What differentiates an entrepreneur is their ability to spot an opportunity and make money from it. And it all starts with an idea.
Yet, in South Africa, too many entrepreneurs opt for tried and tested ideas such as Internet cafes, hair salons or cellphone shops, which leads to market saturation and inevitably contributes to the high failure rate of start-ups in the country. It’s a view strongly held by Mike Herrington, director of the University of Cape Town’s Centre for Innovation and Entrepreneurship, who believes South Africa’s poor schooling system is to blame for the high number of start-ups with copycat ideas.
The problem is spread across all the country’s race groups, he says, pointing out that the education system does nothing to encourage entrepreneurship and lateral thinking.
The danger of overtrading
The lack of original ideas leads to overtrading, and there’s already evidence of this in the construction sector, according to Charles Wyeth, chief operations officer of the government’s Small Enterprise Development Agency (Seda). Here, the high number of entry-level enterprises in the sector has ultimately led to these firms destroying one other, he says.
The agency recently decided that it would only assist enterprises which approached its construction incubator in KwaZulu-Natal, if they were registered by the Construction Industry Development Board as Grade 2 and above. To help entrepreneurs make informed decisions on what business to start, Seda is also planning to develop opportunity fact sheets, similar to those produced by Wesgro and Invest North West, where business people are informed of opportunities that exist within their regions.
Thinking things through
Yet an idea alone is not sufficient, it has to be tested – especially if you stumbled across it while out at a bar with friends in the early hours of the morning. This makes solid market research crucial.
But business consultant, David Brien of Retail Dimensions, confides that he was close to giving up on mentoring start-ups as scores of those that approached him, or were referred to him by a government support agency, simply hadn’t thought through their business idea properly. Brien points out that many entrepreneurs didn’t bother conducting the necessary market research, beyond talking to friends and family, who weren’t much use in any case as they often held biased opinions.
He believes too many young entrepreneurs have been “spoon fed” by government support agencies which hand out cheap business vouchers, dissuading them from having to plough in a lot of their own sweat equity. Brien’s advice is that entrepreneurs be “passionate, but not emotional”, and that they are able to make trade-offs because they understand an idea may not be as perfect as they believe it to be.
Banks not keen
Business consultant Alec Ncube of AN3 Consulting points out that another serious problem is that banks aren’t big on funding original ideas.
Even Sibongiseni Ngundze, managing executive of Nedbank’s Small Business Services, admits that the bank will only fund two out of every 10 new and innovative ideas presented to it. In contrast the bank funds about half of the run-of-the-mill ideas that came across its desk. Furthermore, he says, only about 5% to 10% of all the applications the bank receives for finance, are for innovative ideas.
Ngundze says the bank’s lending is driven by the nature of the market, and the reality in South Africa is that there is a lack of innovation.
Our flawed education system aside, South African entrepreneurs need to think more carefully about doing things “differently”. As Allon Raiz, chief executive of business incubator Raizcorp puts it, just by looking at your resources differently, you can begin to generate new ideas. No longer does a cellphone have to be just a device to talk or send a message, or your car just a mode of transport. The possibilities are endless. Even your friends can serve as a marketing channel for your business. It all starts with one bold idea.
The Three Ts of Creativity
US author Richard Florida’s Global Creativity Index ranks countries according to what he calls the three “Ts” of Creativity: The first 20 countries on his ranking of Talents have a population in which 20% of the people dedicate themselves to economic activities which are concerned with the generation or exploitation of knowledge and information.
Technology is measured by the investments in research and development and the number of patents per one million inhabitants. In relation to patents, the US ranks first by far.
Tolerance measures a society’s acceptance of ethnic and religious minorities.
The Global Creativity Index ranks these countries in the first 10 positions.
- United States
Customers Are The Heart Of Innovative Businesses
Keep your customer at the heart of your business.
One of the main reasons start-ups fail is because they don’t create solutions that meet their customers’ needs. Failure is avoidable. Businesses that understand their customers feelings, challenges, expectations and motivations make themselves indispensable in highly competitive markets because they recognise that true innovation is led by customer insight.
An incredible example of a business that believes in innovation driven by insight is Netflix. They revolutionised the way people watch video content by listening to their customer’s needs. You’ve probably heard the story before: after paying a $40 overdue DVD fee, Reed Hastings co-founded Netflix. He was simply too busy to return his DVD. He recognised that this experience wasn’t exclusive to him, but that it was a problem that many people faced. He saw a gap in the market for receiving and returning videos more effectively, and that is how the $150 billion business was born.
If your start-up doesn’t fulfil a human need, then you’re setting yourself up for failure. It’s not enough to have a cool idea. Ask yourself, “What is the market need behind the offering?” and then test ways of delivering your offering in the most user-friendly manner. Talk to your consumers, understand their likes and dislikes and establish your business purpose before haphazardly allocating funds to R&D.
You can’t go from being a California based DVD-by-mail provider, to becoming the world’s largest online video streaming service without a business plan. It’s important to recognise the step-by-step process of success. Netflix didn’t go from delivering DVD’s to pouring capital into the production of video content within six months. That sort of development would have bankrupt the company almost immediately. It took 21 years for the business to become content creators.
- In 1999, the company became a subscription service because they found that customers preferred paying a monthly fee rather than making a once off purchase.
- Then, in 2009, the company used investor capital to expand their DVD collection because their clients wanted a larger selection of movies.
- In 2010, the business expanded internationally because they saw a gap in the market across various countries.
- Finally, in 2013, Netflix created its first original content series because customers craved fascinating content beyond the overused Hollywood archetype.
The point is: Progress didn’t happen overnight. The business had to set goals and objectives. They then had to fund their growth by presenting market opportunities, backed by customer insights, to their investors. Establish your start-up one step at a time and make sure every progression isn’t innovation for innovations sake – it must be inspired by a human need.
