Having built his business from scratch, Chris Ferguson of Credence International knows the pains and pleasures of starting a new company all too well. Recently, the company crossed the all-important two-year SME milestone and is showing no signs of slowing down. We reached out to the seasoned entrepreneur and gained insights on his winning strategy
Chris Ferguson founded Credence International in September 2014. From an ambitious start-up to a well-established SME, his journey to the top has been quite remarkable. Some of the major milestones the company has enjoyed include: creating a robust management structure; hiring an outstanding team; arranging an MBO from the original venture capital partner; gaining regulatory approval; and building a business that is completely unique in its marketplace.
The current economy requires that SMEs take a good look at the fundamentals of their businesses. As markets mature, SMEs can be hit the hardest by issues such as tight cash flows, increasing costs and decreasing value. So, how does a business owner with limited resources run an effective and profitable company? Here are top tips that can help SME owners stand out in a crowded marketplace:
- Step One: Business planning and feasibility?- Before entering a new business, doing your research and understanding the mechanics of your sector is incredibly important. Your initial research should consist of:
1. Market size and feasibility – Is there a market? Who is the competition? Are you in the right location? What are the consumer patterns in the sector? Is it a growing or a shrinking market?
2. Technical feasibility -?Every company needs a technical infrastructure and this needs to be factored in when starting a business.
3. Competitor analysis -?Who does what and how? How are you different? Don’t be slightly different. Be majorly different, be a disruptive force, change the industry for the positive and shout from the rooftops about how you are different.
4. Scalability -?Can the business expand? Is it local, global or a mix? What challenges need to be overcome as the business grows? Is it a volume player or a boutique select player?
5. Market disruptions -?Is there a new development that will take market share? If so, can you take advantage of it, compete with it or join it? Second to market often irons out the mistakes that the first mover made:?Myspace vs. Facebook is a great example in this regard!
Statistical data: 64% of companies with a business plan experienced growth, compared to 18% of companies that didn’t have a business plan.
- Step Two: Mapping out an exit strategy -?Ask yourself the tough question: why are you doing this? A great business should be built as if it will be around forever, but in a way that will also attract potential buyers. Are you starting the business with a view to selling it to a larger competitor or entity? Do you have a target buyer? If so, what do they look for, what is their strategy and how do they work? Always remember that a business should be built strategically with an end game in mind.
Statistical data: According to Securian Financial Group research, 54% of business owners plan to leave their business in the next 10 years, but 72% have taken no exit planning action.
- Step Three: Sprucing up your finances –?Financial forecasts, profit & loss accounts and cash flow modelling are crucial elements that need to be in place before looking at funding options. Build these conservatively with a contingency and ensure that you have tested all the costs; don’t just guess! Operating a lean business is great for keeping as much control as possible. Cash flow is the most critical aspect of running a business; not having sufficient cash to expand is a disabling feeling that will drive you insane. If you are not a financial expert and do not know how to build the forecasts and models, then request help from a firm that can help you with this, and they will probably end up being able to help you to raise funds for your new venture too. At Credence, we did this through our corporate proposition. We meet many SMEs and help them organise their company finances so that they are well-positioned to secure finance. Having the finances of a firm properly organised minimises risks, giving its owner the peace of mind to concentrate on the core business.
Statistical data: 50% of SME owners say that they maintain audited financial statements.
- Step Four: Looking for funding and strategic partners –?Once you’ve actioned the three steps mentioned above, the next stage is to attract strategic partners to the business. There are several different avenues of doing this. How are you funding the business? Are you using your own funds, venture capital or Angel Investment? If you are working with an investor, can they provide more than just money? What are the expensive services you require? Look for a backer that is capable of providing the services you need at a more affordable cost. More importantly, partner with someone that already has a large network -?this will give you access to service providers that are willing to set up contra-deals. For example, a lawyer can offer legal services to a marketing agency in exchange for promotional material. Get creative and don’t be afraid to explore all the options at your disposal.
Statistical data: 80% use personal savings as the primary source of finance for starting their business in the region.
- Step Five: Getting ahead with marketing?-?A business is nothing if nobody knows about it. So, tying up with strategic marketing partners, right from inception, is crucial for visibility and presence. There are various marketing platforms including press, online, radio and events available to you. Learning to allocate the right budget to the appropriate platform will enable you to take your business to the next level.
Statistical data: 41% of business owners consider marketing as the biggest challenge to generating revenue.
- Step Six: Integrate technology into your business?-?Working in a crowded marketplace requires that businesses constantly keep an eye on radical technologies, new inventions and emerging trends. Adopting the latest technologies will improve efficiency, streamline operations and ultimately boost revenue. Data will also play a pivotal role; businesses will increasingly need to use analytical tools to understand evolving customer needs, forecast future market patterns and build intelligent operating systems.