The Nigerian MSME report of 2022 by Kippa reveals that most small businesses fold within the first five years, with about 80% of Micro, Small and Medium Enterprises in Africa failing within that period. This trend appears to discourage entrepreneurs, especially those venturing into unconventional markets.
To avoid joining this bandwagon of business failures, business finance experts have highlighted fundamental hacks to explore. Viability in business generally implies the ability to survive over a protracted period, corresponding to profit, solvency, and liquidity ratios.
Below are some key hacks to ensure business viability and sustainability:
1. Know Your Business and Solve a Problem: Understanding the central purpose and goals of your business is essential. Knowing the problem you aim to solve and establishing that there is a market for it is the first step to success. Having a deep comprehension of the market dynamics and how your business fits into the existing framework could make all the difference. It takes time to build a successful business, so planning for at least 12 months, and having another plan for three years helps prepare for the long haul.
2. Extra Sources of Income: Starting and running a business generally comes with costs, which can be overwhelming and discouraging. Having a survival source like a side hustle or a career could help keep the business afloat during the initial phase when profitability is uncertain.
3. Opportunities: Being aware of the opportunities available in your market space is crucial. Researching emerging trends and acquiring the necessary skills to take advantage of them can pivot your business to success.
4. Leverage Your Networks: Being an active part of a business community that shares ideas can be invaluable. Having mentors and leveraging networks expands the business’s reach and may lead to unique opportunities.
5. Business KPI: Measuring the viability of your business helps ascertain its health. Core metrics include the cost of value delivery, customer attribution, pricing potential, and uniqueness. Declaring profit may not be possible initially, so keeping an eye on these key indicators is crucial.
6. Do not Compare: Comparing your business to others may be discouraging, especially when they seem to have made significant progress. However, bear in mind that your journey may differ, and measuring your business’s viability should be pragmatic, using standardized metrics.
In conclusion, measuring the viability of your business is fundamental to ensuring its sustainability. Having a clear understanding of the market dynamics, the value your business provides, and how to measure its success is crucial. Entrepreneurs should embrace the advice of experts as well as leverage networks, be open-minded, and keep learning. This way, you can build strong and resilient business models that can withstand the uncertainty of the market.
