BE YOUR OWN BOSS-TIRI KUMBAKULA
In last week's article I stated that being in business will enable you to develop people and leadership skills. This article looks at several more skills you need to develop in order to succeed.
A business exists to make money. That is its essence. The more money the business generates, the stronger it is, and vice versa.
Many people think that making money is hard, but you will realise that managing money is harder than making it. Once your business is established and money starts flowing in, you will have to develop the necessary skills to apply that money aright. Many businesses fail not because of faulty products or an absence of paying clients. They fail because of financial mismanagement by the owners.
As the business deals with money, you will develop many financial skills. Some of the skills are as follows:
2. Cash flow management;
3. Reading and understanding financial statements such as the income or profit and loss statement and the balance sheet; and
4. Presentation of business plans and financing proposals to banks.
Among the financial skills you will feel compelled to develop and utilize will be cash flow management. This is because cash flow is like the business's life blood. As blood is to the human body, cash flow is to the business. Your business will stand firm or waver depending on how well you are able to both generate and manage the cash it generates.
When you are an employee, you have the assurance of a fixed amount of money available to you every pay period. So you can make plans with a lot more certainty. Not when you are in business, unless you have a contract with a client under which your business earns a fixed amount of money. In business, you make a lot of money one day and the next you do not make any at all. So you have to spread what you make over the times you don't make any, so that your business continues to function.
Cash flow mismanagement is the single most important reason many strong businesses fall. Cash makes businesses stay alive. The more cash the better. And the faster it flows through the business, the more the growth.
When cash gets tied up, for instance in physical assets or creditors not paying on time, the business will crunch to a halt. Some business owners make the mistake of concentrating on investing in physical assets such as buildings and machinery that they don't have cash to work with. Then it becomes a case of being 'asset rich but cash poor'. This situation can force the business to go into unnecessary borrowing or even receivership if the debtors establish that they can get their money back by selling your assets than giving you time to pay your way out.
This is what happened to one of the companies I worked for in the early 1990s. The company owned many properties such as houses and flats, factories, office buildings throughout the country but it did not have the cash to fund its day to day expenses. When the bank saw that it could sell off the assets and recoup its money, it swooped in with receivers who shut the company down in a day and started selling everything. By doing this they freed up the cash that was tied up in the properties, plant and equipment to get their money back.
We all have negotiated with others at one stage or another. As children, we have made deals with other children either to our advantage or to cover up for our wrongs. As young people we have negotiated with people we are affectionate with. As employees we have negotiated contractual terms with prospective employers. So we have some negotiation skills with us. In fact we all have the skills discussed in this chapter to some extent. We were born with them. But when in business, you display these skills and develop them more because a lot is at stake.
If you are like most people, when you heard the word 'negotiate', you would have imagined fast-moving wheelers and dealers or hard-nosed penny pinchers that drive hard bargains. Yes, there are people like that who sit across negotiation tables. But you do not have to be such a person to have things flowing your way. There are times to be firm, and there are times to just let the other party seem to have their way.
You learn negotiation skills more in business than in government. In government, it is public interest at stake; in business, it is your own survival at stake. So you negotiate better.
If you were selling something to a client as somebody else's salesperson, you will find that you when the client makes a counter-offer, you have to defer to your boss. You can stall for time. But when you are the boss, you make decisions and cut deals on the spot. When the other parties talk with you, they approach you differently than if you sent them one of your employees.
One of the times you find negotiation necessary is when discussing prices. Some prices are fixed so there is little room for negotiation, but you may need to discuss discounts. The prices of other goods change at every transaction. This makes price negotiation necessary at every transaction.
For instance, my background is in international coffee marketing. I know that coffee exporters negotiate prices every day with overseas buyers. If you are in the coffee business and are not well informed of developments in the world coffee market, overseas buyers can cut good deals for themselves at your expense. It makes knowledge of the market essential. In fact, export managers sit up all night watching the New York and London coffee exchanges as well as negotiating trade, because of time differences between Papua New Guinea and the United States and England.
One of the first things you will find as a business person is that in order for you to make money, you have to market yourself and your product or service. In other words, you have to get your target market know what you are offering.
This may involve writing introductory letters, knocking on the doors of potential clients and making cold calls, advertising in a newspaper or other media outlet, or sending an advisory note to people on your electronic mailing list.
You will soon realise that having a fine product is not really as important as getting people to know about it and buy it. Your product or service can be perfect for your target audience, but if it is not known, it will not sell. By the same token, you can have an inferior product but if you market it well, it can become a top seller.
Marketing is really about influencing people to believe that your product is the best there is on the market. It is about developing the market's perception about the unique qualities of your product, and how it can meet their needs or make their lives better. There are many relatively low quality products selling well due to the perception that they are good, because the sellers invest a lot of money into marketing the products. There are also very good products which do not sell well because of poor market perception.
This is one of the major problems with our coffee. Papua New Guinea produces some of the most aromatic and best-tasting coffees in the world but it is not known and appreciated by consumers, due to the fact that we have not promoted our coffee as much as other countries have done. We have concentrated too much on producing more but have not invested in marketing our coffee. The result is that the bulk of our coffee continues to be sold at significant discounts against the world price. Low prices then translate to low production, because producers are very price-responsive.
Marketing is also an area I am grappling with right now. Most people that have read my books have told me that they are inspiring, but getting the books before a large proportion of my audience is something I have yet to develop and establish as a system. I don't have a marketing system in place yet. All the books I have sold so far are through ad hoc marketing - book launchings, writing letters, half-hearted visits to schools, approaching a few bookshops, selling at seminars, setting up a personal blog on the Internet, etc. I have not promoted the books through media advertisements or established a website to sell my books to an international audience, for instance. The result is that I have not sold as many books as I could.
I know that people like the way I write and the subjects I write about. I am a best-writing author, but I know that when I develop marketing skills I will become a best-selling author.
Today's economic system operates on information. The more people know, the more competitive they are in the market place. That is why major TV channels like CNN have their motto as "Be the first to know".
If you know something ahead of your competition, you have an advantage over them. And this does not mean having access to privileged information for weeks or months. It can mean as short as a few minutes, because today's information technology has enabled everyone to have access to instant or 'real-time' information. The Internet provides information to people as events take place. So if you know something a few minutes ahead of your competition, you can profit from that information.
Communication means investing in an appropriate scale of information and communication technology for your business. For instance, you will definitely need to establish an email account. In today's world, letters and faxes are unfashionable. If you cannot provide an email address to clients, you are considered out of date. You might even find that you need a website to sell your products more cost-effectively.
Communication also means being in touch with your clients on a constant basis. It means finding out what their needs are and developing ways to meet them better. It means telling your clients what steps you are taking to improve your systems and procedures to be a better supplier or buyer as the case may be. It means providing back-up services after selling to them. It means establishing procedures for receiving comments and feedback from your clients.
Another major difference in the mindset of the business owner and the employees is that while employees busy themselves making sales and following up on payment from customers, the business owner is always looking for more profitable business and investment opportunities. In fact he goes out looking for ways to diversify his business activities. He is always weighing out opportunities and calculating in his mind the likely rates of return.
When you are the business owner, you will develop an eye for spotting investment opportunities. Your mind will be filled with visions of growth and expansion, while your employees concentrate on maintaining the status quo. As long as money is coming in and their benefits are catered for, the employees go home satisfied with the day's work. But you, as the owner, continue to think and look for ways to grow your business. It is a different mindset altogether from what you are used to when working for someone else.
Join me next week to look at another reason you need to be in business for yourself. Send your comments to email@example.com or text me on 7688 0033 or 7280 4588.