Do your research, know the risks and you may well reap the rewards!
“How do we help our youth who are innovative to start a business to navigate these difficult times?”. This was the opening comment from the then acting Financial Sector Conduct Authority (FSCA) Commissioner, Mr Olano Makhubela, at the launch of Global Money Week earlier this year.
According to GEM (Global Entrepreneurship Monitor), an organisation that studies entrepreneurship, many of the world’s governments, think tanks, non-governmental and international organizations agree that entrepreneurship can play a key part in the solution to alleviating poverty and social inequity and promoting empowerment, especially for women.
Despite the demands, complexity and uncertainty of entrepreneurship, many South Africans are taking their financial well-being into their own hands, which can be very rewarding but also comes with a certain amount of risk. Money Smart Week South Africa, a financial literacy campaign which aims to help South Africans better manage their money is here to help!
Becoming a successful entrepreneur does not happen overnight. There are many things to think about before starting a business. These include whether your idea translates well into a business idea, whether you have enough money to start your business and who might be available to help get your business started.
Starting your own business can be overwhelming but is important to remember that to be successful in business, you need to think outside the box and be willing to take risks. You also need to ensure that you are legally compliant when running a business.
The big idea!
The reason why many people might fail to take the risk and start a business on their own is that they lack an idea. If you don’t have an idea, do your research. The best ideas can come from everyday activities, including household duties. Could there be a quicker, safer, easier, cheaper, more pleasant or less boring way of doing something? Are there products you could make cheaper or better? Visit shops, talk to friends, follow social media, read newspapers and listen to the radio. Look at whether there is an idea associated to any of your sports or hobbies and look at the community or area where your business will be located, to see where there may be any gaps or opportunities.
While many people start small businesses within the informal sector, to be able to qualify for finance or apply for a tender, or even to open a business bank account, you will need to register the business as well as register with SARS to pay tax.
If you plan to register your business as a company, you will need to register with Companies and Intellectual Property Commission (CIPC). You will also need to complete a form to reserve the name of your business.
Business Plan
A business plan is an important tool for managing and growing your business. A well-designed plan lays out your vision of growth and the steps needed to get there and is an important document when applying for finance or getting someone to invest in your start-up. A business plan should include information such as an executive summary, business description, market analysis, details about your organisational management, sales strategies, funding requirements and financial projections.
Accessing finance
While many of us may have great ambitions and ideas for a business, not many of us have access to the finance needed to start a business.
There are various avenues to explore when it comes to accessing finance for your business, and the process is not necessarily as tedious as you may think.
Some options include government funding through the NYDA Grant Programme, a platform designed to provide young entrepreneurs with an opportunity to access both financial and non- financial business development support to help establish or expand their businesses. There are also other government funding platforms available to qualifying small businesses and individuals dedicated to growing entrepreneurship in South Africa. These include the Small Enterprise Finance Agency (SEFA) and the National Empowerment Fund (NEF).
Angel investors are another avenue to access possible start-up finance. This is where wealthy individuals use their own funds to finance projects that they feel might show high returns, or profits, within a period of time.
Unlike banks or other financial institutions, this type of finance is more likely to take a chance on higher risk new businesses. To access angel investors, a good idea would be to share your ideas on platforms such as LinkedIn or GovChat and to your immediate network of friends, colleagues and family.
Crowd Funding could be another option for start-up finance, which is where small amounts of money are raised from a large number of people to fund a project.
Other types of funding include going to your bank for finance or asking a family member for a loan.
Budgeting
Failing to budget has been identified as one of the main reasons why start-ups and Small and Medium Enterprises (SMEs) don’t succeed.
Calculating your income and expenses, knowing your fixed and variable costs and keeping your personal and business expenses separate are important aspects of budgeting, as is reinvesting profits when your business is still small.
What it takes to be an entrepreneur
While having the idea and the finance to start a business are obviously important, there are also certain fundamentals to being a successful entrepreneur. These include being passionate, independent and hardworking, being self-reliant, self-motivated and willing to take a risk.
Don’t give up!
Remember that starting small has its advantages. Micro enterprises that have an annual turnover of less than R 1 million do not have to register as VAT vendors. Start simple, try not to let the idea snowball or become overcomplicated, and grow slowly and expand as and when you are ready.
Remember too that there are many organisations that you can reach out to for help and guidance.
Everyone that starts and runs a business will come across challenges and hurdles along the way. Business mistakes are a reality, but these are also opportunities to learn and grow.
Most of all, don’t be disheartened when something goes wrong. Persevere and work hard to make your small business a success.
The FSCA has drafted a book to help you work through the process of starting a business. Access this useful resource here https://www.fscamymoney.co.za/Pages/Business%20Finance/Start-a-Business.aspx.
After all, small businesses are an integral part of our economy.
Useful links for more information:
