2.2 The core principles of a successful business  (Page 4/2)

Economic and management sciences

Grade 7

Successful management sciences

Module 6

The core principles of a successful business

The core principles of a successful business

We have approached a successful businessman to share his experience and expertise with grade 7 learners. In this module he will try to give you some expert advice so that you may become acquainted with the secrets of successful businessmen at an early age.

This module requires the following abilities:

• to be able to analyse given statistics of a business;
• to keep a cash-book with which to keep control of your income and expenditures;
• to compile a cash flow statement;
• to write out invoices; and
• to write out receipts.

The following principles (foundations) are always necessary to be able to run a business with success:

1. Knowledge of the product you want to sell or the service you wish to render

Once you have made the decision to start your own business, it is advantageous to be familiar with the kind of product or service you wish to offer. You will have to be able to convince people that your product or service is of the best quality, and that they cannot do without it. Once the business begins to expand, it will be necessary to appoint salespeople to sell your product or service, but you will remain the person to inspire and motivate them and inform them about the advantages of the product. Only at a later stage the product or service will begin to sell itself. Also remember to be well informed of similar products or services in the market place, as it is necessary to continuously improve your product to remain competitive. If you have to decide between two motor vehicles and both are tempting propositions, it will probably be the salesman with the superior knowledge of the product that will convince you.

2. Capital

No business can operate without capital (money). The question is always where to find the capital to start one’s own business. Here knowledge of the product plays an important role! Normally a bank will be prepared to make the initial funds available to enable a person to start his or her own business. However, you will have to convince the bank that there are enough people who would be interested in your product to enable you to gradually show a profit. On the other hand banks will only grant a loan if certain securities can be presented. If things do not go according to your business plan, the bank will want to retrieve its money.

If it is not possible to present any securities, it will be necessary to acquire a partner to fulfil the function. Many successful businesses owe their success to two partners: one with the knowledge of the product or service that will sell successfully, and the other partner who has a certain financial capacity. Never allow a shortage of capital to prevent you from starting a business!

3. Focus

A business needs time to show a profit, as well as being accepted or acknowledged by the public. An enterprise may only show a profit after several years. Many entrepreneurs who had started a business, surrendered along the way because the business did not show a profit soon enough, according to them. In many cases they should have remained involved for a few more months. In other words, they desponded just before reaching the proverbial winning post. The importance of a thorough business plan must be stressed once again. The business plan indicates at what stage a business should show a profit. Should it indicate that an attractive profit would only be shown after three or four years, it would help to remain focussed on the product or the service that is being rendered. Many entrepreneurs are misled by the successes of other seemingly successful enterprises. Consequently they move from one enterprise to another, only to find after a few years that they could not make a success of either. Therefore, remain focussed on the product or the service rendered. Allow your business time to establish itself. Therefore, remain focussed sufficiently on the product of your choice!