11/03/18 - 6 challenges to overcome in a micro-business
14/02/18 - World domination and the micro-business model
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6 challenges to overcome in a micro-business
Owners and operators of successful micro-businesses have experienced and overcome a unique set of challenges; micro-businesses fail because these challenges have not been understood and overcome.
- 74% of New Zealand businesses established in February 2007 were not operating in 2017
- 28% of Australian businesses established in June 2007 were not operating in June 2009
- 55.9% of UK businesses established in 2011 were not
operating in 2015. Refer
- 62.5% of American businesses established in 2007 were not operating in 2015
In this article Astute identifies, in order of impact, six (6) common challenges that owners and operators have to address and overcome to establish and operate successful, long term micro-businesses.
Challenge #6. Customers do not understand or (worse) do not value the micro-business products and services.
In other words - no customers equals no micro-business.
Owners and operators must know and understand their target markets; ensuring that current and future customers can see the benefits and value of the micro-business products and services.
To address and overcome the customer perception and value challenge Astute recommends that micro-business owners and operators:
Challenge #5. Insufficient marketing content and inefficient (sales) conversion processes. In other words:
- There is not enough published information for visitors to understand what products and services are being offered or
- When a visitor decides to purchase, complexity and errors experienced in registration and setup discourages the visitor from paying.
Owners and operators must ensure that it is easy and simple for:
- Visitors (potential customers or leads) to find useful information about the micro-business products and services
- Converted visitors (i.e. new customers) to register, pay and access the products and services.
To address and overcome the marketing and sales conversion challenge Astute recommend that the micro-business owners and operators adopt a customer centric sales approach.
Challenge #4. Creating and nurturing the "micro-business culture".
The importance of attracting and retaining the right employees for the micro-business cannot be understated.
Employees, representing the business, deal daily with the customers of the business. Bad experiences with employees is a major contributor to the micro-businesses losing customers.
Poor, weak, hostile and confusing cultures and attitudes are the major reason employees leave micro-businesses; employees leaving the business result in unplanned costs and effort to replace them. Great business cultures retain employees and (in-turn) retain customers.
It is essential that owners and operators create, encourage and support the development of the micro-business culture. Astute recommends micro-business owners and operators implement steps to adopt and implement a customer centric culture.
Challenge #3. Simplifying and automating the micro-business back office systems.
Micro-business owners and operators typically implement back office systems using a mix of paper, spreadsheets and informal employee and customer related practices and processes.
This approach will work for a small number of customers (possibly less than 10). This approach will fail once the demand for products and services grow.
Customer and staff dissatisfaction and a loss of sales revenue and productivity are the results of complex and manual back office processes.
Owners and operators must develop a back office approach or strategy that supports the business as it grows; the Astute business cloud IT strategy is an approach micro-business owners and operators can use to develop a back office strategy.
Challenge #2. Owners and operators are working in the business, instead of working on the business.
Each of the challenges listed in this artice require the attention of the micro-business owners and operators.
If theses challenges are not addressed in a timely manner, owners and operators end up working in the business; caught up in the detail and distractions of day to day operation of the business; not focused on understanding and growing their business; missing opportunities, losing customers (to competitors) and losing touch with their market.
Astute recommends that owners and operators work to remove themselves (and a minimal interaction with) from the day to day operations of the business. Focusing on working on the business; addressing the challenges listed in this article; understanding their market, their customers and developing strategies and approaches that grow their business.
Challenge #1. Poor cash management - poor cashflow.
Poor cash management is the most common reason that micro-businesses fail. Cashflow misconceptions include:
- Making sales does not mean the business has cash. Customers may defer or even cancel purchases with short or no notice.
- Inventory is usually paid for (from cash reserves), stored (incurring additional costs) until it is sold. Buying inventory puts the business in more debt; the debt cannot be addressed until the products and service are sold.
- Increased sales increases the demand on cash flow. E.g. building more inventory, delivering more products (at cost) where customers delay payments.
- Selling to businesses result in good customers but results in longer and unreliable re-payment cycles.
Cash flow is not intuitive; cash flow needs to be monitored and understood by owners and operators over time and as business conditions change.
Astute recommends that owners and operators monitor and track business expenses, orders, sales and inventory; capturing:
- The average number of days for receipt of payment
- The average number of days that inventory is retained (before delivery to customers) and the associated amount of capital required to purchase and store the inventory
- The average number of days by which the business vendors must be paid
Owners and operators then use this information to estimate and project (at least 12 months in advance) the cash flow position of the business.
In our next article Astute will discuss how owners and operators can address and overcome the challenges required to establish and operate a successful micro-business.
World domination and the micro-business model
"Micro-businesses" are most popular (dominating) business model in the world; it is a business that has 7 employees or less (including the owners).
Why are micro-businesses so popular? Because a micro-business:
- Is typically created by individuals who want to build a business that meets their personal and professional needs.
- Is easy to start, requiring very little capital to setup and operate.
- Is (and needs to be) flexible, adaptable and responsive in the way it delivers products and services to its customers.
- Has a small number of customers in a specific industry segment
- Must be customer centric (to compete for customers in the industry segment)
- Can be implemented across a wide range of industry segments (service, construction, retail, wholesale etc)
In this series of articles Astute will analyse this world dominating business model identifying and clarifying:
- Micro-business challenges.
- Operating the micro-business model.
- The micro-business customer centric philosoph.
- The IT powering and supporting micro-businesses.
- Micro-business risk and security considerations.
- Transforming the micro-business to a small to medium enterprise (i.e. growing the business).
In our next article Astute will discuss micro-business challenges, what to avoid, common reasons for (micro-business) failure and how to address these challenges; ensuring the successful and profitable operations of micro-businesses.