Business is tough because the world is tough

I was tempted to title this post HTFU but that would tarnish my squeaky clean image. The objective of business is fairly simple. To make money. To bring in more money than you give out to other people. To sell something for more money than it costs to produce or provide it. Simple enough. Then why do business people find this so hard? In my opinion it is because real life in the real world is hard.

1. Revenue in the real world

This is also a simple concept. You want people to want whatever it is you are selling. And you want to sell as much as possible, as often as possible, to more people at the highest price possible. Unfortunately, this is where the real world kicks in where there are many variables that make it difficult to do so. As an example, consumers have a finite amount of cash to spend in general. So have to choose between whatever it is you are selling and other things. Your competitors also want a piece of that pie and things that are completely out of your control can hamper your sales.

I’ve worked in businesses that have failed to sell because of systems failing, lack of electricity, vehicles being hijacked and even access to shops being limited by flooded roads. Not easy or nice at all, but it happens. In Zimbabwe businesses can’t access foreign currency so they can import raw materials. The same foreign currency they earned when they exported the finished product. So ultimately, they can’t make anything and therefore can’t sell anything.

Then you get businesses that have billions in turnover, but still go bust. One clothing retailer in South Africa turns over over R25bn ($1.6bn) per year and still makes a loss. Your regular Spaza store or corner grocer that turns over R60000 per year, but makes a profit is actually a better business!

 

2. Cost in the real world

 

When a business sells billions per year and can’t make money, the obvious issue is that it can’t cover its costs. Where costs are rising faster than sales this arrangement is obviously doomed to fail. Of late the item that is destroying many businesses is not the core costs but rather debt. Simple enough then, limit costs and limit debt.

Not so easy because in the real world other countries can dump cheap product into your country, employees can demand higher salaries via their unions, uncontrollable costs such as energy and fuel prices can skyrocket and your debt may become more expensive as your country’s sovereign debt is re-rated by Moody’s! Everyone knows what they need to do, but it’s just so very hard.

3. Running a business in HARD

 

My basic point is that everyone knows what needs to be done, but to get it done every day is extremely difficult. The larger the complexity and the larger the company, the greater the challenges one will face. So that is EXACTLY why as employees we are hired to work in the business. We are expected to navigate the chaos of the real world and add value to the organisation, regardless of the challenging externalities. I worked for a business once that was founded in South Africa in 1976. The year of the Soweto uprising where Hector Pieterson was captured lifeless in Mbuyisa Makhubo’s arms. A period of intense strife and instability. However, out of the madness a logistics business was born, which 30 years later was listed in the NASDAQ and delivering over $4bn per year in revenues.

Imagine using another example, how difficult it was for those employees on a ship belonging to the Dutch East India Company. Sent to conquer the world and literally arriving into areas that nobody from their country has seen before. Imagine the challenge of an African trader in the 13th century having to kill an elephant by hand, then having to make the trek to Great Zimbabwe via the Kingdom of Mapungubwe to sell the ivory. Through an area that is still today inhabited by the Big 5. That must have been extremely difficult. Don’t tell me “the consumer is under pressure” and use that as an example of business being tough.

Has business not always been tough? And I’m sure it will remain tough, because the world is the way it is. Challenges will always be there because that is the way that life happens. The sooner we get used to it, the better.