By David Ndirangu
In Kenya, it is estimated that only ten per cent of new start-up businesses make it to their first birthday and of these, fifty percent close down within the second year of operation.
More often than not, most start- up businesses are small and mainly within the informal sector. To address the challenges faced by small businesses and suggestions for performance improvement, we need to start from the set up stage.
As the aspiring entrepreneur you must identify and determine the type of business you intend to set up.
Identify the products or services you would like to be dealing in and the target market.
Do thorough research on the other players in the market in order to understand your competitors very well.
Identify the sources of raw materials or products and any equipment required to carry on the intended business.
Workers are also a major component of the business and you need to recruit suitable persons for the various positions that you will have already identified including their roles in the structure of the new business.
Determine costs of sourcing or procuring the products for resale or production costs if you are intending to manufacture the products.
On the basis of these costs, work out selling prices taking into account your desired profit margins to ensure business profitability and sustainability.
Your prices must compare well with those of similar products in the market for competitiveness.
Consider the source of financing to sufficiently fund commencement of the business – this could be your own money and if not you may approach banks or other lenders and select the most favourable in relation to expected cash flows from the business.
Compliance with various authorities including County and Central Government is critical.
Ensure your business is compliant in terms of registrations and licences, certificates and other requirements by licencing and tax authorities before commencement.
It is very important that you engage a professional to help you come up with a business plan before you actually commit resources in the new business.
This will help you have a picture of the business you are starting and also help in planning how and when to inject funds and the expected cash flows.
A business plan is also vital in assessing performance of the business after beginning operations.
Book keeping or recording of business transactions is very important in any business.
Ensure that all purchases, sales, bank deposits and all the expenses involved in the running of the business are recorded.
You may engage a person trained in bookkeeping and accounts but at the least ensure the transactions are recorded in the most basic way and all the invoices and receipts including cash sale slips are well preserved in files.
Most small businesses are owner managed. Therefore the challenge of separating personal money from that of the business arises. Ensure that you segregate and record separately business and personal transactions.
Products taken from the business for consumption by the owner must also be recorded as such.
David Ndirangu Bsc. International Business Administration (USIU- A) CPA (K). Business Management Consultant and Author of the book; This is DAVE. Email: ndirangudavid2023@gmail.com
Mt Kenya Times