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In South Africa, Small, Medium and Micro Enterprises, otherwise known as SMMEs account for approximately 40% of South Africa’s GDP and make up over 50% of the private sector workforce. And as far as world economies are concerned, an estimated 80% of new jobs are being created by SMMEs worldwide. Hence, small business is a key driver in growing South Africa’s economy. Further estimates indicate that over 1.5 million self-employed individuals comprise the SMME sector in South Africa and contribute approximately 40% of South Africa’s total remuneration.
At the outset it is worth mentioning that starting a new business is no mean feat and definitely not for the fainthearted, since a whopping 80% of start-ups in South Africa do not make the grade and fail within the first five years of operation. Simply having the desire to be your own boss is an insufficient guarantee of success and before your doors open for business you need to seriously consider whether you possess the right qualities to set you on the entrepreneurial path such as leadership skills, a dedicated support system ad whether or not you indeed have the right temperament to be an entrepreneur.
By conducting an honest assessment of your strengths and weaknesses, you will gain insights into those areas that need improvement. And, after evaluating what the overall picture reveals, you will have a better feel as to whether entrepreneurship is indeed your calling as it were. So, take time to go through the questions that follow and ask yourself if you have what it takes to join the world of entrepreneurship.
There are certain individuals who are ‘self-starters’ by nature and those that need a little push to get them going. As an entrepreneur, you will need to have the stamina and staying power needed to initiate, develop as well as drive projects. You will also need good time management skills and be able to follow through on the nitty gritty details involving any project.
As a business owner, you are required to think on your feet, often while under pressure and you will frequently be placed in the position of having to make on-the-spot decisions without consulting with others.
Owning and running a business means that you are in it for the long haul. That is, 24 hours a day, 7 days a week. Especially in the first couple of years, your business will literally become like nursing your own child. Do you have what it takes to dedicate yourself to working round the clock?
Planning is all about creating a dedicated road map and then sticking to it. Research reveals that many start-ups fail due to bad planning. Organising business finances, inventory management, working towards dedicated schedules are all elements of good planning that ensure the smooth running of any business.
For any business to succeed certain sacrifices need to be made. Investing the necessary time and effort as well as financial capital is a prerequisite. This may mean that you will need to tap into your personal savings and investments.
One of the main reasons that businesses fail is due to insufficient capital investment. Often, it is not only banks that will give you a source of funding but, you may also need to rely on family members and friends to help you raise required funding. Many businesses are funded in this manner.
Managing a business can be extremely taxing and can often lead to periods of burnout. Especially during times when your business appears to be going through a down cycle, it takes true grit and a steely determination to push forward to keep yourself motivated to stay in the game.
Running a business can have an impact on your family. Working long hours can mean less time spent with your spouse and children and often, there are financial sacrifices that need to be made in getting your business off the ground. This may impact your standard of living as well as your family relationships.
If you have honestly considered your responses to any of these points and you are comfortable with each one, then you are more than likely comfortable with the idea of becoming an entrepreneur. If not, it is likely that the world of entrepreneurship may not be the right choice for you.
In South Africa, there are many ways to legally get your business up and running. This largely depends upon a number of factors such as how many people are involved, future plans and personal risk factors.
If you register as a Sole Proprietor income is paid directly to you and other than meeting any tax requirements there are no messy statutory returns. The drawback to this type of structure is that since the business is not a separate legal entity, you, as the owner, are liable for any debts accrued. Should you pass away, the business will no longer exist.
In a partnership, this structure allows for up to 20 partners sharing in on the overall responsibility, skills deployment as well as absorbing the liability of the business. A partnership necessitates the requirement for a contract to be in place to formalise each partner’s contribution to the business, their responsibilities, what profit share they will be awarded, how disputes will be resolved, arrangements around death/disability insurance and what procedures will need to be followed if the partnership is dissolved or changed in some form.
Forming a (Pty) Ltd company means that the business is a separate legal entity and all directors are protected from individual liability. Shares can be made available to staff as a ‘Private Company’ or to the public as a ‘Limited’ company. (Pty) Ltd companies must undergo an annual audit and this structure is best suited to those who eventually intend to list on the stock exchange or sell the business to a larger competitor.
Essentially, one needs to consider that funds will be required in terms of once-off start-up costs and thereafter at least six months funding will be needed for working capital. It is wise to inflate estimated costs to cover any unanticipated expenses and include these in the overall business plan. If you are unsure of what your expenses may amount to, make every effort to determine what these projections are as part of your due diligence. If necessary, enlist the services of a lawyer or an accountant who has experience in working with start-up operations.
