THE BREVITY of Finance Minister Tito Mboweni’s Wednesday supplementary budget speech gives insight into the amount of fiscal wiggle room he currently has at his disposal: very, very little.

The national debt to the GDP ratio has risen by over 15 percentage points since the last estimate, from 65.6% to 81.8%; South Africa’s unemployment rate tipped 30% in the first three months of the year; tax collection is disastrously low; and the Gross Domestic Product is expected to contract by 7.2% this year.

That constitutes the largest contraction in almost 90 years, and it could be significantly greater, depending on the effects of Covid-19.

It’s safe to say that Mboweni is between a rock and many, many hard places.

THE DEBT AND TAX CRISES

Gross tax revenue collected during the first two months of 2020/21 was R142-billion, compared to treasury’s initial forecast of R177.3-billion.

As a consequence, gross tax revenue for the current fiscal year is revised down from R1.43-trillion to R1.12-trillion.

“That means that we expect to miss our tax target for this year by over R300-billion,” said Mboweni.

Thanks to these low collection figures, extra government spending around COVID-19, and a massive economic slowdown, South Africa’s debt level has seen a steep, unexpected increase.

Current forecasts are that it will reach close to R4-trillion this year, or 81.8% of our GDP.

“Debt is our weakness,” said the minister in his speech.

“We have accumulated far too much debt; this downturn will add more. This year, out of every rand that we pay in tax, 21 cents goes to paying the interest on our past debts. This indebtedness condemns us to ever higher interest rates.”

While acknowledging the current debt hole, Mboweni said that the government would need to borrow more in order to stay functional.

“Without external support, these borrowings will almost entirely consume all of our annual domestic saving, leaving no scope for investment or borrowing by anyone else,” said Mboweni.

“For this reason, we need to access new sources of funding. Government intends to borrow about US$7-billion from international finance institutions to support the pandemic response. We must make no mistake, these are still borrowings. They are not a source of revenue. They must be paid back.”

However, he did not give any updates on the roughly R4-billion loan that he previously indicated was up for grabs by the International Monetary Fund loan, or the funding that the country planned to apply for from the World Bank.

In addition, we don’t know many details about the US$-1billion loan that has been approved by the New Development Bank (formerly known as the BRICS bank).

The government has come under fire from the likes of the Economic Freedom Fighters (EFF) for considering such funding.

“The IMF and World Bank loans come with restrictive conditions, which will deprive South Africa of its fiscal and monetary policy in the future,” said the EFF in an April statement.

However, many analysts have said that the country has little choice other than to accept the funding on offer.

COVID-19 SPENDING

While trying desperately to shore up debts, the government has had no choice but to spend significant amounts of money dealing with the health, social and economic implications of the COVID-19 virus.

The supplementary budget puts aside R21.5-billion for COVID-related spending on things such as hospital beds and testing; an additional R25.5-billion for a Special Relief of Distress grant for the poor; and R23-billion has already been paid out by the Unemployment Insurance Fund (UIF) to employees affected by COVID-related company closures.

R19.6-billion will be added to the existing R6-billion put aside this year for the Presidential Youth Employment Intervention, rolled out earlier this year.

The Economic Support Package sets aside R100-billion “for a multi-year, comprehensive response to our jobs emergency,” said the minister.

In addition, R200-billion has been set aside for the COVID-19 loan guarantees scheme.

Overall, the government’s COVID-19 fiscal package identifies R500-billion in economic relief, “one of the largest economic response packages in the developing world”, said the minister.

The budget details say this includes R190 billion in main budget spending – of which R145 billion is allocated immediately – to protect lives and support livelihoods, R70 billion in tax policy measures and a R200 billion loan guarantee scheme to support short-term economic activity.

“In addition, the Reserve Bank has reduced interest rates and provided additional support to the bond market, financial-sector regulations have been eased to support the flow of credit to households and businesses, and commercial banks have introduced temporary payment holidays,” reads the detail.

SOUTH AFRICAN PUBLIC REMAINS HUNGRY FOR DETAILS

February’s 2020 budget speech faced an already very tough economic climate, and yet did well to address many of the hot potatoes faced by the Treasury at the time.

Whilst it must be conceded that the economic circumstances have spiralled significantly since then, it’s difficult not to compare how comparatively little this supplementary speech did to address many of the bugbears of the electorate.

