The road of an entrepreneur

23 April 2010 Frances Wright is the MD of Trinitas Consulting

Hans started his company in 1998, selling computer components to the trade. Celia started her law firm roughly at the same time and Lindiwe started her chemical engineering firm beginning 1999. They are all excellent at what they do and they all had good contact in their perspective markets. The country showed a couple of consecutive quarters of growth, interest rates were down and a thorough market analysis showed that there was demand for their products or services. They all had everything going for them.

Today, just over ten years later, looking back at the road they travelled, they all agree that despite the favourable conditions it was very hard. When asked whether they would do it again, they all agree that they probably would, but that they would be much more conservative in their growth strategies and cash flow management.

What is it that makes entrepreneurship so difficult? Firstly it is amazing that all three of these entrepreneurs are still in business with a mere 3.9% success rate in South Africa. Researching the variables impacting on business success and speaking from my own experience, it is actually amazing that anybody succeeds in business. From a literary search it becomes clear that there are 88 variables impacting on business success. At least 30% of those variables cannot be controlled by the entrepreneur.

It is a simple truth that entrepreneurship is complex. There is no simple recipe.

El-Namaki (1990) researched what causes business failure and he attributes failure to a lack of professional management skills and the entrepreneur’s lack of competence in the entrepreneurial process, lack of strategic plan and lack of innovation. Low and Abrahamson (1997) contended that efforts to identify factors that would lead to entrepreneurial success have failed due to the fact that what will work in one context will not necessarily work in another. They continue to say that, what may lead to success in one context, may lead to failure in another.

Timmons and Spinelli (2009) said that even when all 88 variable are favorable, the company will not be successful if the operational management i.e. processes are not in place and well developed. From my own experience (a cobblers’ children don’t have shoes) the lack of mapped processes caused chaos in the company when a merger was embarked upon. So that explains what we are seeing in the market.

When the company starts to grow due to the excellence of the entrepreneur, politics start, suddenly the happy family feeling is gone, CCMA cases are brought, customer complaints skyrocket and the entrepreneur is engulfed in a meeting of chaos. His or her spouse starts complaining that they are never home and when they are they are working. Family holidays become a dream, not a reality. Is it worth it? Especially when financial security is never a given?

The solution is really to know what is going on in the organisation. An operational audit will highlight exactly where the hurt points are and what causes them. Knowing is not enough though. It is important to fix all the operational issues in six different areas of the company: human resource management, production, quality control, financial management, supply chain and technology. The integration of all of this with marketing and communications is what affects the net profit and provides the entrepreneur with quality of life….. or shall we say family life.

For instance, to eliminate - or at least control - politics in the organisation it is important that every employee has a clear job description and is aware of exactly what is expected of him or her. When this is not in place employees will duplicate efforts and therefore step on each other’s territorial toes, this is a recipe for disaster.

Management by perception is a sure way of ensuring unhappiness amongst employees and unfair bonuses or increases being paid. The solution? A good performance management system that will ensure numerical scores on performance, taking all personality clashes out of the equation. Such a performance management system should lead into a continuous skills gap analysis.

Even customer complaints can be contained through processes. Having mapped processes and quality policies implemented will ensure standardization in delivery according to customer requirements. Not only will delivery be standardized, but it will be possible to duplicate the entire operation in as much as giving somebody the manual.

All this sounds so easy. It is. It is basic housekeeping and common sense. Entrepreneurs, however, are focused on what brings the money into the business. And that treadmill runs fast while every month end races towards you at a pace that you can hardly keep up with. The problem is that, in small and middle sized companies, operations management is a forgotten science and without it, chaos can be the only definite. In addition, it is often a line manager, qualified in the field the company operates in that becomes the operations manager. In order for a company to run in an operationally sound manner, a professional operations consultant or a permanent operations manager has to be appointed. During a recent study it was proven that only 23% of COOs and operations directors in Gauteng have formal operations training.

No wonder we suffer so. Will sound operations management ensure profitability and success? Not at all, but it will control at least 42 out of the 88 variables which results in a more stable and sure-footed company
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