The role of small business in promoting growth and development has shot to the top of the agenda this year with both President Ramaphosa in his inaugural SONA and Minister Malusi Gigaba in his budget speech highlighting the critical role of this sector of the economy.
Globally, SMMEs are recognised as one of the key drivers of economic growth and job creation – and it is clear that the small business sector has led the world out of several global recessions – but in South Africa, the sector is under-performing.
Entrepreneurs need help to become sustainable
Recent data from the Global Entrepreneurship Monitor shows that South African entrepreneurship lags behind that in similar economies. And for every 1.5 people who were engaged in early-stage entrepreneurial activity in SA in 2016, one was exiting a business.
According to Mark Graham Associate Professor in Accounting at the University of Cape Town, typical reasons for business failure include: insufficient start-up funding, incorrect pricing for products or services, growing too quickly or prematurely, and inadequate cash flow.
“We need entrepreneurs to run their businesses successfully so that they can be sustainable,” he says. “Most of these issues can be addressed through a proper understanding of financial and accounting principles and concepts to help entrepreneurs run their businesses better.”
A growing understanding of financial principles
Graham, who runs the Finance for Non-Financial Managers programme at the UCT Graduate School of Business (GSB), emphasises that finance and accounting terms are really just a language that uses numbers to tell a story about a business.
“If you understand the fundamentals of financial principles you will be able to analyse what is happening in any organisation,” says Graham.
“Concepts like profit and cash flow are basic to business. However, people are often surprised to find that while a business can be extremely profitable, there may be a cash flow problem that will soon bring it to its knees.
Most people don’t know the basics of financial reports, what the right capital structure (i.e. the mix of debt and equity) might be. By getting to grips with concepts like working capital management and cash flow vs profit, business owners and managers can give themselves the best chance of success.”
Financial literacy is key to entrepreneurial success
Jannie Rossouw, head of Sanlam’s Business Market, agrees that financial literacy is key to entrepreneurial success and has argued that it should be integrated into the school curriculum so that future business owners can understand critical concepts like the time value of money.
“It is imperative that SA starts to spend significant time and resources to address the need for access to quality education aimed at those who want to pursue entrepreneurship and business ownership. We shouldn’t only start teaching these skills at the tertiary level,” says Rossouw.
And it is not just entrepreneurs that would benefit from a better grasp of the basics of finances, says Graham. All businesses should invest in developing the financial skills of their people – especially those in managerial roles.
“It is important for everyone working in business to understand the basic language of business and demystify the jargon – which is one of the things that the course I run at the GSB seeks to do,” he says.
“Feedback from previous course participants shows that people really appreciate being able to see how the numbers are telling a story about the health – or lack thereof – of a business and that this helped them make better business choices.”
Financial tools are needed to optimise businesses
“Sustainable small businesses have big potential to make a significant contribution to the SA economy and put a dent in the unemployment figures. So when Gigaba said that by enabling new businesses with new ideas to emerge and thrive, ‘we are radically transforming patterns of production in the economy’ he is not wrong.
But unless serious steps are also taken to equip owners and managers with the financial tools to optimise their companies, we will find that despite more proactive government policies and funding, the small business sector will still not thrive.”
The Sky Is The Limit For South Africa’s Top Women Achievers
High-powered women achievers from across the private and public sectors, academia and diplomatic spheres gathered for a charged two-day conference in Johannesburg this week to share experiences about empowerment, achievement and the role that women are destined to play in a competitive global environment.
Several hundred women attended the 15th Annual Standard Bank Top Women Conference which, with the Top Women Awards, has become one of the premier events for women on the national calendar. The objective of the gathering at the Maslow Hotel on the 17th and 18th of October, was to showcase the achievements of South African women and reignite their passion as they have major roles to play in all arenas of endeavour, says Ethel Nyembe, head of Card Issuing at Standard Bank.
“The delegates to the Top Women Conference were inspired by speakers such as Yvonne Chaka Chaka, singer, songwriter and an entrepreneur in her own right; Phuti Mahanyele, executive chair of Sigma Capital, a black-owned investment group, and political and academic stalwart Geraldine Fraser-Moleketi, now Chancellor of Nelson Mandela University and other women who are playing leading roles in many of the nation’s listed blue-chip corporations.”
“The overall message is that women are playing a central role in growing all facets of our economy and are helping to build a future from which other women can benefit and, in turn, inspire others. Women, regardless of whether they are entertainment icons, professionals engaged in helping shape the minds of future generations, businesswomen or scientists are part of building a new global reality.”
To inspire delegates about the breadth and depth of the future for women, the conference examined all facets of economic life from the impact that IT and scientific research is having on building businesses, through to the development of entrepreneurs and leadership skills. Insights were offered through the contributions of speakers and roundtable panel discussions in which leading women offered observations and advice gathered from their vast experience.
“Standard Bank is proud of the role it has played in enabling women achievers to reach their full potential within its ranks. The bank also recognises that women across society have a broad role to play in the future of South Africa. It is through support for events like the Top Women Awards and the Top Women Conference that this approach is made visible and tangible.”
“We expect this year’s conference deliberations to deliver insights and inspiration that will not only spur established women to new heights of achievement, but also stimulate young women starting new careers,” says Ms Nyembe.
The Ins And Outs Of A Good Exit Strategy
The thought of parting with a business you’ve grown from the ground up may be unsettling, but Gugu Mjadu, spokesperson for the 2018 Entrepreneur of the Year® competition sponsored by Sanlam and BUSINESS/PARTNERS, says that it is better for both your business and yourself to plan for this as early as possible.
“The challenge that business owners often face in this respect is comparable to the difficulty that many new parents have with imagining their children grown up and leaving for university. Imagine, however, if parents did not plan ahead for the cost of their education – that would be detrimental to the future of their children. The same could be the case for your business.”
