by Alex Roldan
As discussed in my earlier column, many micro enterprises find difficulty fulfilling government regulatory requirements, like renewing business permits and paying taxes. Some of them simply decided to cease operating, while others were forced to borrow money to pay for government requirements because they had no choice.
But why? After all such requirements, particularly taxes and permits, are inherent to all business?
I am referring to those which, for the foregoing reasons, decided to call it quits and those which are still in business but continue to operate in the red but seemingly burdened by having to pay for even standard government obligations.
One of the least understood aspects of entrepreneurship is why micro-enterprises fail, and in my experience, the simple reason for the confusion lies with the entrepreneurs themselves.
I have a close-up view of numerous business failures, including a few of my own start-ups. And from my observation, the reasons for failure cited by owners are frequently off-tangent. Had the owners really been aware of what they were doing wrong, they would have been able to fix the problem. It amazes me no end that many of them continue to deny that they don’t know!
Let’s dwell on the importance of customer satisfaction for example. In many cases, the customers, or should I say “ex-customers”, have a better understanding than the business owner of what wasn’t working. Instead of looking inward, owners tend to put the blame outside – high interest rates, government fees and taxes, the country’s poor economic performance, or an idiot of a business partner.
Strengthening the customer base is of utmost importance for any business to succeed, be it micro, small or macrol. To me, allegations of low demand for the product or service at a price that will produce a profit, or the lethargic state of the economy hence the difficulties, are not good enough reasons. Owners should realize that they are in the game called competition! A good assessment that the business can be competitive is a must from the very beginning – such as prices, economies of scale, quality, distribution network and many more.
Many micro-entrepreneurs would want to stay in their individual comfort zones instead of going out of their way. They may be perfectionists, adverse to risk, greedy and insecure, but they are also self-righteous. Others seek advice and listen what others see as the problem and will even agree with the observations, but they continue to make mistakes over and over again.
Another waterloo for businesses is “greed.” Others would use a less severe phrase like “over expansion”, but I still call it greed. This hurts the most, because business owners may have already experienced initial success. But the initial success, the craving to make more money fast becomes intense. Though not generally a bad thing because, basically, this is the central motivation why they are in business, yet because of greed that masks their objectivity, they do not want to think anymore, and want to expand fast! It is not all bad either – to act quickly when the opportunity comes, but hasty expansion can also result in bad decisions – moving into markets that are not so profitable, the burden of experiencing growing pains that damages the business, and borrowing too much money to sustain the desired growth.
This may be too academic, but frankly speaking, there are a lot of reasons why so many of our enterprises remain micro despite decades of operation. Another example is to take for granted the “numbers” that show what is happening to one’s company. They do not want to hire good accountants as a cost-cutting measure. They are already comfortable with the knowledge that the company “is earning” without due regard to whether it is indeed earning enough to achieve a safety margin its operations and that profitability reflects the established goals. As a result, innocent-looking glitches in the operation could already shake the foundation of the whole business. Without these numbers, the owners are flying blind!
The above are just a few of the reasons why micro-enterprises fail. You can go on an on, such as functionality of the structure, operational efficiency and the like.
Business is unforgiving. If people don’t like your product, your employees stop working for you, and the natural consequence follows – customers stop doing business with you.
For comments, e-mail to roldanalex@yahoo.com
