Securing funding is a major feat for any brand and requires a great deal of planning and expertise. However, the real value comes from turning that initial support into long-term growth – transforming a spark into a sustainable fire. Without financial stability, eCommerce brands lack the foundation to tackle key business endeavours like evolving product lines, expanding geographic storefronts or making new investments into shipping and packaging that enhance the customer experience.
This is particularly true for emerging businesses transitioning from angel or first-round funding sources into companies with verified equity. These brands are no longer simply selling an idea but must be able to back their entire business model with a concrete financial plan.
As both the CEO of Dotcom Distribution and a CPA, keeping track of our financial standing is a critical component of managing a business – at any stage, but especially in the early days. With a lineup of clients funded heavily by private equity, I’ve seen my fair share of financial successes, as well as blunders. With 50 percent of U.S. businesses failing within their first five years, it’s important that any emerging company makes smart financial decisions.
Here are three tips I find valuable when helping entrepreneurs keep their brands out of finance troubles:
1. Develop a clear vision/path to profitability
It’s important to develop strict financial principles that govern all incoming and outgoing spending. If you are seeking capital through funding, you must demonstrate your expected return-on-investment (ROI) for those investors and detail where expenditures will go.
You should also be able to explain how you intend to manage cash and receivables, and have a clear vision toward becoming, and remaining, cash flow positive. When involved in any type of private equity or venture capital funding, ‘building the business’ is no longer a detailed enough financial plan.
For example, if you intend to allocate $10,000 to marketing, why are you doing so? What outreach efforts are you going to push, and is your anticipated ROI based on real-world research? You should plan to speak to how you will stand out from competitors and compel consumers toward conversion. If you cannot demonstrate how future funding will build upon your existing business, investors will likely take their money elsewhere.
Part of following through on your finances is developing clear communication strategies with your investors, as this creates accountability for you and your team.
Transparency with your funding sources will ensure they see you as a worthwhile investment and can enhance your own strengths. Also, when working with investors, it’s important to showcase business maturity. For instance, it’s imperative you implement segregation of duties, work processes and controls that support your key performance indicators and success drivers.
2. Use investors to increase financial viability
Your own finances are paramount, but it’s equally important to think critically about the success of your investors and partners. These players are backing your growth, and it’s a sign of good faith when you can make business decisions with them in mind. For example, if you have the chance to scale down a marketing strategy while maintaining growth or can cut costs by decreasing manufacturing inefficiencies, this helps stretch an investment further.
Helping your investors or partners often allows you to ask for help in return down the line. We have helped clients remove pain points on the manufacturing side and in turn have been able to help them save money. Those companies were later able to negotiate discounted supply chain costs, which ultimately helped to positively affect their cash flow.
3. Make sound hiring decisions
I once had a client say to me “I don’t know if I’ll always be the CEO.” Shortcomings are tough to admit, but self-awareness is the mark of a smart entrepreneur who is focusing on the financial future of his/her company.
Others’ experiences and expertise are often the best way to avoid squandering important financial opportunities. We’ve been impressed by clients who knew when to bring in smart executives from other already successful eCommerce players. The people often better understand how to leverage finances (including private equity and venture capital funds).
Running and owning a business should never be all about money, but properly managing your finances is a key part of long-term success, especially in eCommerce sales. By using the tips above, you can help your company make the most of the investments it has earned.
It’s also a good idea to add new technologies – or seek out a partner that can add these technologies for you – that will help you make smarter financial decisions when it comes to areas like advertising spend, strategies for liquidation, customer acquisition costs, etc.
As you continue to grow it’s not enough to just know how to spend or save money. Successful brands also need to know how to manage money on behalf of investors.
This article was originally posted here on Entrepreneur.com.
Making Money Online: 10 South African Entrepreneurs Doing It
You don’t need an eight-to-five job or stacks of capital as the launch-pad to start a business and create your own source of income. Here are 10 entrepreneurs who’ve found some unconventional ways of making money online using common platforms.
What do you know about making money online using Airbnb, Fiverr, YouTube or Instagram? While the average consumer uses these platforms to share their lives, talent and find holiday pads, a few local entrepreneurs have cashed in on these platforms to start lucrative a online money-making business.
Ten South African Entrepreneurs who are making money online:
- Making Money Online on Fiverr: Lauren Gouws
- Making Money Online with Podcasting: Matt Brown
- Making Money Online with Airbnb: Brigid Prinsloo
- Making Money Online with YouTube: Caspar Lee
- Making Money Online on Instagram: Thithi Nteta
- Making Money Online with Self-Publishing: Dudu Busani-Dube
- Making Money Online with a Collective Online Community: Marnus Broodryk
- Making Money Online with a Specialised App: Karidas Tshintsholo & Matthew Piper
- Making Money Online with Facebook: Zelda Arnott
- Making Money Online with Niche Software Products: Darlene Menzies
Fintech And Small Business Success: 5 Tips For SA’s Fintech Start-ups
Let’s look at what the future holds and how small businesses can benefit.
Around the world, the fintech revolution is disrupting our relationship with money, both in our personal and business lives. This global market is expected to be worth $10,499m by the end of 2018 – and digital payments account for much of this growth. This means it’s an exciting time for small businesses looking to get ahead. Whether they’re fintech developers, users or both, these businesses are putting new technologies to work and benefitting hugely.
South Africa’s small business community, like elsewhere, is embracing fintech with enthusiasm. To make the most of this energy, new incubators and accelerators are setting up shop across the country. Cape Town, for example, hosted its first ‘Startupbootcamp’ which focused on creating scalable technology solutions for financial services and related industries. At Xero, we recently launched a virtual hackathon to enable South Africa’s technology entrepreneurs to compete with other forward-thinking developers on a global scale.
