According to Magodo, a seasoned banker and entrepreneur herself, some business owners think financiers are dumb and can be easily fooled by fancy business proposals and cash flow projections that are out of this world.
Then they go on talking about how banks discriminate and don’t want to give money to black businesspeople.
Some people actually think a bank can give them a loan, use the bulk of the money to buy a fancy car, a plasma television or for some other non-essential, non-business purpose and then use the balance to make deals that will enable them to pay back the loan.
Unfortunately, things don’t usually work out as planned and the next thing, the bank is auctioning your property. The number of Deputy Sherriff auction notices in the daily newspapers is clear testimony that things are not working out the way many SMEs hoped when borrowing money.
The next thing that came out at the seminar is the way SMEs complain about the stringent conditions imposed by banks. If you look at it, most of these requirements are a necessity for anyone hoping to seriously grow their business. Small businesses that don’t have basic things like financial and management accounts, don’t bank business money and have no tax clearance or VAT registration, are clearly not planning to grow their businesses.
Such basic things are required if you want to supply big companies or government departments and take your business to the next level. Growth needs a strategic plan.
Growth is important to every business because staying at the same level means you are actually going backwards. Famous author Lewis Carroll wrote in Alice’s Adventures in Wonderland: “Now here, you see, it takes all the running you can do to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that.” If you make the same profit as you made last year, you have made a loss because you’ve grown below inflation.
There are tools that can help you make a useful strategic analysis of your current situation.
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SWOT stands for Strengths and Weaknesses, Opportunities and Threats.
What strengths do you and your business posses that will help it to grow in the coming year? Do you have certain expertise, experienced staff, a unique process or some other asset that gives you a clear advantage over other businesses? How can you use that strength to grow your business?
You also need to mitigate your weaknesses.
Every business and person has weaknesses. Identify and find ways to overcome them so as to go up to the next level. Here is a quotation from one of the best books on strategy, The Art of War by Sun Tzu: “If you know neither the enemy nor yourself, you will succumb in every battle. If you know yourself but not the enemy, for every victory gained, you will also suffer defeat. If you know the enemy and know yourself, you need not fear the result of a hundred battles.”
Strengths and weaknesses are internal issues that you and your business have. The other two factors are external — the opportunities that you can take advantage of to grow your business and the threats that you face in the process.
Take time to analyse them and plan how best to mitigate the threats and grab the opportunities. This takes us to the next step in the strategic planning process.
Set clear goals. Your goals have to be measurable in dollar terms. How much revenue and profit do you want to make in 2012? Write that down. The third step is mapping an action plan of how you will achieve those financial targets.
How much more goods or services will you need to sell in 2012? Can the current premises, machinery and manpower sustain the increase? If not, how are you going to increase your production capacity?
The DVD from the Accelerate Your Growth in 2012 seminar is going to be available from next week for those who missed it but want to seriously grow their business. You will also find the presentations from the seminar at our website http://smebusinesslink.com. To join my mailing list and receive the free newsletter please send me an email.
l Phillip Chichoni is a strategic business planning and financial management consultant who works with SMEs and entrepreneurs. You may contact him by email chichonip@smebusinesslink.
