South Africa’s SMB or SME market makes up for 91% of formalised businesses, provide employment to about 60% of the labour force and have a total economic output for roughly 34% of the GDP. That’s impressive, it’s basically the back bone of the economy, which means that the owners of these SMB’s have a huge amount of pressure on their shoulders to succeed. Unfortunately, over 90% of start-ups fail in year one which means that most business owners fail to successfully navigate the challenges of a business. I am a South African entrepreneur and have faced the following 5 challenges growing my business’s and would like to share with you my experience and what I believe are some valuable insights for business owners.
It takes money to make money, and your idea most likely needs some start-up capital to get off the ground. Securing that start-up cash is going to be a challenge especially in South Africa. Unfortunately, the bad news doesn’t end there, cash flow in a running a business is also a challenge, getting clients to pay on time is extremely challenging and non-payment can be a death of any business not just a start-up.
The good news is there are ways to mitigate this risk. In general, always try get a cash deposit for a deal where you need to purchase materials for an order, and then get cash on delivery. Offering your clients terms will immediately turn the risk of cash flow onto your business, and unless you provide a service that you can turn off or a product that you can take back all the risk is on you. Remember that if your product or service is valuable to the client they will not have an issue paying you on time or upfront.
For start-ups or investment prospects look towards the IDC which has R4.5 billion available for youth-owned businesses in several sectors.
For infrastructure, manufacturing, small scale farming, renewable and clean energy and telecommunication business that turnover less than R60 Million a year that require between R70 000 and R 2,5 Million can apply at the Royal Fields Finance site
Banks such as Nedbank offer an overdraft facility based on cash flow projections and historical turnover, this is a great way to make ends meet when clients don’t pay within their terms.
Technology has changed the face of the world we live in today, in South Africa 30% of the population are active on Facebook via their phones. There are more active sim cards than citizens and South Africa is ranked 5th in the world for mobile data usage (USA is 7th). With that in mind are you using the right approach to attract your clients? Are you leveraging the right technology to enhance your business? Cloud technology is changing the way the world works and modern subscription based models allows for affordability across the board. There is no excuse not to have a digital transformation strategy in place in your business today.
Hubspot is a Marketing, Sales and CRM cloud service that can manage all client’s communications in an Inbound method to attract more clients, boost your brand and manage your pipeline to close more deals.
Office 365 is an enterprise cloud platform at a low monthly subscription cost to provide you with company and client wide communication and collaboration tools such as, Skype for Business, Word, Excel, PowerPoint, Teams, Groups, Mail, Workflow, SharePoint and more.
This is an issue everyone in the world faces who has a growing business. The funny thing about a skill is though is it can be taught, and if you spend enough time training your staff they will then be able to train each other and so on. Again, leveraging cloud technology such as Udemy and Pluralsight can ensure your team gets the information they need to build those valuable skills. If, however your training requirements are unique and not covered by cloud technologies mentioned before, then you will need to create this yourself, by recording video’s creating tests and spending the time with technology to scale your training efforts. If you are saying to yourself you don’t have time to do this, I can assure you your business will fail without it. Either delegate this task to your best most knowledgeable team member if you yourself don’t have time or outsource this most valuable requirement to your business success.
Being a small business a huge challenge is getting noticed and having access to show off your services or products. Traditionally this hurdle would either cost a lot of capital to attend a conference or advertise in media such as TV, radio, newspapers and magazines and none of them ever guaranteed results. The perception of a small business might too have a negative connotation with your ideal market and so breaking into that market becomes that much more challenging. So how does one get noticed in the markets of today’s world with these challenges in place?
Social media advertising is inexpensive, targeted and your potential clients are most likely to be using this right now. Remember that more than 30% of the South African population are active on Facebook alone.
Facebook has a great advertising options which you can tailor for your business needs to target your immediate area with shared interests. No pushing your product to people who don’t need it, only to those who may be interested.
Shopify offers an extremely inexpensive eCommerce site which gives you the ability to sell your product or service online quickly and professionally. No developers needed J
Dealing with TAX, labour laws, health and safety regulations, municipal bylaws and the consumer protection act can be an everyday daunting task. South Africa is rated 74th in the world for ease of doing business out of 190 other countries, not the easiest and not the worst but somewhere in the middle. Regulatory compliance is mostly to blame for this but getting on top of it can be done and here are some great ways to assist you in doing so.
Check out “The Ultimate regulatory checklist for SME’s”
SEESA provide labour solutions, skills training, BEE assistance, POPI and protection act services.
SARS check list for small business to assist with all TAX dealings.
And there you have it the top 5 challenges faced by SMB’s in South Africa SOLVED!
If you want to see how Mozart Ice Cream has leveraged technology to solve their biggest business challenges download the recording below.