2.2 The core principles of a successful business

1. Accept having to take risks!

Successful entrepreneurs are prepared to take risks. Sometimes a business will prosper, and at times it will experience difficulties. Be honest with the bank (or the person who funded the business). Explain why there is a shortage of cash flow, and why there is being deviated form the business plan. Initially you may find it difficult to sleep peacefully whilst knowing that your business was experiencing difficulties. With time one learns that difficult times are part and parcel of operating any business, large or small, and that there are creative ways to overcome them. A golden rule is to fully inform the bank of the reasons why the business is experiencing difficulties, and how the problem is being addressed. Being able to involve the bank as a partner during these difficult times will result in acquiring the trust of the bank. Eventually the same bank will be prepared to finance a larger enterprise in which you are involved, because a special relationship based on trust developed between you and the bank when the difficult times were experienced.

5. Each client is special

It is difficult to describe one’s excitement when the first client buys one’s product. One should let the client feel special and build a relationship with him/her to ensure satisfaction with the product and also to offer one’s support. As the number of clients increases, it becomes difficult to offer special treatment to all of them on a regular basis. However, well-written letters offer positive inspiration to clients.

Always listen attentively to positive and negative criticism from your clients. Often clients want to experience a willingness from your side to care for their needs. In many cases unhappy clients can be comforted with good and honest means of communication. Learn to handle negative criticism from the beginning.

6. Managing cash flow

Although many enterprises show a potential profit over the medium term (one year), they sometimes experience a shortage of cash during certain months to meet their expenses. In this case two golden rules apply: apply thorough debtor’s control, and pay the larger accounts only after enough clients have paid their accounts. Perhaps you are unfamiliar with the word debtor’s control . Debtors are the people who owe you money. They are supposed to receive invoices (account statements) on a monthly basis.

Debtor’s control means that someone in the company must ensure that the accounts are paid. In most cases a friendly telephone call or a letter to remind people are met with success in collecting payments that are in arrears.

7. Design systems that work

You will soon realise that successful business management will challenge you to make sound decisions on a regular basis. One needs management information to make sound decisions. Information that applies in this case, is the following:

• How many clients does the business have?
• How are the clients distributed geographically; in other words, how many of them are close to the establishment, and how many come from afar?
• What are the monthly expenses?
• How much money is needed to pay all the expenses and still maintain capital in reserve?
• During which months must VAT be paid, and if all debtors pay their accounts, and if all expenses are paid, what amount for VAT must be paid to the Receiver of Revenue?
• Is the business still expanding?
• Are there any unhappy clients?

Assessment