Against an energetic business landscape, fintech presents an attractive market for SA’s budding entrepreneurs. In today’s competitive business environment, new technologies are key to meeting your target audience’s needs and expectations.
So, how can entrepreneurs take advantage of what fintech promises? Let’s look at what the future holds and how small businesses can benefit.
Think smart, grow fast
The range of available fintech solutions and tools is vast. However, new technologies alone are not enough to get your business off the ground – and keep it there. Here are five tried and tested tips for small business owners to keep in mind at all times.
1. Have an idea
Entrepreneurs first need an idea, then a plan supported by realistic goals. Your idea has to be good: ask yourself what you’re going to sell, and why. Once inspiration has struck, subject your idea to some hard scrutiny. Chances are someone else is already doing something similar – which is fine if you can do it better.
2. Build a plan
Your business plan is your map. It will help you launch your idea with structure and thought, and guide your company’s progression. You don’t need to stick to your plan like glue: Flexibility is certainly a virtue. A new twist or turn – as long as it’s on the right track – could take the business forward faster.
3. Be flexible
Of course, if something isn’t working then don’t be afraid to abandon it and move on. Fear of failure often results in entrepreneurs throwing good money after bad. Know when to scrap an idea, take what you’ve learnt and focus on something new. Remember, there’s no point crying over sunk costs.
4. Stay alert
When it comes to new ideas, look at what’s old and needs refreshing. Keep a constant eye out for ways to disrupt the status quo and offer people a better way of getting what they need. Even if your business is running smoothly and doing well, if you don’t stay alert, you could lose out on some low-hanging fruit to a competitor.
5. Use technology
Startups are typically constrained by limited resources – namely time, money and labour. A solid plan will help allocate your resources effectively. Fintech solutions can provide a strong backbone that helps you enhance your capacity, manage your cash flow better and improve productivity.
The future of fintech in SA
South Africa is fertile ground for fintech. A lack of legacy infrastructure – particularly in outer lying areas – has created a large underbanked rural population hungry for financial services. What’s more, a growing urban middle class is demanding more sophisticated solutions to outdated forms of payment processing.
Fortunately, these demands are not falling on deaf ears. The local tech community is part of a dynamic development ecosystem that is working hard to innovate tools that provide greater financial access. With a clear gap in the market and an eager target audience, the future for fintech developers and users in SA is looking stronger than ever before.
Regardless of what your business offers, where it is based, it’s size or age, it’s time to join the fintech revolution. By embracing relevant solutions, your business will become more agile, efficient, responsive and ultimately, more successful.
Loan Scams: How To Protect Yourself From Loan Scams
My thoughts are that only if there is a grassroots movement by people affected by these scams to get rid of these unscrupulous marketers, will there be any chance of change.
The current economic situation we’re experiencing in South Africa has created a strong appetite for credit. Often consumers need to borrow money out of desperation just to help them survive. It is here where scam artists and unscrupulous marketers prey on the public, signing them up for services they do not need, with monthly debit orders adding to their woes.
It’s a tactic that we’re seeing more of these days: A company advertises that they can help you secure a loan, even if you’re blacklisted. They charge you for this ‘service’ and at the same time sign you up for a bundle of monthly paid-for add-ons, hidden away in the Terms and Conditions (T&Cs).
They are doing this despite the fact that it is illegal to advertise loans to those who are blacklisted (according to the National Credit Act), and that a company cannot charge to facilitate a loan (according to National Credit Regulator [NCR]). To make matters worse, in 99% of cases, the applicant is turned down, and now has to continue paying for services that they were unaware of signing up for in the first place.
This is criminal behaviour, but for some reason it does not get acted on by relevant authorities (such as the NCR) which should be protecting consumers. With an estimated one million South Africans being preyed upon like this annually, those who are tasked with watching over the consumer should not shake this responsibility. That’s not to say the marketing industry is blameless – far from it, but without a regulatory body, there’s very little to be done to act on these rogue companies. Even Google benefits from these loan scammers – just type in “bad credit loans” and see how many ads pop into the paid search results.
My advice would be for consumers to be vigilant in managing their financial affairs, especially when it comes to “too good to be believed” offers. Here are some pointers to help consumers protect themselves:
- Never give your bank details to an unknown brand or marketing company that is not your own bank or insurance company.
- ALWAYS read the Terms and Conditions before signing up for anything. Most of these scams work because the extras you sign up for are buried in the T&Cs, making them part of the contract.
- Never agree to pay someone to find you a loan. The service provider is conducting an illegal act, since they cannot charge consumers for loan finding services according to the NCR.
- As difficult as it can be, do not apply for loans if you are blacklisted as there is little chance you will qualify. These scams are run by people who feed off/take advantage of people’s desperation, so rather speak to your bank to get advice about your situation.
- Sites such as Hellopeter are a great resource to check if companies are offering fraudulent services. It will only take a few minutes, but could save you years of problems.
As for what to do if you have fallen victim to these scams, complain in writing to the Credit Ombudsman (firstname.lastname@example.org) as soon as possible. At this stage, we’ve lost faith in the NCR or the Consumer Protection Act stopping these types of scams. Rather get in touch with Carte Blanche, your local or national newspaper, and note it on Twitter and Facebook. My thoughts are that only if there is a grassroots movement by people affected by these scams to get rid of these unscrupulous marketers, will there be any chance of change.