The annual budget speech made bold assertions around slashing the public wage bill by R160.2-billion over the next three years, but this topic was almost a non-item on Wednesday’s agenda. Mboweni hinted at the political deadlock the government faces with the unions, and said that labour minister Zenzo Mchunu is negotiating with labour partners to find a balanced solution that sets compensation at an appropriate, affordable and fair level. “We wish him well,” said Mboweni; the simplicity of the statement belying the enormous complexity of the task.

With Eskom hinting earlier this week that load-shedding could be back on the cards, and the current restructuring of the power utility lumbering under R43-billion in debt, South Africans were looking forward to more details about expenditure here, but received little. “Provisional allocations to Eskom were made on the understanding that Government’s Electricity Roadmap would be implemented. Progress is slow,” said the Minister.

“Eskom will need to show progress in meeting the milestones as laid down in the Roadmap. This is non‐negotiable.”

The ongoing question about South African Airways continues to hang in the air as well. In fact, there was very little mention of state-owned entities overall, other than an announcement that the government would be allocating R3-billion to recapitalise the Land Bank.

“This Bank holds 29% of South Africa’s agricultural debt,” said the Minister. “The National Treasury is supporting the Land Bank find a solution to its default and craft a long‐term restructuring plan.”

One arguably bold undertaking was made by the minister, likely in an effort to appease ratings agencies and foreign investors.

The minister stated that the government undertakes to stabilise the debt to GDP ratio at 87.4% by 2023/24.

When the South African debt-to-GDP ratio hovered around 60%, analysts highlighted that the main issue was not that South Africa’s debt to GDP ratio was unacceptably high – being comparable with some other emerging markets – but that there was no demonstrable pathway to drive down the debt over the medium term.

The minister’s announcement curtailed some analysts’ speculations that it could continue to rise every year over the decade.

Investec’s chief economist Annabel Bishop said, however, that this would not be enough to put the country into positive ratings territory.

“While South Africa projecting a peaking, and hence stabilisation of debt is positive, it will not be enough to avoid South Africa being pushed into the single B credit rating categories over the course of the next few years, with 87.4% still a huge figure for an emerging market’s government debt, and one which does not tally with debt sustainability.”

AN OMEN OF THINGS TO COME?

The minister did not mince his words in spelling out the ominousness of South Africa’s current situation. In particular, he warned about the devastating effect of a sovereign debt crisis.

“The results are devastating,” said the minister.

“We are still some way from that. But if we do not act now, we will shortly get there.”

Mboweni said that, in order to avoid this, the Medium-Term Expenditure Framework process will be guided by the principles of zero‐based budgeting.

“This means that we will try to reduce all expenditure that we thought we can no longer afford,” he said.

“After all, we are not as rich as we were ten years ago.”

His words may be an effort to prepare the public for some very tough news in the budgets to follow.

Yolandi Esterhuizen, tax practitioner and Compliance Manager at Sage Africa & Middle East, said that tax increases are likely to follow.

These would have been complex to implement in the middle of a tax year, she said, so “it’s not surprising that we did not hear anything today for that reason. However, tax increases are necessary to stabilise debt, and we are likely to see an increase in personal income taxes announced in the February 2021 budget speech.”

CRITICS CLIMB IN

Political opponents have been highly critical of Mboweni’s speech.

The Democratic Alliance’s federal leader John Steenhuisen tweeted that it was a “speech that could have been a WhatsApp.”

Founder of The People’s Dialogue Herman Mashaba said that it was “an insult to the South African people, who are enduring the hardships of declining household income.”

In Mashaba’s opinion, the Minister’s greatest failure “lies in the unwillingness to make the necessary budget cuts within government to reduce the need for international loans and allow for real measures to stimulate our economy.”

Mashaba said that in his former role of mayor of Johannesburg, “we were able to cut-back on non-essential expenditure to the tune of R2 billion. These funds were re-directed towards infrastructure and pro-poor priorities. If this can be done in Johannesburg, it can be done nationally with vastly larger sums being freed up.”

(Compiled by Inside Politics staff)

Article by www.thesmallbusinesssite.co.za

Building a business is only half of the equation. Making your business a success is just as important. Dr John Demartini, human behaviour expert and founder of The Demartini Institue, gives advice on ten essential principles that will ensure your business is successful.

1. Find a need in the marketplace

Find out what the world needs. What services? What problems? What needs the world has? If you don’t fill a need, there’s no business.

