Credit, profit-taking killing small businesses
Some operators of small and medium scale enterprises have identified early profit taking and credit giving as killers of businesses.
Mr Onuoba Chida, who owns a provision store in New Nyanya town of Nasarawa State said his business was at one time affected because he sold a lot on credit which was not paid back.
“When I started, I was giving goods on credit thinking it will help me realise a quick turnover but many did not pay back as expected.
“My capital dwindled and I had to seek more funding. Now I have learnt my lesson,” he said.
Madam Juliet, another provision store owner in Indian Yelwa, Kaduna, said business should attain some financial backup before giving credit.
“I stated giving credit at an early stage in my business to friends and family members. They dealt with me!Now, I give credit only to customers who have proven to be credit worthy,” she said.
Another issue that retards the growth of SMEs is too much profit taking. Taking all profit from a young business rather than ploughing back some into capital is bad for business, Mr Ado Auwal, a shoe designer in Zaria, Kaduna has said.
Ado, who has two shops, said he learnt that the hard way. “I used to put all my problems on my business and the profit was not enough for that. At a time, my business was shrinking till I learnt to reinvest part of the profit in the business first.
“It then began to grow and now I have two shops for making and selling shoes. I have also employed more hands and taken trainees.”
He advised that 50 per cent of profit from an infant business should be dedicated to expansion so the business can be more buoyant.
Joshua Yakubu owns a satchel water business in Karshi, Abuja. He believes in the adage that says business progresses faster when friends and family pay for services.
“Rather than give too much credit, startups should use other avenues to promote the business. You can give discounts, guarantees or extra services but not credit when you are just starting,” Yakubu advised.
The killer disease of SMEs which is over withdrawal from its profits coupled with credit sales are tactical issues that need strategic solutions. This is because while the most principled entrepreneurs are forced into credit sales because the brand is yet to gain market shares, overhead cost which stifles the profits are necessities for SMEs.
However, to avoid the above, a business consultant on entrepreneurship and innovations, Mr JohnDavid M. JohnDavid say a personal and governmental approaches are required.
“There is need for the government to provide adequate Functional Organic Business Incubation Centres (FOBICs). These FOBICs will have to be ran by practicing entrepreneurs with experiences as against the existing CUBICs that are majorly ran by political appointees which makes them inactive and hence defeats the very purpose of shading the SMEs from avoidable overheads costs. FOBICs should be garnished with both full time, part time and volunteers coaches and advisors from patriotic Nigerians.”
“The second solution is strict adherence to the principles of savings. Savings is the commitment putting aside certain amount of money inspite of your pressing needs. It is the ability of the SME owner to assume that the saved amount is non-existent and stick by it. That will curb the menace of over withdrawal from profits because enormous dependence on profits cannot be separated from lack of savings to meet basic needs.”he said.
The effective application of the above solutions could save a lot of SMEs from dying in their infancy.