Over the last few years, the Middle Eastern region has transformed into a business hub for small and medium-sized enterprises. With the recent development of owning 100% of businesses, the Dubai Economy has seen a rise of 4% of issuing corporate licenses when compared to 2019. The government authority further reveals that they issued a total of 42,640 licenses in 2020, in which 35% were for commercial businesses, while the rest was for industrial and tourism activities.
While many businesses flourish and gain momentum, several others face numerous challenges leading to complete failure. According to a report submitted by The Small Business Administration (SMA), in 2019, the failure rate of a startup was almost 90%. It further claimed that 21.5% of corporations fail in the first year, 30% tend to in the second year, 50% by the fifth year and finally 70% by the end of a decade. Considering how difficult many business situations could be, this column will explore some industry pitfalls and ways to tackle them.
Any business needs to have a comfortable cash flow where business owners must understand how to respond to financial crises. For any growing business, it is crucial to identify cash constraints and find suitable options that will not limit the growth of the company. According to Business Insider, it is identified that 82% of small businesses fail due to a staggering cash flow experienced in the company. Therefore, every aspect of the working capital must be carefully analyzed and controlled to increase one’s free cash flow. The corporation should be successfully able to perform credit management and hold tight control over its overdue debts. In such cases, it is always essential to plan and anticipate the possible outcomes that will require financial support.
Surprisingly, complacency can be considered a threat in itself. When business owners or entrepreneurs no longer have the thirst to create, develop, explore and flourish, it often results in obsolescence giving space to other competitors to take over. For instance, Blockbuster is now replaced by Netflix and other OTT platforms. Microsoft was ‘asleep’ when mediums like Web TV and e-books were on the rise. Dell and Motorola were overridden by smartphones. Yahoo which was once regarded as the largest search engine failed to keep up with change while Google was introducing numerous digitally-forward tools. Lastly, Kodak was too busy focusing on the usual products that it lost track of the digital era and lost almost $10 billion in revenues between 1996 and 2011.
While these are mere examples, for businesses to survive one must frequently revisit and update their strategies and plans. Some ways to do so would be to change suppliers with the rise of new priorities, renegotiate contracts to increase volumes, train and develop employees to improve efficiency and lastly, remain updated to the latest technology and digital aspects.
Aptitude and attitude
It is a given that entrepreneurs are the driving force behind any business. However, more often than not, they are the ones who hold or limit their employees. For the business to grow, one must learn to delegate properly, trusting their management team and placing day-to-day control over the company’s accounts and activities.
Reports suggest that one of the biggest challenges as an entrepreneur is the inability to listen and take advice from their employees, instead of believing in a hierarchy. In these cases, it is ideal to analyze one’s limitations and appoint a director or a chairman who can manage those responsibilities. Along with aptitude, one must have the right attitude. It is believed that an employee’s 80% success is based on their EQ (emotional intelligence) while only 20% come from their IQ. Hence, it is essential to look into their personality, mannerisms, and attitude as much as one would place importance on their skills and competencies.
While there are numerous reasons for businesses failing, these are some key elements that are common irrespective of the industry, region, or business climate.