When I was nine years old, I asked my father if I could earn some money and he told me that he didn’t need anything done, so if I wanted to make money I had to go and ask the neighbours. So I went to the neighbours and asked them what needs they had, what problems I could solve for them. I provided a gardening service for many of them, and as a result of that, by asking and being willing to do a service, I was able to earn extra money.

So the first principle of business success is identifying the needs of the society and then directly or indirectly filling those needs. In other words – either you offer a service, your skills or a product that will fill a need, or you become a broker to somebody else who is capable of producing the product and service to fill the need. But whatever it is, it is necessary to find a need that needs to be filled.

2. Find what you love to do

Ideally, you want to find what inspires you and do what you love to do most, in addition to filling people’s needs. So if you can identify what the needs are and then find the ones you are inspired to fill, you have two components: a need from society and a desire inside you to fill it. Those two components are very empowering. When you can’t wait to get up in the morning and bring a service to people, people can’t wait to get that service.

3. Identify the highest priority actions

Prioritise the actions that it takes to fulfil those needs and identify what the highest priority actions are that will help you fulfil those needs most. Make sure that you are working on top priority actions and delegating the low priority actions. If you are doing things that are most important and you are doing them with inspiration, you are going to increase your business.

4. Delegate low priority

Make sure that you are enrolling and hiring people to do the things that you are not keen or inspired to do, but need to be done.

By delegating, you are basically enrolling other people to assist you and you are extracting surplus labour value out of their services while freeing yourself to do what you do best, that which you find most inspiring – your highest of the priorities.

5. Structure your business to maximise profits

You want to reduce redundancies, make sure you are not doing things that are superfluous. Make sure you are doing the most important actions most effectively and efficiently.

6. Build liquidity

When you have a cushion of liquidity, you automatically have more stability in the business. You have better quality clients, you will end up attracting more opportunities and you won’t be desperate. You’ll be inspired to select only quality clients.

7. Invest your money

Make sure your money is working for you and you are not working all your life for your money. After saving your stability cushions be sure to invest in progressively higher levels of risk and return. Earn the right to risk.

8. Communicate the product and share the need of employees and clients

When you are inspiring teams, make sure you are communicating to them using their highest values.

Remember, their individual highest values are what they are inspired to do. Nobody goes to work for the sake of work; they go to work to fulfil their highest values. If you communicate the company’s vision and clearly specify the work that needs to be done in terms of peoples’ highest values, they will be inspired by what they do and will produce more.

Also, make sure you are communicating effectively when it comes to sales, advertising and marketing. You need to take your clients’ highest values and needs into account. Not only do you need to discover what those are, but you constantly need to keep at the forefront of what they are, as they change, and keep getting feedback from your customers to assist you in filling their needs. Make sure that you are honouring their needs and get feedback regularly for those needs – don’t live on assumptions.

9. Expand your vision

You’ll only grow to the level of your vision and if you are not expanding your vision, you’ll plateau your business and you’ll plateau your wealth.

10. Innovate and research

Keep your eyes open for new customer opportunities and new ways of presenting products or services for those opportunities. You need to put energy into innovation and research. When you are constantly at the cutting edge, in the frontiers of research and innovation, you tend to draw more opportunities to you and lead the way.

Article by www.thesmallbusinesssite.co.za

Article by www.entrepreneur.com

As an entrepreneur or business owner you know the truth of the old saying that sometimes you have to spend money to make money. But, you also have to save money to have money! And saving more money consistently ranks as a top financial resolution people make each New Year.

We all need to do it — whether to build a robust emergency fund, secure our retirement, or create the equity we need to build a business and lifelong wealth. But, how many people actually succeed?

According to some reports, up to 80 percent of people who make New Year’s resolutions fail to keep them. Yet we know that people who make resolutions are 10 times more likely to attain their goals than people who don’t.

For many people, the start of a new year is the trigger they need to change their behavior patterns to set themselves on a lifelong journey toward financial security and self-sufficiency.

What does it take to be one of the successful few? What can you do this time around to increase your likelihood of remaining on track when next New Year’s Day rolls around?

1. Understand that real, permanent change comes from within, rather than from outside pressure.

In their groundbreaking book, Changing for Good, three psychologists looked at 130 different techniques that people used to try to give up smoking. They discovered it is not a lack of potent and effective quitting techniques that defeats so many smokers. Rather, it is the internal thought processes that prevent (or enable) permanent, life-enhancing change.

