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You can imagine how startled I was when I found out that every year over one million small businesses are started in United States! Even more startling was the Department of commerce’s report that by the end o the first year, at least 40% of these would be out of business! Believe it or not the most startling fact of all, is not even that within the next five years more than 80% of these one million (i.e. 800,000 businesses) would have also failed but of the survivor-businesses that make it past year five, 80% would die by second of the next five years! In other words, given any year in which 1,000,000 businesses are started, only 4% of them will still be in existence after a 10 year period. The following table may paint the gruesome picture better:
 

I do not even have to go into the statistics in Ghana (i.e. if they are even available) but you certainly know how at least two people who went into some kind of business venture at some point in time and did not last very long. Perhaps, you may even be one such “former Businessman.” Why is this so and what can be done to stem this raging tide of business extinction. What can we do to prevent our businesses from becoming history, dinosaurs and museum pieces?

One major factor which results in such a high attrition rate of small businesses is systems and structures or rather, the lack thereof. This series under the systems & structures caption will handle various aspects of the said issue. Indeed, one cannot say he owns a business without having employed someone (or persons) within the context of some structure to run a clearly outlined system.

I am sure you have come across some “business” men and women who have to close down their “businesses” when they are off to a funeral some weekend or out of town for a season. You surely do know of some artisan whose workshop has to be closed down when he catches a cold or is down with Malaria. These people do not own businesses; THEY ARE THE BUSINESS! You have a business, in the proper sense of the word, when you have employed people and have systems that can run without you. In fact, many true business people don’t even work in their own establishment; those who do CHOOSE to.

I dare say that many people who claim to be “business men” (and women) in Ghana do not really qualify to call themselves so, in a certain sense. Any so-called business that cannot run on its own because of the lack of people or structures and systems is no business at all! This fellow, whose business invariably cannot run without him, would best be described as a SELF-EMPLOYED person but NOT a business person because business is basically putting people and systems to work for profit.

It is my hope that you your taste buds have been excited enough by this introductory article to watch out for the unfolding series under Systems and structures on Bizaura by the kind courtesy of NEOracle® , the organizational turnabout and business advisory subsidiary of NEOparadigms Ltd.

What many people fail to understand is that while it may take pioneers, passion and pennies to start a business, it will take sweat, sobriety, systems and structures to keep it going thereafter. When passion wanes, profits sway and pioneers are dazed, systems and structures run the business. Whether it is a spendthrift choleric or a frugal melancholic who takes over as CEO, systems and structures will ensure that the organization’s vision, mission and general composure is not essentially altered (unless of course if person amends the structures and systems themselves).

You will not always have your honest nephew doing the accounts; systems and structures will ensure that no matter who becomes accountant, financial loss is not incurred by your small business. The only way to guarantee that Auntie Meri’s Waatche (rice and beans) will always taste the same is systems and structures because you will have the formula well-documented and always followed. In other words, when all is said and done, systems and structures run an organization: not original passion or original people. When people begin to say that the taste of your “Waatche” is changing, you can be sure that your rice and beans business is on the way to extinction: history, a dinosaur, a museum piece – one of the 96% of start-ups which won’t make it after 10 years.

Systems and structures have distinguished the Mobils, Shells, Nestles and co. from all others. I have been to McDonalds in California (USA), Taipei (Taiwan) and Pretoria (South Africa). I could tell it was McDonalds because they all have the red and yellow branding. The best part is that though the fast food was prepared by Americans, Chinese or Africans, it ALWAYS tasted the same! That is SYSTEMS at work.

Part of the challenge of the lack of systems and structures is WHICH kinds of people attempt to start a “business” of their own and WHY they do so in the first place. This will be the subject of discussion in the next column of Systems & Structures on Bizaura.com.

Dr. Yaw Perbi
(CEO, NEOparadigms Ltd)

Last changed: Feb 09 2010 at 8:08 PM

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