Whenever you inject your money in any investment, you expect to earn profit from it. But at times, as it is the nature of any business or investment, the returns may not be as expected or you may lose your cash altogether.
How to move on from this loss, especially if it is your first investment, can be a heart-wrenching experience. Experts advise you to conduct surgery on what might have caused your business to fail.
Patrick Okinda, a senior business analyst with iGrand Business Plans Limited, who specialises in writing business plans says businesses do fail for three basic reasons – the market fails to respond, operational reasons and capability of the entrepreneur.
“There is always a risk and an entrepreneur should be able to predict what is likely to come up. And as much as you cannot completely foretell the future, there are basic things that you need to put into the limelight,” says Okinda. READ MORE
Do your homework
Sometimes it could be that you lost the money you invested because you did not get people to buy whatever you were selling. Such happens when you predict that you will sell your products at a certain price guaranteeing you a particular margin.
Okinda references this to the real estate bubble which burst for some firms after they could not offload the units put up.
“You could be putting up products meant for expatriates who are paid a lot of money but there are only 100 in the location while whatever you are selling if it was at a price that the majority could afford, it could sell,” he points out.
Operational problems is when you are not able to deliver on the work that you have because you have no experts or you are yet to streamline how work should flow.
“Basically you are taking more orders than you can handle or you do not have the infrastructure to do the job, business systems or tools to work. Let’s say you are running a media company and you do not have a camera or a way to get footage,” says Okinda.
The entrepreneur’s capability also determines an investment’s downfall. Okinda says even before the bank lends you money for a business, it has to analyse if you have the expertise in that area.“Let us say you want to open a car yard, how well do you understand the industry? You could have sold in […]