Their discovery captured the attention of leading academics, clinical psychologists, life coaches and authors looking into why certain people are able to set a life-changing goal, meet it and keep themselves from relapsing.

The good news: Researchers have discovered that we all have it within us to modify our behavior and cross the “Resolution Finish Line,” regardless of how ingrained our habits are. When you consider how mindset affects everything in our lives, it’s no surprise that it’s the key to achieving our financial goals.

2. Enlist allies to help you stay on track.

Many people require outside support when they decide to get serious about holding themselves accountable for their financial resolutions.

M. Kathryn Seifert, Ph.D., a Maryland psychologist who operates three mental health clinics, says a coach — whether a professional for hire, a friend or a religious leader — can help people reinforce their commitments.

Dr. Seifert’s clinics see about 2,000 distressed individuals a year, many of them struggling with financial crises. For most people, the right motivation coupled with persistence and the aid of a coach provides what they need to achieve their goals, she says.

3. Set incentives and consequences for sticking to or breaking your commitments.

Consider using websites such as www.stickk.com that allow you to give yourself incentives for sticking to your commitments, and set up penalties for breaking them.

This carrot and stick approach relies on three factors: a goal, stakes, and a referee, according to an article a few years go on commitment contracts.

When you make a commitment binding in this way, it will make you think twice before backsliding. Even better, the rewards that come with sticking to your commitments establish a feel-good pattern of positive reinforcement. And that will make staying on track easier as you move forward.

4. Skip the pity party when you fall short.

Don’t wallow in self-blame when you fail. Instead, pick yourself back up, learn from your mistakes, and go right back to work toward your goal.

Steve Siebold, author of How Rich People Think, says one of the key differences between those who are defeated by financial roadblocks and those who knock down barriers along their path, is how they respond to disappointment.

Siebold estimates that 40 percent to 60 percent of today’s most successful investors, entrepreneurs and executives have failed multiple times. Those who rebound the fastest and most successfully set aside emotional thinking and put their minds to the task of plotting a logical pathway forward.

5. Don’t set yourself up for failure by insisting on an all-or-nothing change.

Judith A. Belmont, a psychotherapist and author of the “The Swiss Cheese Theory of Life,” has described New Year’s resolutions as “a setup for failure” because they embrace an all-or-nothing attitude toward change.

Belmont cautions against perfectionism and advises patience and persistence instead.

“It doesn’t matter where you are on the journey, what matters is the direction you are going,” she says. “Learn from the past, accept shortcomings, realize where you made errors and build on them like stepping stones.”

One final piece of advice: Give yourself reminders to keep your focus on where you are going and your long-term goals. One of my favorite ways to do this, especially when it comes to holiday shopping, is to wrap my charge cards in my goals. Every time I take a card out, I see a picture or some words that remind me of why I am saving. This is a trick to make yourself pause a moment and consider whether what you are purchasing is more important than your goal.

Remember, when it comes to keeping your financial resolutions, you are the key. You make decisions every day, every week and every month throughout the year that all add up when it comes to building savings and wealth. Only when you set your mind and heart to the task can you successfully create long-term change in your fiscal direction.

Article by www.entrepreneur.com

Article by: www.growthinstitute.com

Experiencing a major growth spurt in your business for the first time?

Then chances are, you’ll be making some mistakes. Though some are a natural part of the growth process, the rest should be avoided at all costs. And here’s your chance to learn from those who ventured out before you.

Growing from a startup or mid-market company into a scale-up is a challenging transition. Even the most experienced CEO or executive will admit that growing pains are inevitable once you start scaling. However, the faster you overcome the hurdles, the smaller the chance your business fails.

One of the biggest problems when you lack experience with scaling up, is that you don’t know what you don’t know. But fortunately for you, others have already made some mistakes in the process. Knowing what they are can help you prevent them.

Over the past decade, I have personally helped thousands of startups and mid-market companies move from one phase to the next. By now, more than 70,000 companies have successfully scaled up with my elaborate framework of tools and tactics, the Scaling Up methodology, which is described in detail in my bestselling book Scaling Up: How a Few Companies Make It…and Why the Rest Don’t.

One of the main reasons CEOs and executives of fast-growing companies struggle and fail is that they try too many things at the same time. It’s really important to have focus, be disciplined, and gather the data you need to be able to know what works and what doesn’t.

Here, I’ve listed 10 of the most common and dangerous mistakes CEOs and executives of scale-ups make that you can avoid.

