Beata Drzazga on how a mentor can be a real support for an entrepreneur.
We meet to talk about small and medium-sized enterprises. In developed, competitive economies, they are the most important force that creates gross domestic product. This means that supporting their development is of great importance for the economy, how should it be done?
The problem is that no stimulus programs, subsidies or subsidies will not help the entrepreneur if he does not have the knowledge and skills to use them. These are most often instruments that operate in the short term. In the long run, two other factors are always important – diligence and knowledge. The first feature is verified by the market very quickly, while when it comes to knowledge, it is natural that novice entrepreneurs may lack it. Meeting both entrepreneurs and people who would like to start their own business, I can clearly see that there is a huge demand for it, and it is not about book theories, but about specific solutions to problems faced by small and medium-sized companies.
Very often I meet people who have extensive substantive knowledge in their fields, but are unable to overcome mental or bureaucratic barriers. Therefore, they are delaying the establishment of the company. Meanwhile, it must be remembered that starting an individual business in Poland is very simple. Banks and accounting offices are helpful in completing the formalities, thousands of texts and tutorials are available on the Internet. Also, the level of taxation of private enterprises is still favorable.
A very effective method of solving the problems of novice entrepreneurs is also to use the help of a professional mentor or business advisor. Two-way communication with an expert guarantees a quick solution to almost all problems, especially since they are usually not complicated.
You need a plan to start a business. Most often it is called a strategy. What is a strategy, is it really needed?
Strategy is a concept that small entrepreneurs very often understand intuitively. By translating it into their language and avoiding book concepts, the point is to gain some advantage over other companies that operate on the same market. Customers must have a reason to come to us. This reason may be, for example, a lower price. Customers will be very satisfied and loyal if they can buy a product cheaper. However, a very dangerous trap may await ambitious entrepreneurs here. In the long run, the price war is won not by those who offer a lower price, but by those who have lower costs. If our competitor is lower costs, we should be very careful. If we provoke him to lower the price, we will be in trouble.
Fortunately, the price is not the only factor that can make our offer stand out. It is much better to rely, for example, on unique knowledge. Lowering the price of a product by our competitor is a matter of one quick decision, while gaining unique knowledge is often a long process. Therefore, a knowledge-based advantage is always more durable than a price-based advantage. The more so as copying some solutions may be difficult, for example when we protect ourselves with a patent. Please also note that it is knowledge that can contribute to the fact that we will be able to reduce costs and, consequently, win a possible price war.
It all sounds easy enough, why then so many young companies fail?
Indeed, in practice it is not all that simple. The vast majority of potential entrepreneurs do not think about ways to gain an advantage over the competition. They just buy a truck and want to transport goods with it. The problem is that almost anyone can buy and drive a truck. Anyone can bring a container of T-shirts or sneakers from China. Such businesses are immediately doomed to a devastating price fight, in addition, they have little chance of winning it because their costs are very difficult to lower. A business like this can get lucky and stay afloat, but the reality is that a lot of the time it’s gone.
Forgive me for saying the same thing again, but I would like to point out that such problems will be immediately noticed by a professional business mentor. The absolute first thing the mentor will pay attention to is whether there is any chance for the company to gain a competitive advantage.
If we manage to stay afloat for a while, we will face completely different problems.
The company will grow, which means that it will have to hire people, find a larger headquarters, store more products, invest in marketing. Most likely, there will be a need for external capital. On the one hand, we will have to ensure the uniqueness of our offer all the time, and on the other hand, we will have to watch the costs more and more.
The processes I am talking about are quite easy in a one-man business, but the larger the company, the harder it is. The costs will increase in unexpected places, some projects will turn out to be unsuccessful, there will be a temptation to enter business areas about which the entrepreneur has insufficient knowledge. For example, I am talking about a situation where a car dealer suddenly decides to open a restaurant. Then the most important question arises again – is it able to develop a competitive advantage in this business, or maybe a new, unprofitable business unit will become a burden for the well-functioning one.
On the other hand, you have to remember that business growth gives us completely new opportunities. Subsequent products are much easier to introduce to the market than the former. We have the ability to automate processes, not only those related to production or storage, but also sales and finance. Thanks to this, we will be able to develop an advantage over other, smaller companies. Fixed costs will be spread over a larger number of products sold. This is also a way to develop a cost advantage. We will start to make more and more use of our knowledge and experience, which means that it will be easier for us to base our advantage on knowledge, and we will also have an increasingly experienced team. If we do not forget about two basic principles, i.e. creating an advantage over the competition and controlling costs, it should become easier for us with time.