Navigating the 4 great challenges faced by entrepreneurs

In July, 2019, we had an interactive panel discussion at Parklands Sports Club, to discuss investing, entrepreneurship, budgeting and real estate (Check out the videos from the event here)


I know a lot of people who are passionate about entrepreneurship. Very few of them have started a successful business. Some of them have started a business but failed. Some of them have the best of ideas, but they never have it in them to execute. Personally, I would love to start a successful business down the line, but I still think there’s a lot I need to learn before I get there. I was therefore eager to listen to Val Njoroge, a successful entrepreneur who was among the panelists.


As she was addressing the 70 people in the room, keenly listening to her as she slowly took us through her journey, she talked about some of the challenges that she has faced as an entrepreneur, and how she had to navigate these challenges to achieve success. 


In today’s blog (Inspired by the Africa’s Pocket event in July, 2019) I will share with you 4 great challenges faced by entrepreneurs and how you can navigate them to achieve success



  1. Fear


Most entrepreneurs experience fear right before they start a new venture. Some people succumb to the fear and evade the opportunity, leading them to never taking a chance on themselves.

 

To overcome fear, there are two main things that you can do. One, make additional preparations. Do more research to ensure that you have locked in all the nitty-gritty that you need to start your business. You may miss a few points, which is okay, but at least you’ll have prepared for the bulk of them


Second, you need a change in mindset. Fear is only a stumbling block if you allow it to be.


  1. Commitment


I can give you an endless list of people who started a business, did it for a few months, and just decided to give up. Some do this based on actual issues, such as cash flows being too low (we’ll talk about cash flows later in this article) but some decide to end their business due to lack of commitment.


How do you then make it easy to stay committed to your business? It’s simple. Only venture into something you are passionate about. When you are passionate about your business, you’ll never hold back on going the extra mile to make your business successful. 


Passion can come in many forms, let’s use a bakery to explore this. You can be passionate about the activity your business does, in this case, the actual art of making a cake, cookie or pastry, decorating it, packaging it and getting it to the customer. You can also be passionate about the value chain of your business, in this case, you may be passionate about improving the flour and sugar supply chains, and therefore create a bakery which only sources ethical ingredients to support this industry. You can be passionate about an issue in the industry you are in e.g. healthy baked goods, therefore you start a bakery that produces healthy treats. Finally, you can be passionate about giving your kids the best education, and see a bakery as an opportunity to  succeed in business, and therefore start a bakery. Although in all scenarios a bakery is the business venture, the passion and thus commitment comes from different places. 



  1. Failure


90% of businesses fail in their first year. If you, therefore, decide that entrepreneurship is the path that you’ll take, you are already fighting some tough odds. So let’s get to how you navigate this.


As we mentioned before, you need to be passionate about the business that you venture in. This is truly the first step to reducing your chances of failure. Second, the business you are passionate about, must have the ability to generate income, otherwise, you are setting yourself up for failure. So do some research to ensure that there’s a profitable market for you out there.


Finally, other than the fact that you have the ability to create a quality and profitable product/service, do you also have a grasp on the non-market forces? Non-market forces are basically the things that don’t have to do with price, supply, demand. Do you have the right networks? The right opportunities? Are there situations you can take advantage of? To overcome the challenges that can make your business fail? 


  1. Cashflows


A lot of entrepreneurs have the notion that entrepreneurship is easy. This is however not the case. To create a successful business, you need to make 120% more than your last salary. So assuming that your net salary was KES 50,000, you now need to make at least KES 110,000 to be successful.


Why 120%? Because when you start a business you need to cover all the costs.  If your business deals with production/manufacturing, 30-40% of your sales should be spent on raw materials. About 20% should be used to cover salaries, marketing, and distribution. You’ll also need to cover for tax, which is about 30% and still have some money left to reinvest in the business.


So this is how it would look for your business, if you’d need to make the KES 50,000 profit at the end of the month

Revenue (100%)

121,630

Costs of good sold (20%)

101,000

Operating expenses (30%)

78,000

Tax (30%)

65,000

Profit (90%)

50,000


Kindly note that your profit would be sliced further if you have shareholders that would need their share


So there you have it.


Entrepreneurship is not easy, however, with the insights we have shared today, you have a bigger chance of being successful.


In case there’s any challenge you would need help navigating, kindly comment below and we’ll be in touch.