1. Scaling up too fast

One of the most common mistakes companies in the startup phase make is that they scale up prematurely. After getting one or two clients, they believe they have already proven their market-fit.

Although the excitement is understandable, you really have to validate your business model before you scale. Because even when you already have more than one or two clients or users as a startup, you still have to gain traction on the main market.

Geoffrey Moore wrote an interesting book about this phenomenon, called Crossing the Chasm. It describes the challenge of getting from very few buyers to a lot of buyers. You have to realize that at first, it’s the early adopters that are buying your product; people who generally like to try new things. But after that, you need to reach the majority. The majority of buyers are very different and the gap between the two can be a difficult one to bridge. Therefore, this point is also the one in which most companies get stuck or even go down entirely. Make sure to test your product-market-fit thoroughly and that you know exactly who your ideal customer is.

Also, without proper preparation and strategic focus, rapid growth does not necessarily mean profitability. You have to be ready to scale. CEO and Co-founder of Fracture, Abhi Lokesh, said they had to learn this in his company the hard way: “It’s a euphoric feeling to see orders flood in, but you have to make sure you’ve got an ironclad grasp on the unit economics of those orders and the efforts that led to those orders. How much did you pay for them? Are they actually profitable?”

Lokesh’ advice was not to be seduced by top-line numbers: “Along with rapid growth also comes additional overhead costs – more employees, more infrastructure, more everything. Are you truly prepared to handle it? We weren’t, and it cost us dearly.”

In any growth phase, dig deep to ensure that the growth is sustainable and you can actually keep it up. Otherwise, you’re not scaling at all – you’re just getting bigger and less efficient.

2. Lack of focus and alignment

When your company is gaining more traction, the decisions you need to make grow even more complex. This pressure can cause you to make poor decisions that can hurt your potential for success and even set you back.

More companies die for the excess of opportunity than for lack of it. To prevent overwhelm, (excessive) stress, and disorganized movement in all directions, it’s essential to know exactly what your focus is.

This means you’re deliberately choosing what to do, but also – and equally important – deliberately choosing what not to do.

Don’t go crazy trying to add new features or related products once you’ve achieved product-market-fit and started scaling up. It’s important that you can do one thing better than anyone else before you start building new stuff.

A great tool that you can use in your organization to gain more clarity on what your focus should be at any point in time, is the One-Page Strategic Plan or OPSP. This is a very concise plan that’s easy to communicate with your entire team. This one-page document will literally get your employees on one page and achieve team alignment.

You need to have the right goals and metrics in place and these need to be clear and transparent for everyone on your team. Because without alignment, focus, and commitment, fast growth isn’t sustainable.

Everyone makes mistakes but the key is being aware of them. This is the only way can discover what works and what doesn’t. It’s how we distinguish smart, well-informed decisions in your business from the opposite. What you don’t track and measure, you cannot improve.

The daily huddle is also an effective tool that helps you and your team(s) to remain flexible without losing alignment or focus. This is a 5-15 minute meeting to discuss tactical issues and provide updates. It’s part of a proven meeting rhythm that many of the most successful entrepreneurs in the world implemented in their organization to enable their major, rapid growth. You can read more about effective meetings in my article “How Weekly Meetings Can Accelerate Your Firm’s Growth, Keep Everyone Motivated, And Achieve Your #1 Priority”.

3. Hiring prematurely

Another common mistake startups tend to make in their first period of significant growth is to hire too fast. Jeremy Ong, the owner of HUSTLR and a chain of blogs and eCommerce stores, learned this the hard way: “One of the biggest mistakes I’ve made when my company was experiencing rapid growth was to hire people prematurely because we were just desperate for extra manpower just to cope with the demand.”

“As a result, I have hired employees that do not fit into the company culture at all, which hurt company morale in ways I didn’t imagine. Employees started sharing bad habits with each other and the productivity per employee dropped because of the distractions and the poor performance of other employees. We ended up being less productive as a company, even with more people.”

Jeremy was hoping things would improve over time but eventually had to dismiss the bad apples after a series of poor performances spanning over a year and a half. The company had to undergo a culture rehabilitation exercise to get the best employees back on track.“I now believe that it is better to push our best employees harder and treat them better, instead of using a duct-tape solution by hiring employees just because we’re in need of more manpower.”

