What you need to know:
- The subsistence entrepreneurs use all the money they earn to survive, they do not re-invest any capital into the business. Secondly, they never really seem to have a bigger vision for their business.
- s and also work on projections of income to handle new prospective costs such as new hires to your company, which may also mean office space. And office space is an entire bill on its own.
- If you have to hire, hire only necessary roles. It is however preferable to keep your staff lean, which might mean you will be the sole employee for some time.
Forget for a second what is said about entrepreneurship needing your input 24 hours a day; it is also exciting, an opportunity to live your dream and be your own boss. But there also is an illusion of grandeur about it. True, dreaming you will be Mark Zuckerberg overnight and get to change the world is a great motivation to succeed, but you need to be very keen about the processes to grow to that point.
There are numerous factors that are overlooked by young entrepreneurs starting out. Here are a couple of pointers to consider as you stay on the path to success.
1. The Subsistence vs. Visionary Entrepreneur
Most young entrepreneurs today are subsistence entrepreneurs, not visionary entrepreneurs. The subsistence entrepreneurs use all the money they earn to survive, they do not re-invest any capital into the business. Secondly, they never really seem to have a bigger vision for their business.
These businesses don’t last long. According to the 2016 National Micro, Small and Medium Establishment (MSME) Survey, conducted by Kenya National Bureau of Statistics, 46 per cent of businesses close after just one year. Subsistence entrepreneurs fall in this category.
In comparison, a visionary entrepreneur centres their business on offering solutions to a need in the market. This requires research and continuous reinvention to meet the dynamic needs of the market. A good example is Safaricom through M-Pesa. Safaricom was a conventional telecommunication company offering data, SMS and calling services, but with M-Pesa, a simple money transfer option soon evolved to become an entire virtual banking system.
Where does your business lie? You can still crossover from a subsistence to a visionary entrepreneur. All you need to do is research, pay close attention to the market and offer a viable solution. That model guarantees sustained income and evolves entire markets, but you need to be patient. It does take time.
2. Manage the overheads
You have heard this several times, but these are the realities you never fully grasp until you have received your certificate of incorporation. These responsibilities come in the name of taxes, business and legal fees. The Kenya Revenue Authority charges various forms of taxes based on the kind of business you do. The best way to handle this is to contract a tax lawyer.
That means a contract and salary or retainer needs to be paid to ensure your monthly taxes are submitted. There are also certain legal obligations companies have. You need to find a lawyer to work with on a retainer basis to assist you draw up legally sound contracts and other legal particulars.
Maybe you are lucky and have a family member or close friend who can render pro bono tax accounting and legal services, but when it comes to business fees, there is no escape. Business fees, such as county business permits and various certificates of compliance to operate your physical business affect your overheads.
3. Marketing is essential
You have heard the phrase, “It takes money to make money”. You do need to spend money to build a website and maybe run Facebook adverts to grow you target clientele base. You can also go the extra mile and rope in some friends and make some company videos to share on your social media platforms.
Another way to market is to ensure you have business cards to give out at business networking breakfasts and dinners. The only way people will know about your business is if you go out and tell people about your business. And these networking events are a great way to market your business. But they do cost something.
4. Work - Life balance
The truth is, with all the work you will be doing, it will be a struggle to balance your social life and business. The first two years are genuinely intense as you figure out how to grow the business and also ensure you pay your bills. It is hard work. You need to be ready for that.
5. Plan Your Finances
Even if your first client pays you, say Sh100,000 for your first job, you need to be very clear on how to allocate the money accordingly before you receive any money. You need to have a financial plan. That means you have a clear budget of your expenses and also work on projections of income to handle new prospective costs such as new hires to your company, which may also mean office space. And office space is an entire bill on its own. If you have to hire, hire only necessary roles. It is however preferable to keep your staff lean, which might mean you will be the sole employee for some time.
6. Delayed Gratification
A six figure salary comes with time, its boot strapping in the beginning, which can last up to three years depending on your business, operations and its growth potential. There are very many schools of thought who argue about entrepreneurs paying themselves first or last.
We believe that you should pay yourself first. Why? If you don’t, you are likely to spend less time building the business and head down the subsistence path.
You are better off paying yourself a small monthly amount to help with simple things such as transport, phone airtime, data bundles, and food to keep you energised. It can be as little as Sh5,000. You may need to humble yourself and move back home with your parents or live with a sibling, work from your bedroom and plan your meetings once a week to ensure you save on bus fare.
Being an entrepreneur means making the small sacrifices now to reduce expenses and maximise business profit. In time, your business will be profitable from that sacrifice, and will pay you a handsome salary, hire thousands and buy you the luxury dream car you’ve always wanted.