It goes without saying that failure to manage business cash flow is one of the leading causes of business failure. While you may still generate profits, bankruptcy can happen if there is simply no cash flow. A cash flow forecast will give you an idea of estimated funds flowing into and out of the business over a specific time period which will in turn enable you to establish budgets, set targets and monitor business performance.
Once you have established the profile of your ideal customer and you have a good idea of who makes up your target audience don’t waste your time and money targeting those who are not interested in your products or services. It is important to only advertise to those who would be interested in what you have to sell. This will save you time and money and help you generate better quality leads. Now that we are living in a fully-fledged digital world, and over 3 billion of the world’s population are connected to the Internet, consider your website as your ‘online office’. Your target audience needs to know who you are, what you are selling and at what price. Don’t waste valuable customer time with essays about the history of your business, people are simply not interested. Your primary goal should be to create the ultimate customer experience. Hence, your website needs to make things easier for people to find what they are looking for. You need to give your customers every good reason to choose you over your competitors.
One thing that you need to bear in mind at the outset is that you simply cannot do everything on your own. There are times when you need to let go of the reins and delegate the work to members of your team. It is important that you focus on what you do best and delegate the less important tasks to your staff. But, having said that it is vitally important that you have employees that you can rely on and who can be trusted since your staff is a major element of your company reputation and image. Your customers will judge you on the quality of work and the level of service that your staff delivers. Having a good team means that you need to be selective as to who you hire and what they have to offer. It is important that your staff fit into the overall culture of your business and that they can work well together in pursuit of company goals. As the owner of the business, you also need to maintain a balance between being the team leader and actually managing the team since at certain times you will need to take a firm control over problematic situations, yet, at other times you can hand over to your team. This is where the competence and reliability of your staff really comes into the picture. Essentially, your business should be able to effectively run in your absence. This is when you know you have the right people on board.
For your business to survive it needs to be flexible in the face of change. Since, no matter which way you look at it, change is inevitable. In fact, the only constant we can rely on in this world is change. And it goes without saying that this is abundantly clear and true in light of recent changes ushered in by the ‘new normal’ that has come about as a result of the Covid-19 pandemic. Not to mention that technology is the single most important driver of change in the new era of the 4th Industrial Revolution. Staying abreast of the latest technologies and trends relative to your industry and keeping up to date with those trends and technologies is critical to business survival. Gearing up for change can be made easier if you are prepared for change. Bear in mind also that as your business evolves, so do your customers and your target too markets will change. Hence, it is vital to constantly analyse and monitor consumer behaviour trends.
The old adage: ‘it’s not what you know but who you know’ applies here. Networking is a powerful tool that can lead to a whole host of new opportunities for your business. Networking is also considered to be one of the most powerful marketing tactics for making new business connections, building new relationships and generating potential new business leads. It is also a good way to improve your knowledge by learning from the successes as well as the mistakes of others.
Often, the answer is ‘no’ when clinching a potential deal. For instance, with cold calling, only 2% out of every 100 calls made will result in an appointment or even a conversion. The trick here is not to lose heart and let disappointment rule the day. Things don’t always pan out the way we would like them to but there are always opportunities so stay firm.
It is completely normal to sometimes feel insecure when you are trying your utmost to run a successful business. Yet, you need to maintain an air of confidence so that your customers have confidence in you and your business.
Customer service has to be the single most important aspect of any business and showing your customers that you are genuinely concerned about their needs and wants will help your business tremendously. Since, among other things, making the needs of your customers a priority embeds trust and generates positive referrals.
Since growing your business requires dedicated resources, bear in mind that each time you draw from your business funds you are robbing your company of those precious resources. While you deserve adequate compensation in the form of a salary, make reinvesting in your business a chief priority.
While your current market may be serving you well, there are always new markets to explore. Especially in the light of change, when one door closes new ones are always opening up, most likely along avenues that you never thought would be viable or even possible. So, do your research and establish what other markets you could serve.
Another old adage that applies to our point of discussion is: you cannot please all of the people all of the time. This literally means that you simply cannot do everything and be all things to all people. The trick here is to know what is beyond your control and to accept that there will always be situations beyond your reach. What this really boils down to is that you have to know where best to focus your energies in order to obtain the best results.
BOTI’s New Venture Creation Basics course will enable you to develop the appropriate knowledge and skills required in order to establish and develop a small to medium business venture, and address the administrative, economic and behavioural barriers that contribute to the success of starting the venture and ensuring that it is sustainable.
Upon completion of this course you will be able to effectively:
This course is aimed at those who wish to start, operate, manage and grow a new small to medium business venture.
Click here to book your seat on the course that will set you on the path of entrepreneurship.