Small business biggest challenge

[Dave A]

Every business has different challenges when it comes to getting timeous payment. Ultimately it's a case of identifying where and why you are being taken for a ride, and then put measures in place that control and reduce the risk.

And then stick to them!
Which at times can be tougher than you might think. But it is critical.

[tec0]

I am going to go

In my opinion a business of any size have 3 major drawbacks.

I would like to start with the suppliers. Now I only know the “tech” industry and based on that I can say that you cannot be competitive because the supplier base is limited and there requirements are beyond belief.

After all how do they expect you to stay

• Competitive
• Profitable

In a saturated market?

How can you comply with supplier requirements if you can’t get competitive pricing?

Thirdly is the endless TAX battle and I believe that must actually become a subject in its own right because it seems like extortion!

Then there is a question of stock insurance and transport insurance and life insurance that seems to be the norm. Basically your business starts with a massive overhead that is seemingly impossible to do without.

Take in account how much your business cost you a month? For most small businesses “depending on how small” this is still a large amount. Rent can set you back about R15k a month “as an example” or R1500 a day depending on location. And FACT IS business is 60% about location.

Now you need insurance, security, training and cash points. ALL of this cost money.

So the biggest challenge is “cost effectiveness”

If you business is not cost effective its game over.

[adrianh]

tec0 - it all comes down to being shrewd, SPAR survives next to Pick n Pay and the Café on the corner survives next to SPAR. There are ways to deal with tax and business is not always about location.

[tec0]

There are 3 computer shops in our immediate aria about 15min away from where I live. Two are located in close proximity to each other “walking distance” one is doing very good the other very bad.

Both have competitive pricing, goods are of the same quality “same supplier” and they carry more or less the same stock. The one is making it but the other is losing it. Why? Simple answer the one is located inside our local Shop the other is located closely to a less popular shop. So as a matter of convenience the one shop is factually doing better.

Now the third shop is out of the way and closely situated to the mall now its biggest competition is the local franchise shop “incredible connection” Truth is our “incredible connection store” is very competitive. So that computer shop is suffering. There stock is about six months old! There sales are so bad that the owner let go of all his staff.

I read what you are saying but it is what I am seeing that that is the decisive factor.

[Dave A]

After all how do they expect you to stay

• Competitive
• Profitable

In a saturated market?

Establishing a viable business model is the shop owners responsibility, not the suppliers.
The interest of the supplier is to get its product to market and get paid by their customers (in this case those shops).

[tec0]

Business has a few factors that contributes to its success.

• Firstly is clientele.
• Secondly its goods and services supplied and rendered
• Thirdly support and warrantee/guarantee if applicable.

Now your supplier determines the second and third aspect of your business. The first aspect however is based on research. Fact is your business is a dead duck if no one needs what you are selling. Another factor is competitiveness... This is directly link to expansion, service provided and quality of goods and services.

Then you have overhead, running cost and taxation to deal with.

But your biggest risk in my opinion is your supplier.

In my case as my supplier grew bigger their demands became more and more unreasonable. Unfortunately they did retain the right to change the parameters of the agreement when you signed there none negotiable contract.

Thus I was no longer cost effective... Factually I was “Working for my supplier” because they wanted larger and larger orders then it just became impossible. I opted to import directly but even with massive funding behind me I couldn’t pull it off. Why? Because of contracts between fabricators and existing suppliers. So basically they own import rights.

So the biggest challenges;

• Find trustworthy supplier
• Keep overhead low
• Location

[tec0]

Establishing a viable business model is the shop owners responsibility, not the suppliers.
The interest of the supplier is to get its product to market and get paid by their customers (in this case those shops).

I agree with you however let’s take a simple product let’s say you buy 1 cup of gold for X amount. And sell that cup of gold for y making z amount in profit. You are doing well everyone wants your gold and is willing to spend money on it as it is a sound investment.

Now your supplier says wait a minute I now need you to buy a minimum of 10 cups of gold! Or you can no longer buy from us “the only suppler in the country” What do you do? Your clientele is good but it is not that good. You are making money but not that amount of money.

Now because you cannot comply to the new demands of the supplier “the only supplier” your business goes away because you have enough business to sell 1 cup of gold not 10 cups of gold.

[HR Solutions]

Location depends on what type of business you are operating. Location has no influence on our business.

“the only supplier”

How is this possible ?

[adrianh]

Well, as the saying goes "If You Want to Run With the Big Dogs, You Got to Learn to Pee In the Tall Grass"

If the clientele is so good then why don't you simply get orders for the volumes that the supplier requires and get a loan against the orders?

Where there's a will there's a way. Nobody ever got rich because of giving up when they hit obstacles, the learn to work with them, go over them or go around them.

It all boils down to locus of control, do you control the situation or do you let the situation control you?

[tec0]

Location depends on what type of business you are operating. Location has no influence on our business.

How is this possible ?

Sadly it is possible if you want to know more Google "Exclusive Distribution Rights"

[tec0]

Well, as the saying goes "If You Want to Run With the Big Dogs, You Got to Learn to Pee In the Tall Grass"

If the clientele is so good then why don't you simply get orders for the volumes that the supplier requires and get a loan against the orders?

Where there's a will there's a way. Nobody ever got rich because of giving up when they hit obstacles, the learn to work with them, go over them or go around them.

It all boils down to locus of control, do you control the situation or do you let the situation control you?

Some markets allow you to be creative others not so much.

[adrianh]

Which ones don't allow you to be creative, give us a couple of examples.

[tec0]

Which ones don't allow you to be creative, give us a couple of examples.

I am sure that you are familiar with the term “affiliation” let me clarify “the act of becoming formally connected or joined”. Basically if a business uses a particular brand and your business is not affiliated with that brand you don’t get the service contract nor do you get to sell their stuff the end.

There is no working around it there is no getting your foot in the door or anything like that. It is or rather it comes down to the simple fact; you are in or you are out. Now to get in is a crazy mixture of paperwork, getting qualified and financial investment. Not to mention you have to comply with ALL their standards.

[adrianh]

I am sure that you are familiar with the term “affiliation” let me clarify “the act of becoming formally connected or joined”. Basically if a business uses a particular brand and your business is not affiliated with that brand you don’t get the service contract nor do you get to sell their stuff the end.

There is no working around it there is no getting your foot in the door or anything like that. It is or rather it comes down to the simple fact; you are in or you are out. Now to get in is a crazy mixture of paperwork, getting qualified and financial investment. Not to mention you have to comply with ALL their standards.

You can't blame companies for vetting their resellers. Imagine if Joe's corner garage started selling new BMW's without the appropriate knowledge and knowhow. What you need to realize is that you as the reseller is responsible for creating an environment that is suitable to the supplier because if you can't then somebody else will. Just think about any of the franchise operations, KFC, MacDonalds, Wimpy etc. you can't do as you please, you have to adhere to very very strict rules and standards...they boot you out quick quick if you don't comply.

Bottom line is that it is your responsibility to ensure that you either satisfy their requirements or come to a suitable arrangement with them. So, why don't you take a loan, like we all do and create the required compliance?

[HR Solutions]

Import yourself.