agreements in effect and instead recommend that you bargain on mutual trust and possibly dire consequences!
Templates are available for a wide range of agreements. It is an excellent idea to acquire a collection of these templates and absorb the content. Signing business agreements that detail all deliverables, costs, and terms should be done in writing.
Marketing, sales, and distribution
The entrepreneur created a detailed marketing plan as part of his business planning.
Entrepreneurs are naturally skilled in marketing and sales. One problem with entrepreneurs is that they may become too involved in marketing and neglect other aspects of business management. What then happens?
Although orders may come in, no one can invoice them because the entrepreneur might not be tech-savvy enough to appreciate how vital technology is for business.
Or, if you don’t take stock lately, the shelves may be empty.
The orders are also wrong for business because they are based upon prices that date back months and exclude stock. If he delivers, the entrepreneur will be selling at a loss.
This lesson is both an administrative and technical one.
Production,/and service and retail
A business is all about selling and manufacturing a commodity or, if an entrepreneur is in the services industry, rendering service for a fee.
When starting a business, manufacturers will need to manage a variety of tasks, such as Product design, office layout, manufacturing planning, stock control, maintenance, upgrading, selling products, distribution, and post-sale services planning.
This is a lot of work, considering that business owners have to also take care of the other tasks mentioned so far. If the owner is able to hire staff, he or she will take care of each task.
There are many ways to help your business succeed.
Although many potential entrepreneurs may feel disillusioned by the article, it is better to be prepared before you decide to become an entrepreneur. Entrepreneurs who are knowledgeable about the main challenges faced when starting a venture will have an advantage over those who don’t know how crucial skill and knowledge are for survival.
Roodt is a D.Phil. Roodt holds a D.Phil. He has also studied subjects in corporate finance and corporate law. MCR Advisors is his company’s founder. He has been a consultant in strategic research, business planning, strategic marketing, stakeholder communication, and service management for small businesses (and the corporate market) over the past 14 years. Roodt has worked in many sectors during his career. Primary sector experience includes Insurance, Financial, and Public utilities. Secondary sector experience includes Banking and Service Management and Information technology. For two years, he was a member of Business Unity SA’s Small Business Chamber. He had also lobbied extensively to support the SME sector in South Africa using the internet. He plans to lobby extensively again in the future, especially with the South African Ministry of Small Business established recently.