Fail to Plan = Plan to Fail
It all starts with an idea.
You have a product or service that you think is different from the rest, and you cannot wait to get it out to market. Although entrepreneurs are generally known for being more open to risk and relying largely on their instinct, it is important to step back for at least a moment and cast an objective or even critical eye on your business idea.
The UAE is reportedly the most sought after destination for startups in the Middle East. Much like the other GCC countries, startups in the UAE represent an important source of job creation and contribution to the local economy. It is estimated that SMEs contribute between 80 to 90 percent of non-oil GDP in the UAE and provide over 80 percent of private sector employment.
However, it is also estimated that 8 out of 10 entrepreneurs who start their own business typically fail within the first 18 months. Common reasons for failure overwhelmingly relate to a lack of understanding of the market, lack of planning as well as insufficient funds.
While setting up a business undeniably requires a certain degree of courage, entrepreneurs also have a number of tools at their disposal to allow for the adoption of more calculated and informed decisions, thus reducing their exposure to risk across the business lifecycle.
Developing an idea into a sustainable business venture takes more than passion. How can you be sure that there is sufficient market demand for your product or service? Do you know who your closest competitors are? How does your idea differ from theirs?
Conducting a market study can help answer these questions, and provide insight into the potential strengths, weaknesses, opportunities and threats of a venture.
Feasibility Studies and Business Plans
Setting up a business can often be a costly and time-consuming affair. However, prior to investing valuable time and further money into a venture, preparing documents such as feasibility studies and business plans can prove extremely beneficial in terms of indicating the viability of a venture as well as the future trajectory of its operations. Furthermore, as business operations in the GCC continue to formalize, it is becoming increasingly difficult to secure external financial assistance without some of these supporting documents.
Amidst ongoing uncertainty linked to geopolitics, GCC banks are likely to retain a cautious attitude in 2017. In addition to this, some entrepreneurs may prefer to opt for different forms of financing preferring equity over debt. Indeed, in recent years, the venture capital industry has been emerging as a key source of alternative funding for entrepreneurs and SMEs in MENA region.
Regardless of the stage of the business, the choice of investor can impact a business in many ways and it is important for entrepreneurs to think about what it is they are seeking to gain from third-party investors. Is the entrepreneur willing to relinquish some control of operations for external finance? How much equity is the entrepreneur potentially willing to part with?
There is no doubt that setting up your own business comes with a number of risks. However, having a solid understanding of the market, its customers as well as business operations, is key to minimizing exposure to unnecessary risk. Entrepreneurs should seek to take advantage of the various tools at their disposition in order to increase their chances of success.