Today we continue with the article which started last week, looking at failed Small and Medium Enterprise (SMEs) which resulted in the owner committing suicide.
In the article, a business that looked so promising at the start, down the line failed to live up to its anticipated performance and flopped, in the process leading to the death of the owner.
As I promised, I want to look at some lessons which could be drawn from this sad episode, especially to those entrepreneurs who would want to pass through the same path of conducting business.
According to a source, the now-deceased entrepreneur drew the courage and hope of starting a business of such a huge magnitude from the fact that he had gathered enough capital from the benefits and sale of land, but had no concrete plans to cement his business to perfection.
His ‘lazy’ thinking cost him his life in the sense that his business plan never looked at business risks, in the case of the second-hand machine breaking down, what happens or if the marketing staff mishandles sales.
If these questions were answered in a well thought business plan maybe a life could not have been lost.
He got a good package after resigning from a well paying job and from the money he generated after selling a piece of land he inherited.
But is having a lot of money is the reason enough for one to start a business?
The answer may be yes and no because it all depends on the implementation of a business idea through a well thought out business plan.
Some entrepreneurs may not have huge capital but may have ambitious work plans that have made them successful entrepreneurs using borrowed capital.
The idea was perfect for investing the money into such a business.
However, his mistake was that, the entrepreneur did not seem to have had any workable business plan, which could have addressed most of the issues relating to his investment.
Although his strength lay in the huge capital, the weakness was the organization structure, of the unsupervised marketing staff who could not account for sales and secondly he could not scrutinise his equipment for continuous performing by engaging experts.
It is important for SMEs when employing staff to ensure they employ honest and trusted employees as they are the backbone of the business.
Risk management must be a piece of management advice which must be taken seriously.
The piece on the second hand equipment which was obtained should have been put to scrutiny to ensure its performance endured for a long period without experiencing a break down.
Painting castles in the air without looking seriously at the negative side of a business in planning must be discarded.
The machine breaking down led to lost time such that rentals on the premises and on the vehicles kept on mounting.
The question is did the entrepreneur carry out feasibility studies and construct a perfect business plan to embark on such a business venture
for the first time without practical experience of managing a similar one?
A well thought out structure and workable business plan would have looked at the caliber of the workers in the management team in terms of contribution, skills and qualification and their backgrounds.
No matter how small a business may be, it is also important to look at the risks involved and this piece of advice is what is referred to as risk management.
Most often times the entrepreneurs when starting businesses they ignore the gloomy side of business until they walk through it and then they realize that they would have taken care of some of the mistakes
before it’s too late.
For in the referred business, buying second-hand equipment was not very carefully thought of, because the performance guarantee was not properly looked at.
In a well thought out business plan, the plan was going to look at the risk factor of machine performance.
This was going to ensure that before the machinery is transferred to the plant, it was going to be checked by qualified engineers to ensure continuous performance.
Equally the business plan was going to address the issue of the content of the management team and who was going to supervise the marketing department and the measures put in place to ensure cash management for the sales money was taken care of.
Sometimes lowering of costs in a starting business is very important. In this case study, the business took off with huge costs on rentals and the high cost of hiring a consultancy team. All these costs were set against a working capital before the business could start generating its own resources. As the business failed to perform these costs could not be addressed.
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