Business can be as simple as abc and yet as complicated as applied mathematics; it is all a function of your approach. It is simple if you follow the universal laws of business but complicated if you ignore them. No matter the size, location and type of business you opt for, they are all the same. Business is business. The same set of laws (business principles) that govern Unilever worldwide also governs the one room soap factory in Onitsha. The bottom line, therefore, is this. To succeed, YOU must and simply need to follow the universal laws of business.
Gaining a PhD in business, spending millions to obtain an MBA or being a Harvard graduate is no guarantee of success in business. To succeed in business you learn how to, and be able to, pull the pieces of business puzzle together. This is the fulcrum of business success.
The secret of great business owners and CEOs is their "intense focus on the fundamentals of business." They have the flair of bringing complex business issues down to their fundamentals. These are the fundamentals that govern a small family provision shop or a bakery. As a business owner never lose sight of the basics if you want to succeed in your business. Business is all about common sense. Often times, though, this common sense is lacking.
The basics of Business
Remember, first and foremost, that business principles or laws are universal. While it may appear that running a one man business is easier, it requires the same kind of decision making that the CEO of a big corporation say, General Electric, makes.
• Business is not 123 or ABC.
• Business is neither Charity nor family.
• Business is not friendship.
• Your Passion should drive your Business.
• Do not go into strange businesses.
• Businesses are governed by rules; yours must have one to succeed.
• Business is official. Be official in your business. It is the only way to succeed.
• Set targets and goals for your business, yourself and your employees; enforce the achievement of those targets.
• Have a daily resumption time for your business and obey it.
• Your Business should pay and sustain itself.
• Take salary not drawings.
• Your Business depends on People to succeed.
• You networks for your business.
• Your Business will die without a plan; Develop one immediately and ensure it is realistic.
• Begin each year with a business plan and review monthly or quarterly.
• If you cannot someone in the face and discipline him for misconduct, do not hire him or her.
• Audit your business annually and ensure you engage professional accountants to do this for you.
• Above all remember, business is dynamic. What was yesterday may not be today.
The Nucleus of Business
A one man business owner in Kenya and the CEO of Sony in Japan both think and work on the same aspects of their businesses - product, sales, customers, profit margin, and return on assets. They know which items in their product lines are profitable and which are laggards. They know that without the customers their businesses are dead.
To succeed an entrepreneur must understand that business principles are universal and must have the ability to focus on the basics and make money for your business.
All businesses conform to the following basic principles, namely:
i. Viable idea/project
ii. Business plan
iii. Business Execution
v. Cash generation,
vi. Return on assets, and
vii. Sustainable Growth.
It does not matter what business you are into; as a business owner you must understand these parts individually and the relationship between them. They form the nucleus of any business.
1. Viable idea/project: Every business is about the translation of an idea or project into money making venture. If it cannot make money then it is not a business but some other thing. To engage in business you must therefore come up with an idea or a project that can be sold and bought. You also have the option of being original about it, joining a bandwagon or buying up a franchise. Whichever one you chose be sure that your idea or project is viable, for the whole essence of businesses is viability - defined in terms of its ability to make and generate profits.
2. Business Plan: A common maxim in business if that the entrepreneur who fails to plan has simply planned to fail. This perhaps explains why most sole proprietorships, partnerships and other companies collapse after a few years in business. The advantage of planning is that it aids adaptability, anticipates risks and opportunities and keeps you ahead of competition. Most businesses have annual plans; others complement their annual plans with monthly or quarterly plans. A through business plan is a diligent and rigorous exercise involving all actors, especially the top management. It is not a ritual but livewire for the business. The irony here is for most businesses business plans are nothing more than annual rituals. The sooner it is completed the sooner it winds up in the office museum as an antiquity. Any wonder businesses that seem to have survived turbulence suddenly disappear?
3. Business Execution: Execution is the discipline of getting things done either by yourself or through others. This is what business is all about. Do you the guts to execute your ideas and business plans. A case study of leading industrialists and business men brings out this one point – the ability to execute on time with military mentality. No wealthy man is liable to the charge of laziness, for they know that a busy life is a happy one. They work through the night, on the plane, in their bedroom, at the board meetings, anywhere, every time to execute their ideas and achieve their goals.
4. Customers: Customers are the reason you are in business. As another business maxim puts it, the customer is King. These are universal laws. No business can thrive without customers. The good business owner understand his or her customers and have a close connection with them with the strong conviction that the business cannot thrive without satisfying them. In realization of this, a Nigerian bank has its maxim as “My Bank and I”. Another calls itself the “One Customer Bank”. Another says “Happy Customer Happy Bank”. Yet another says “In Your Best Interests”. All are customer centric. Would you blame them?
It is not enough to carve the best words on marble in praise of your customers, no, it is rather more salient that you know their pulse. Make special effort to observe and talk directly to your customers – constructive engagement. Such contact provides insight that best expensive market research cannot provide.
5. Cash Generation: Cash generation is the difference between all the cash that flows in the business and the cash that flows out. Cash is the lifeblood of any business.
An astute entrepreneur must always ask the questions:
i. Does the business generate enough cash?
ii. What are the sources of cash generation?
iii. How is the cash being used?
Failing to ask these questions often spell the end of the business. Without cash, a business can be in trouble even if other aspects, profit margin and sales, are good.
If the business generates sufficient cash, the business owner is in a better position to grow the business. He would be in control and make better decisions if he has his own cash.
6. Return on assets: For a business to be successful and remain in operation, its return on assets (ROA) must be greater than the total cost of funds. The ROA can be computed as the profit margin multiplied by the rate of sales (turnover) or as the net profit divided by the assets of the company. What this means is that a business can still thrive with a small profit margin if it has a fast inventory turnover. An greater than 10 is desirable.
A business owner should have answers to the following questions?
a) How much money is been made with the business assets?
b) What kind of money is being returned through the use of the assets?
c) What is the return on assets?
7. Growth: Growth is vital to every business. It energizes the business and creates new opportunities. However, growth for growth's sake does not do any good. The growth of a business must be accompanied by improved margin and business turnover and the cash generation must be able to keep pace. The following points should be noted about growth.
a) A smart entrepreneur does not only push for sales. Instead, he or she must know how and why the business is growing; and whether the growth can be sustained.
b) Sales may be growing, but if the cash situation is getting worse the entrepreneur must take the prudent approach and step back.
c) When growing a business, the businessperson must determine if the company is generating or consuming cash, and whether profit margin is improving or getting worse.
d) Another characteristic of a person possessing business acumen is his or her ability to find opportunities for profitable growth when others can't.
Teasers for YOUR Business?
1. What type of business are you into?
2. What is your product or service?
3. What does it cost to make/buy in/provide the product or service?
4. What price will the product/service sell for?
5. Where will you carry on the business and where will you sell the products?
6. Who will buy the product/service
7. How much/many do you need to sell in a year? And how many customers do
8. How will people know about the service/product?
9. Who will run the business? How many employees do you need? Their
qualifications and pay?
10. Does the business provide a cash surplus at the end of the day?
11. What are the government regulations on your business? Have you complied