Mjadu says that a good exit strategy is about sustainability and being able to measure your business performance against the goals you have set for it. “It’s really about being able to say, ‘this is when the work is done and I can exit the business or take on a different role – this is what success looks like in terms of monetary return on investment and other business growth indicators’.
“The lack of an exit strategy could be telling of a fundamental lack of measurable business goals and this needs to be addressed,” she says.
From immediate liquidation to liquidation over time; family succession; selling to staff or external investors; the open market or another business; or the gruelling but profitable exercise of taking your company public – there are many different ways in which an entrepreneur can exit their business, but Mjadu says that whatever the process, a strong and solid strategy is essential.
She shares five key points of a good exit strategy:
1. It tells you when you are done
Mjadu says that a good exit strategy should reflect a core understanding of all the intricacies of your business and should be able to tell you when the lifecycle of your business (or of your involvement in the business) should come to an end. This is usually done by including a set of tangible measurables or objectives so that it is easy to ascertain when these have been achieved.
2. It sets out the right environment within which to exit
A good exit strategy considers the economic, social and political environment at the time of your exit. Mjadu says that this is important in order to plan for a secure financial future.
“Failure to think about this could result in short-changing yourself by exiting during a tough economic climate when the risk to buyers reduces the value of your business.”
She references the case of Victoria’s Secret when founder, Roy Raymond, sold the failing business for $1m unknowing that it would later grow into the multi-billion dollar empire it is now. “While Raymond’s exit was ultimately necessary for Victoria’s Secret’s growth, he sold it in 1982 during the global recession of the early eighties – one of the world’s biggest financial crises and this influenced the selling price at his exit”.
3. It compensates those who have contributed to the life of your business
It is important to consider the impact your exit could have on investors and staff, says Mjadu. “Closing shop for example, means that your staff no longer have employment at your business. Selling could mean the same.” She adds that it is important to consider ways in which your exit could also benefit these stakeholders – for example, selling to a bigger business could mean more career opportunities for your staff, as well as continued job security.
4. It compensates you
Mjadu says that entrepreneurs often struggle to recognise their own true worth, especially when this involves attaching a monetary value to what has been achieved. “The time of exiting a business is no place to short-change yourself. You need to get out the full worth of what you put in,” she says, explaining that this means ensuring that you are financially secure before and while you go into your next venture.
“Your needs for retirement and medical insurance, as well as the maintenance of your living standard, should be met at your exit.”
5. It sustains your entrepreneurial drive
Mjadu says that while you may be nearing the end of one journey, your exit should enable and encourage you to continue to be an entrepreneur – and to look forward to the next journey. “Your entrepreneurial skills and capacity do not end when you exit your business and whatever your strategy, it should egg you on to more entrepreneurial activity including becoming a mentor to aspiring entrepreneurs.”
Mjadu says that exiting your business should allow you a good retrospective look at what you have done over the years – and so planning the strategy early on in your business lifecycle will set you up in regards to what you hope to achieve. “Upon exit, you should be able to say that you have done what you set out to do, financially and socially, and you have some energy left to do more elsewhere.”
Search Is On For SA’S Online Retailer Of The Year
World Wide Worx in partnership with Platinum Seed, Visa, Heavy Chef and the Ecommerce Forum of Africa, launch new awards to recognise online stores that promote shopper trust.
World Wide Worx today announced that it was launching a new awards programme — called the Online Retailer of the Year — to honour online stores in South Africa that grow trust amongst digital shoppers. The awards are part of a broader project to boost online shopping by World Wide Worx in partnership with Visa, Platinum Seed, the Ecommerce Forum of Africa and Heavy Chef.
“Online retail in South Africa has consistently grown above 20% since the turn of the century but only passed 1% of overall retail in 2016. Research shows that trust is a big factor in ecommerce growth, which is why we want to recognise online retailers who help to grow the entire sector by ensuring the kind of ecommerce standards that engender trust with online shoppers,” Goldstuck says.
“But once online retail passes two per cent it crosses an essential psychological barrier and this often leads to a tipping point in emerging economies. That’s when we see online retail snowballing. It gathers real momentum and everyone in the sector benefits,” Goldstuck explains.
To be eligible for entry to the Online Retailer of the Year, owners of digital stores are urged to participate in an essential survey of local online shopping being run by Goldstuck’s World Wide Worx, together with Visa and digital growth agency Platinum Seed.
To participate in the research, local online retailers can go to www.surveymonkey.com/r/OnlineRetailSA
All online retailers who participate will be entered into the award. However, participation in the survey is not a precondition for entry to the awards. However, only online retailers who operate from within South Africa’s borders are eligible for this local award.
The awards will be made at a Heavy Chef event in Cape Town on Thursday, October 01 2018. At the same event, World Wide Worx’s Arthur Goldstuck will lay bare the state of local retail, with Brad Elliott, CEO of Platinum Seed, and Visa.
Goldstuck, who is judging the awards, will present the following awards:
- Online Retailer of The Year
- 1st runner-up – Online Retailer of the Year
- 2nd runner-up – Online Retailer of the Year
- Best New SA Online Retailer of the Year.
The winners of the Online Retailer of the Year awards will be given a digital badge that the online store can display online. The winners will have bragging rights for a year — until the next award is made in 2019.
Judging criteria for the awards include trust, innovation, customer service, digital excellence, customer engagement, product excellence, and the online reputation of the digital store. Visa, Heavy Chef, and Platinum Seed will oversee the judging of the awards. The Ecommerce Forum of Africa will audit the results.
Retailers or entrepreneurs who want to attend the awards and presentation of the research results by Goldstuck can purchase tickets from Heavy Chef.
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