Entrepreneurship Industry News

Start out strong: What you need to know to build a successful business

Many people starting a business have a common mistake of thinking that they know everything Oftentimes, you find people have access to capital but do not have access to knowledge and they end up wasting the capital

Over the last five years, incubation hubs have made major contributions to Kenya’s growing entrepreneurial culture. They have provided crucial start-up space for individuals or groups looking to start a business, and enabled entrepreneurs to obtain vital resources, including funding support, mentorship and access to business networks.

Sam Gichuru, the founder and CEO of Nailab, one of Kenya’s earliest incubation spaces, shared some of the key lessons his team passes on to entrepreneurs.

From your experience, what’s the biggest mistake entrepreneurs make when they’re starting out?
I think the biggest mistake that most people make when coming up with a business idea is thinking they know everything. This includes people who have worked for big corporates and multinationals for years who make a lot of assumptions about running a business, and fail a lot more because they assume they already know enough.

Oftentimes, you find people have access to capital but do not have access to knowledge and they end up wasting the capital.

On the flipside, you find entrepreneurs who have the business knowledge but do not have the capital to turn it into something money-making, and they end up struggling a lot getting the business off the ground.

What are some of the misconceptions people have when they decide to quit their jobs to start their own business?
That entrepreneurship means freedom. A lot of people think that quitting their jobs and running a business will give them more control over their schedule, but this is a misconception.

When you are working an eight-to-five, you have 21 leave days and you also get to rest on weekends and public holidays without worrying about the aspects of the business. You do not need to worry about payroll or filing taxes or dealing with a lawsuit because that falls under someone else’s docket.

That is what freedom is. You might have someone telling you what to do, but you are not sitting idle the whole day looking at your dashboard, tracking how much revenue you’ve made or if you have any new users.

While you have one boss at an eight-to-five job, you have many bosses as an entrepreneur – your staff members, your customers, the government, board members; all these people are your bosses.

What should be the first thing on my checklist before I decide to make the big leap?
Make sure you have a viable business idea.

This means asking yourself difficult questions: Who’s going to buy your product? How viable is it? Is there need or an addressable market for what you are going to provide? You have to do a lot of research, and not just in the sense of sending out questionnaires and waiting for answers, but also practically feeling out the market.

If you are developing a subscription service, for example, you need to approach a sample of your potential customers and find out if they would be willing to pay for it. Bring them a sample of the product if possible, and have them pay for it.

Anybody can tell you they want or need your product and that they can buy it, but that does not mean you rush out to start production immediately. People rarely tell you that they do not want your product or that your product is bad, and the difference between market research and having people actually committing money to your product is worlds apart.

So I have my business idea and I have identified my market and made successful test runs. What should I do next?
Once you have a product and commitment from a few customers, you can start looking for a co-founder who shares your vision.

It’s very important to get a co-founder because of burnout. Also a lot of people will be reluctant to put their money on a single founder because of the risks associated with it – if something unforeseen happens to the founder, the business stalls and investors lose money. Co-founders ensure that there is continuity and balance.

You can then approach investors because now you have a team – which demonstrates technical capacity – you have a product and demand. As long as there is a lot more demand for your product than there is supply, you can always raise more money and keep building on the product.

Growth and expansion come organically, and in the initial stages you might well be able to handle all aspects of the business between the co-founders. However, if you find that you have a growing number of customers and there is a breakdown of operations when you are not present, then it’s time to design systems.

What is your opinion on having someone run their business as a side-job until they’re sure they’re ready to quit their day job?
Having a side-job only works when you are trying to raise capital. You give yourself a target of a specific amount of money you need to raise within a specific period of time, so you are working for your business – you’re just not there physically.

In that time, you put in place key components such that when you leave your job, you have a place to start from.

However, working like this for an extended period of time while you are still building your start-up will take a toll on you. You will constantly find yourself spread too thin trying to balance the two, and neither will get the attention it deserves.

The amount of time it takes just thinking about a single business is about 16 hours a day, so you might end up in a situation where your business is more of a distraction.

What role does failure play in entrepreneurship? And have we romanticized it too much?
I don’t think we have romanticized it enough, otherwise we would have more people starting businesses.

You have a 90 per cent chance of failing if you start a business, so failure should be extremely acceptable. Failure turns into big lessons, and I’d rather take advice from someone who has failed than from someone who has never tried.

Entrepreneurs, especially, experience more failure than CEOs of large companies. A CEO of an established company already has customers, an advertising and marketing budget, and staff; their main work involves growing these resources and expanding distribution.

On the other hand, you have a 24-year-old who for the last three years has built a product with zero customers and zero capitalization, failed and recovered, and grown their customer base. I think this person knows more about running a business than the CEO of the big firm.

Where can an entrepreneur without the ‘right’ business connections turn for resources to grow their business?
It is important to try as much as possible not to work alone.

Find a place where you can get a community – whether it is in college or through meet-ups and conferences.

Incubators are very important because they give you these resources in a structured and professional package. Working in a community and with others helps you reduce the number of mistakes you will make, or helps reduce the impact of these mistakes.

Working in a community also helps you maintain morale and focus, and that is something you can’t put a price on. It is also important to take advice cautiously because a lot of people who are loud about entrepreneurship are enthusiasts; they watch from a distance and believe they know how it goes.

When it comes to entrepreneurship, only another entrepreneur knows what it means and can help you make sense of your predicament.

Read More: Standard Digital