Matthew Ross, Co-owner and COO of The Slumber Yard had a similar experience due to hiring too quickly without the proper interviews and screening: “After a couple of weeks, it was apparent that we had hired the wrong candidates. Whether they didn’t possess the skills necessary to succeed in the position or didn’t fit into the company’s culture from a personality standpoint, these hires actually hindered the company’s growth.”

His advice: “Take your time and really train up each new employee. If you’re constantly trying to rush, you may find yourself getting out over your skis.”

It’s also important to remember that you need to stay lean. Don’t hire too many people (middle managers or specialists) as this takes away from your core competencies and leave you prone to trying to scale other areas too quickly. A small, motivated, and highly productive team is better than a sluggish team with poor morale.

But don’t postpone hiring new employees too long either as failure to deliver is at the core of many business closures. Just make sure to hire efficient resources that believe in your vision. And don’t forget that especially amidst rapid growth, outsourcing can be a great solution for non-core tasks too.

4. Mistaking leadership for management

When your company is still in its initial startup phase you may be able to handle all of the functional roles, but it’s a fatal mistake to believe you can continue to do so.

To stay on the path toward achieving your BHAG (Big, Hairy, Audacious Goal), stick with leading, don’t start managing. Shyam Krishna Iyer, the founder of SKI Charities, experienced the consequences of getting too managerial as a business leader. He said: “While an entrepreneur may drive early success, I have found successful entrepreneurship to be far more “bottom-up” as local level ownership and buy-in will determine the success of any project or enterprise.”

When Shyam started out, he decided that a high level of oversight and control would be necessary but he soon learned this was not scalable: “I quickly became stretched too thin and lost the connection with my staff on the ground. The entire enterprise began to lose focus and flounder.” He found that autonomy and control must devolve from the entrepreneur to the field in order to scale successfully.

Business leaders inspire others, have the vision, make connections, and secure funding for their companies’ continued growth. They’re idea machines. These are not necessarily the same qualities found in a good manager. It’s important to leave the execution to those who are great at that.

5. Not setting long-term goals

Goals give you direction and keep you on track during the day-to-day operations. By making sure your goals are SMART, you can identify where you want to go and outline the specific action steps needed to get there. This is something most business leaders understand and do well.

But although most startups and scale-ups do set short-term goals (monthly, quarterly, yearly, and perhaps also 2- to 5-year goals) to measure their progress, they often fail to define long-term ones too. If the long-term is not clearly defined, your short-term goals might end up being the wrong ones.

Long-term goals are often overlooked in startups for reasons (or excuses) of agility but if you want to move fast, you need to know where you are going. You have to be able to make quick but smart decisions. And this requires a clear sense of direction.

Coming up with a Big, Hairy, Audacious Goal (BHAG) that you’re striving towards the next 10 to 20 years can help you with that.

6. Saying yes to every customer request (“over-customizing”)

Another mistake that fast-growing companies often make when they start to scale-up, is that they say yes to every (feature) request made by their customers. In this case, you’re running the risk of over-promising and under-delivering.

This is also what the Co-founder of GreenPal (a company described as “Uber for lawn care”), Gene Caballero, experienced: “One mistake we made when trying to scale, was to give our customer too much power when it came to dictating their schedule. We allowed homeowners the chance to add one-at-a-time appointments whenever they wanted and didn’t give them the ability to easily schedule either weekly or biweekly appointments. This is a logistical nightmare for the lawn care pros that used our platform.”

They decided to implement a change that forced homeowners to opt for a regular routine. This ultimately provided them with better service from the vendors, who in their place were more engaged since, knowing that the homeowners they obtained via GreenPal were in it for the long haul. “This has helped us grow at over 100% YoY. Our projected revenue for 2019 is $20m,” said Caballero. The saying they have at their company is one that could be useful for many to remember in the scale-up phase: “We let the thousands decide what the millions will do.”

7. Focusing on marketing too little or too late

One of the biggest, most persistent mistakes startup founders make is assuming they don’t need to market and that their customers will find them. Many believe that marketing is a function they can do without for the longest time and they almost always use it as a last resort to gain traction. But thinking you can create a major, sustainable growth organically is very naïve. And word-of-mouth referrals and direct marketing do not scale.

Obviously, the best type of marketing for you depends on your business and your target audience. But whether it’s traditional advertising, online marketing or content marketing, you’ll need something to scale, and that something has to be a strategic choice with clear KPIs and ROIs that are well measured.

