The motives of those staging roadblocks sometimes go beyond the reasons cited above. Roadblocks are on many occasions used to rob innocent travellers or molest and intimidate opponents during political campaigns. Approaching a roadblock is terrifying but well-prepared travellers overcome them.
Small business owners should be like these well-prepared travellers. They need to be focused, stick to plans, be trustworthy and avoid using unethical practices to maximize profits if they are to overcome roadblocks they often find along the way as they struggle to build successful businesses. Such roadblocks of building successful businesses include: financial lulls, decline of market share, loss of customers, and lack of selling or bankruptcy.
In this paper, we will discuss the “FPTE” formula which means that focus, plus plan, plus trustworthiness, plus ethical practices equals a well managed small business.
One mistake which small business owners make is not being focused. Today the owner is selling foodstuffs, the following day she/he will be marketing tyres sometimes in the same premises. When a customer inquires for item A and it is not available, the following day it will be stocked. This is a common scenario with small business owners. J. M. V. Canfield and others quote Jim Rohn, America’s foremost business philosopher by saying, “Many people don’t focus very well. That’s the reason they ultimately end up broke and disillusioned.” In The Power of Focus, Canfiled and others advise that when you focus most of your time and energy doing the things you are truly brilliant at, you eventually reap big rewards. We should heed this advice, as this is a proven way of keeping a business on target. Otherwise we will be like a person passing through a roadblock without stopping. To put it in another way, it is like a driver overtaking on a sharp corner. This is committing business suicide.
Another mistake made by small business owners is not to stick to plans. They draw well-designed expensive plans and on their strength receive loans which they later divert to other projects. C. A. Poissant and C. Godefroy in their book, How To Think Like a Millionaire. The Success Secrets of Ten Millionaires advise that we should be careful not to set too many goals at the same time because it does not lead to success. Why not follow this advice based on real experience? After all, if it worked for others who are millionaires, why not use it in your business?
The final mistakes demonstrated are those of untrustworthiness and unethical practices to maximize profits. Instead of small business owners pursuing their dreams, visions, interests and wants by focusing on customers as advised by M. E. Gerber in The E-Myth Revisited. Why Most Small business Don’t Work and What to Do About It, it is profit that is strategy number one. This is not the best way of overcoming roadblocks to small businesses. The small business owner as T. Foster states in 101 Ways To Boost Customer Satisfaction should first respect the customer’/clients’ time and intelligence and allow them to decide their own destiny. We need to know that a customer is a valuable asset to an organization and need be treated carefully and respectfully.
Let’s demonstrate these problems that lead to small business failure using real life experiences.
The first real life experience of not being focused and sticking to plan is that of Simba [not his real name]. Simba was a prominent businessman in Uganda, operating a fuel station in 1980s and early 1990s on behalf of the then ESSO that subsequently became GAPCO. The capital base to run the fuel business at that time was US $25,000. Most weeks, Simba would be in deficit by amounts ranging from US $750 to US $10,000. Whenever this happened, his bank (then Uganda Commercial Bank) always rescued him by granting him overdrafts. These overdrafts would promptly be settled within two to five days gaining him a good credit rating.
Simba continued to operate his business as described above – of being focused and sticking to plan up to around 1993. In 1994, he applied for a loan facility equivalent to US $17,500 to boost his capital for fuel trade with his only house as security. Being an old customer who had built himself a good banking reputation, the bank willingly granted the loan. This was about the period when trading in coffee was very lucrative.
Simba, in his wisdom decided to divert the loan money meant for fuel trade to the coffee business. He was lured into the belief that by first investing the money in coffee, he would be able to pay the loan much faster and remain with enough capital to run the fuel business. Alas! This was not the case as there was a slump in coffee prices. All the money disappeared in the coffee business. Consequently, Simba could neither service the loan nor continue operating the petrol station. GAPCO Petroleum Company decided to terminate the contract with Simba as a result.
He was left with no alternative but to gather his few belongings and go back to his home village. The bank was on his heels asking him to repay the loan, which he could not since he had no other source of income. The bank had to sell off the security -house- to recover the loan. Simba right now is a pauper in the village.
Many people in Uganda know the above story and a lot more have heard of similar ones, but the same mistakes continue to happen. The major reason for this is that there is a general lack of discipline in financial management among sections of small business owners, coupled with a lack of focus by not sticking to their plans. If Simba had stuck to the fuel business, it is most likely he would not have lost the money nor halted operations.
The second and third real life experiences are untruthfulness and using unethical practices to maximize profits. A lady colleague of mine one time was walking along Luwum Street in Kampala City, Uganda. She saw a very nice pair of shoes in one of the shops. Indeed the shoes were one of the latest models in the market at that time. The lady entered the shop and inquired about their price. The shopkeeper told her they could not go for less than US $22.50. Since the shoes were attractive, she paid the money and walked away with them. A day later, this same lady found vendors who sell merchandise in front of shops selling the same pairs of shoes at US $15 thus 33% cheaper. This unethical practice that has happened to many people has made customers to abandon the shops preferring goods sold by street vendors. As a result, shopkeepers have lost customers. Shopkeepers ought not to unreasonably overcharge their customers.
An up and coming contractor in Mbarara Town, Uganda provides another example of an untruthfulness and unethical practices. He had gained a good reputation with the organizations and people and he was winning contracts. He then made the mistake of wanting to maximize his profits by doing substandard work on a structure of one of the institutions in the area, which collapsed later. This contractor has since been blacklisted.
The examples above happened in Uganda but small business owners make the same mistakes in sub-Saharan Africa. They simply want quick returns overnight and in so doing cheat the innocent customers whom they end up losing. The end result of such practices is failure and bankruptcy.
These three scenarios on the “FPTE” formula are shared through personal experiences. It’s likely that a small business owner that is not focused, does not stick to his/her plan, is untrustworthy and uses unethical practices will from time to time meet roadblocks of would be a well managed small business. Such roadblocks like the failure to pay a loan, lack of profits, poor quality products or services, loss of customers, financial lulls and decline of market share will lead the business to halt operations and eventually fail. Therefore, remember the “FPTE” formula, but more important apply it as a habit!
Be focused, stick to the plan, be trustworthy, and avoid unethical practices in order to overcome roadblocks in small businesses.
By Charles Tushabomwe-Kazooba.
Thw author is a Senior Lecturer in Management and Accounting at Mbarara University of Science and Technology (Uganda). He is a 1988 graduate of University of Birmingham Business School and Certified Public Accountant.