Netflix was founded by a computer scientist and a marketing director. While one partner focused on Netflix’ service development, the other focused on sales. Since the company’s origin, collaboration and balance have been the cornerstones of the business’ success.
Netflix is currently composed of a diverse team of tech-professionals and designers. They understand the importance of combining technology and design to offer customer-inspired user-experiences.
After conducting consumer research, Netflix discovered that series and movie artwork influences viewing decisions by 82%. This has resulted in the creation of more descriptive and provocative designs. Netflix is known for leveraging human-behaviour to revolutionise their service offering.
As an entrepreneur, you can increase your ROI by partnering with the experts that understand human-based innovation.
Keep your customer at the heart of your business.
Why Smart Business Growth Means Smart IT Budgeting
(…And how to do it)
For any business today, no matter its size or sector, getting the IT budget right has become a critical part of success and sustainability. The difference between a three-device network and a fifty-device network has significant ramifications for your IT spend and your overall budget outlook.
Let’s take a closer look at several potential costs and how to plan for them…
Network: The driving force
Essentially, the network is the backbone/core of your IT infrastructure. It needs to be reliable, fast and efficient. Often, a young and growing business will have a piecemeal network in place, bolting on new sections over time. This can lead to the network becoming inefficient and slow.
The important thing to note is that when you have reached capacity on your current network, is it’s sometimes better to start from scratch and also leave room for expansion down the line (rather than adding to the existing network as a quick fix).
While it may appear more costly (and scary), the end result is a reliable network that you won’t have to worry about revamping for many years.
Licensing: Pricey but critical
Software licensing often comes as an unexpected (and unpleasant) cost to many business owners and their financial teams. Indeed, purchasing legal software can be pricey if you aren’t prepared for it (and don’t understand how it all works!). However, if you buy software licenses in bulk, or commit to a longer term, they can cost far less…so again, budgeting intelligently for your business growth can save you money in the long term. Also remember that many software licenses nowadays can be rented on a per user per month basis so its flexible and always up-to-date.
Maintenance: Be realistic
As the business grows and expands, so too will your IT maintenance needs. The key factor to note is to carefully consider the potential costs of IT failures and hardware issues. You need to take into account that you will undoubtedly have to spend money on maintaining your computers and overall network – and breakdowns can be extremely costly in downtime and lost productivity.
Some businesses find that it makes good financial sense to employ someone to be an IT technician in addition to taking on other responsibilities – but this person may not have the right expertise and experience to manage everything. The other increasingly popular option is to outsource your IT management. With flexible pricing options now available to businesses, this is becoming a viable and often much more flexible route to take.
Think Beyond The Box
With a holistic view of your business finances and admin in place, Sasfin’s new digital banking platform is engineered to help you grow your business.
Welcome to the banking platform designed to support your banking needs. In response to more than 50 years of financing and supporting SMEs, Sasfin has launched a digital banking platform, B\\YOND, to help address the pain points and pressures that business owners face in South Africa.
“We’ve spent decades understanding what makes SMEs succeed or fail, and a lot of it begins with how well a business owner understands their finances,” says Sasfin CEO, Michael Sassoon.
“Failed SMEs often tend to either neglect or become completely consumed by their finances and admin. We wanted to create a platform that could help them take control of these factors, and give them a full 360-degree view of their businesses.”
B\\YOND was built to enable businesses to attend to their finances and admin seamlessly, thereby ensuring that entrepreneurs can focus on their clients — driving revenue and enhancing their products and services in the process.
Everything you need on one platform
According to Sassoon, entrepreneurs on the B\\YOND platform will never need to set foot in a branch again. The sophisticated technology incorporates many value-added services at no additional cost, including:
- B\\YOND online applications: Businesses with multiple shareholders and directors can apply online, by uploading documents and signing the application digitally.
- B\\YOND payroll: A simple-to-use and SARS-compliant payroll function enables business owners to perform their own payroll management.
- B\\YOND invoicing: Businesses can create and send personalised quotes and invoices directly from the platform.
- B\\YOND insights: Smart dashboards generated through clever account and transaction classification and tagging helps manage revenue and expenses, and keep track of projects.
- B\\YOND integrations: Direct-feed integration into Xero ensures that small businesses and their accountants can safely and seamlessly connect their Sasfin Bank transactional data with Xero, the fastest growing cloud-based accounting software provider in the world.
Serving the entrepreneur
While there is much in store for the next versions of B\\YOND, the platform currently offers business leaders the basic tools they need to run their businesses smoothly in one place at no additional cost, with the ability to bank at their convenience.
“Sasfin has always existed to serve the entrepreneur and investor, the two key drivers of the South African economy and it bothers us that there is such a high failure rate of entrepreneurs in our country. We have spent the last three years building B\\YOND — a future-fit digital banking platform to help these entrepreneurs,” says Sassoon.
Engineered for success
Sasfin has gone above and B\\YOND to bring you a new digital banking platform that gives you the tools to make managing your business simple and profitable.
B//YOND is a value-add to all Sasfin Transctional Banking clients
Bank outside the box
The Sasfin Transactional Banking Business Account is designed for SMEs who want to focus on what they’re most passionate about — their business — while their banking platform not only sweats the small stuff for them, but helps manage and grow their business.
- Do you spend unnecessary time on banking?
- Does your bank pay you market-leading annual interest rates?
- Does your bank give you easy cash management in real-time?
- Would you like to manage your payroll and invoicing from your bank account?
- Does your bank help you keep track of your cash flow, manage your admin, and provide you with the set of tools you need to help run your business successfully?
Sign up today and have access to a whole new world of banking better for your business.
Call 0861 SASFIN for more information.
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