Too little strategic focus on marketing can also result in becoming dependent on one marketing channel only. And like Abi Lokesh from Fracture experienced, this is inadvisable too: “One mistake we made at Fracture while scaling was putting all of our growth eggs in one basket. We rode the wave of what helped us achieve scale, somewhat naively hoping that it would never end, without taking advantage of that opportunity to diversify our marketing efforts.”

Lokesh learned that “you’ve always got to have multiple irons in the fire”: “Sooner or later, a marketing channel will peak and begin to lose efficiency. Don’t wait until that happens, because by then it’s too late. Recognize that every scaling tactic has an expiration date and keep working to find the next growth hack.”

8. Postponing the next-round funding too long

Running out of money should be avoided at this stage, so have your action plan in place early on and get ready to impress investors earlier than you may have intended.

Venture Capital firms that invest in later-stage funding are more risk-averse than your early-stage or pre-revenue investors. It usually takes much longer to attract them and seal the deal. But you need fast cash to grow your facilities.

Hunting down funding almost becomes a CEOs full-time job if it’s not approached strategically and you don’t partner with investors for the long run. This is what Kim Saxton, MBA, PhD, and Clinical Professor of Marketing, found and described in the book she co-authored, The Titanic Effect: Successfully Navigating the Uncertainties that Sink Most Startups: “To grow means having enough cash on hand to make investments in sales, marketing, and people to support customers. Often early on, startups are interested in any source of funds. They don’t vet their investors. They need to partner with investors who can fund successive rounds of investment. Instead, they end up having to hunt down new sources of funds. That takes time and the process is slow. So, it’s hard to match up funding time with needs for cash to grow.”

Apart from the difficulties that business leaders may experience in their quest to impress investors, it also becomes more difficult to estimate your expenditure correctly in the scale-up phase. William Taylor, currently CDO (Career Development Officer) at MintResume, had this experience while running a previous company of his: “Initially, we thought that we wouldn’t be needing additional staff as we already had a well-trained team that was good at multitasking. But, we soon realized that we needed more people as our team was already overworked and struggling with time management issues. So, we hired a new team. To accommodate this cost, we compromised on the office renovation and our higher management had to pool in a few resources to meet our expenses.”

You never miss the water until the well runs dry, but if you wait until the last minute to seek funding this can lead to extremely tight and stressful situations that could threaten your company’s very existence.

9. Lacking a scalable infrastructure

As your company grows, nothing scales automatically, unless it is systematically set up for scale. You need to have the right infrastructure in place – systems, procedures, and physical space – in order to keep the pace and make optimal use of your company’s momentum.

To expect communication naturally evolves with growth, for instance, is a false assumption many startup founders make. It’s obviously a lot easier to communicate changes and progress to a few other people, versus 10, 50 or even 1000 other people.

Fracture founder Lokesh also learned that you shouldn’t take good communication at scale for granted; you’re going to have to work at it: “During rapid growth, it’s much easier for messaging to get misinterpreted, key points to get lost, and dangerous assumptions to be made. You have to invest in your company’s communication infrastructure to make sure everyone gets and stays on the same page.”

Your IT infrastructure has to be set up properly too. This does not only mean having the right systems in place for communication and execution; it also means investing in redundancy. As Deni Ivanov, CEO and CMO of Royal Services could illustrate from his experience. He admitted they didn’t invest heavily enough in their company’s online infrastructure “We didn’t think about the fact that you should make backups for almost everything you work on. Redundancy is of huge importance as we try to keep all of our information online and all of our communications are done in one form or another over the internet. You need to have backups for whenever a system crashes or an email gets deleted by accident – we learned the hard way.”

10. Not being agile

Strategic action plans are important to achieve your vision but they can’t be written in stone either. Unforeseen situations occur, market trends change and aggressive competitors can pop up out of nowhere. Consequently, you may need to change course quickly at one point or another.

Change is the only constant, especially in startups and scale-ups. Don’t to pivot for the sake of pivoting but if you become stubborn or paralyzed, you will stall out.

A strong IT infrastructure and communication system can help you iterate. Making small, daily, incremental changes that are aligned with your company’s long-term vision or BHAG and that contribute to your most important KPIs, is the best way to ensure agility.

If you’re experiencing hiccups on your road to major business success, know that you’re not the only one in battle (regardless of the type of product or service you provide or the industry you’re in).

Always remember that for every problem you encounter, another company has already faced something similar, and you can implement the tools and strategies that have proven to work.

Article by: www.growthinstitute.com