Is your small business struggling to survive under the current economic conditions? Or are you considering entry into the turbulent entrepreneurial market? Generally, Micro & Small Medium Enterprises (MSMEs) can represent between 30-60% of a country’s Gross Domestic Product (GDP) and bring innovation, growth and employment opportunities. As small business entrepreneurs, running a successful business comes with its share of inherent challenges, especially when one operates within a developing economy like Dominica. I will speak to five (5) general extrinsic challenges that I believe we can control as Small Business Entrepreneurs.
Lack of Business Management Knowledge
Many small businesses fail because entrepreneurs have insufficient business knowledge to turn a solution into a sustainable business. For example, with the absence of proper market research, you run the risk of failing to identify your target audience and could also fail to create a strong competitive advantage for the industry you wish to enter. This may ultimately lead to incorrect product mix and pricing and resource wastage causing you to lose money over time.
What to do: Subscribe yourself to various courses to expand your business knowledge. There are also several free webinars that offer training in that topic. Seek out mentors who possess the knowledge you lack. Integrate partners in your business that have strengths in your areas of weaknesses.
The Inability to Adapt
What’s in your Business Continuity Plan (BCP)? Research shows that more than 60% of small businesses do not have a business continuity plan and fail to adapt in times of change. A study conducted by the Climate Resilience Agency for DOminica (CREAD), revealed that in times of disaster, the heavily affected sectors are the service sector, followed by the retail sector. The survey group also anticipated that these will be severely impacted by disruptions from COVID- 19. The inability to adapt can wreak havoc on a MSME with limited financial resources and weak processes.
What to do: Create a BCP that outlines your business’ risk profile based on people (the lives of your workers and their families), processes (enterprise operations), profits (revenue generation) and partnerships (the enabling environment to carry out operations.) This can limit business downtime, especially in times of uncertainty. If you are unsure where to begin, seek help from the Dominica Youth Business Trust and the Dominica Association of Industry & Commerce. Once created, continue to update your BCP as time changes.
The Lack of Strategic Planning
When was the last time that you took time out to do a full analysis of your business? That is, reviewing the performance in key areas, conducting a SWOT analysis and then developing key initiatives necessary to take it forward? At present, does your business have a documented strategic plan? Or are you just going with the flow? The lack of strategic planning by small businesses can result in lost opportunities to improve, adapt and grow. As the saying goes, failing to plan is planning to fail.
What to do: Seek out the services of someone who can assist you to conduct a strategic planning session. This should be done at least once yearly. Once completed, hold yourself accountable for the strategies that have been arrived at.
The Absence of Financial Statements
Do you know what’s contributing the most to your business’ profit or loss? Many small businesses fail because the owner does not keep track of the financial side of the business’ operations and its financial position. The availability and analysis of proper accounting records can eliminate the uncertainty of business performance and ease the process for accessing finance. At times, entrepreneurs price items using guess work. If you do not review business performance, you have no idea where the business is losing money. The absence of financial statements leads a small business entrepreneur to make strategic decisions blindly which can have long term negative effects.
What to do: Prepare monthly financial statements and review your business’ performance month to month. If you are unable to prepare or analyze the financial statements, outsource that function to Finance Focus. Over time, your business will be able to conduct monthly, quarterly and yearly ratio analyses. This will contribute to your business’ adaptability and strategic decision making.
Limited Access to Financing
Many entrepreneurs find it difficult to access business financing for a number of reasons. Have you failed to access financing due to a lack of collateral, absence of financial statements or lack of a strong business plan? While I acknowledge the inherent reasons which may inhibit one’s access, there are opportunities available. Small business owners around the region can now access finance up to $300,000XCD through The Eastern Caribbean Partial Credit Guarantee Corp (ECPCGC). The guarantee is intended to provide credit enhancement for borrowers that do not meet typical bank credit standards. This opportunity may act to reduce the challenges to access financing. However, in order to qualify, there are criteria to be met.
What to do: Improve your chances to access financing through the ECPCGC by registering your business, investing 25% equity into the business and maintaining proper accounting records. For more information, contact the National Bank of Dominica. Speak to a business coach to provide other options of obtaining finance such as through offering shares in your business.
Conclusion
I acknowledge that at times, the inherent challenges may outweigh those factors that are within our control as small business owners. This should not, however, prevent us from seeking opportunities to improve our current positions.
Connect with me on social media for personal finance coaching and small business management services.
Email: focusonfinance767@gmail.com
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