Starting and running a successful small business requires skills and knowledge that many business owners may not possess. For example, the owner of a food truck may be an amazing chef but they may not have ample knowledge of accounting, employee management or inventory control. They may also not have the ability to successfully negotiate with landlords, partners or suppliers.
The ability to reach an agreement on an issue without having to compromise too much comes with practice, and can be learnt by taking negotiation skills courses and interacting with more established members of your industry. The reasons why these skills are vital to small business owners are outlined below.
These skills are beneficial for everyone involved
While negotiating in a boardroom is a useful skill to have, small business owners need skills that translate to their situation. Negotiation skills are needed when meeting with suppliers, in order to receive a better price for bulk goods, and can be useful when hiring a new employee and discussing what their responsibilities will be.
Being able to negotiate professionally is also beneficial when dealing with customers. You will be able to reach an agreement that suits you both, without fumbling and settling for less. Your customers will respect you as a vendor, especially if you are able to stay calm and collected throughout the transaction.
You can create win-win situations
Negotiating is not simply creating a positive outcome for one party but reaching an agreement that both parties benefit from.
The best small business owners are those who are able to negotiate an outcome that has a win-win result, in which every party involved believes the deal is a good one.
Being able to reach agreements that are positive for both you and the other party is a highly valuable skill. Not only will everyone involved have positive results but you will become a more respected businessperson. Your suppliers will enjoy dealing with you, your clients will respect you and partners will be more likely to use your viewpoints in their decisions.
Good negotiation will improve your bottom line
The ultimate goal of a negotiation is to reach an agreement that is favourable to you and your business. By being able to negotiate a good deal, you are automatically improving your bottom line. But, this takes a keen mind and a knack for negotiation, which some business owners do not have. By taking courses, you’ll be able to improve your ability and thus improve your end results.
If you are able to reduce your overhead by 10% due to an effective negotiation, that money can go directly to your profit margin. Negotiation skills are imperative for a thriving small business, because as the business owner, you are in charge of dealing with suppliers, partners and clients and will need the ability to create outcomes that favour your bottom line and end goals.
Related: How to Win a Business Negotiation
Your business confidence will be boosted
Walking into a negotiation feeling unsure of yourself and your ability to negotiate can lead to an agreement which favours the other party, not yourself. However, by improving your skills and being able to argue and negotiate professionally will boost your business confidence tenfold.
Having confidence when walking into a negotiation means that you will be able to concentrate on the issue at hand, not worrying about whether the other party is out-manoeuvring you. The ability to confidently make a presentation and provide offers and counter-offers has been shown to garner better results. Confidence in business helps to win many boardroom battles.
You will build respect
Having effective negotiation skills will build respect in the eyes of your competitors, suppliers and staff. Having the respect of your employees is vital for a successful small business, as your team is most likely small and close-knit. If they respect their employer, they will most likely work harder and be more productive.
Being respected in your industry is another benefit of having sound negotiation skills.
The impression you leave after a negotiation can have a lasting effect on how you are viewed in your industry, so it is best to be able to have a positive impact. Being able to negotiate professionally and without incident will more likely result in respect from vendors, partners and clients.
The simple fact of the matter is that it is better to be seen as intimidating rather than a pushover at the negotiation table. Your ability to confidently present your case will have a positive effect on your reputation in your industry, and will ultimately work toward achieving your bottom line and end goal. Work on your negotiation skills and you will see your business grow from strength to strength.
The Rising Cost Of Small Business
Many of the hidden costs that tend to surprise small business owners are related to the employment of people. However, the silver lining is that there are ways to mitigate the risks associated with scaling a business and several tools available to streamline HR processes.
A small business starts with a visionary dream fueled by energy and grit. Founders build on that and attract a small team of people who can help breathe life into the business. But not very long after setting out on course, the harsh realisation of rising costs like insurance, permits, licenses, equipment, maintenance, taxes, shrinkage and utilities suddenly appear.
Poor Labour Relations Management
Extensive labour laws in South Africa require dedicated overseeing and management, which generally lead to additional costs of employing labour consultants or hiring human resources managers that are not entirely relate to the core of your business. However, left unattended, labour relations issues can and will shut down your shop.
Labour relations issues cost South African companies R14 billion annually. Many companies have costly compensation orders from the CCMA due to Line Managers and HR employees not complying with legislation regarding disciplinary matters.
A surprising statistic from SEFA suggested that of the small businesses that fail, 40% of them can be attributed to poor labour relations management, therefore managing disciplinary processes by the book is critical. There are useful templates as well as step by step guides available online to help managers through disciplinary processes and to avoid incurring penalties from the CCMA.
By law employees are entitled to at least 15 working days’ vacation leave in every leave cycle. Employers could face substantial penalties from the Department of Labour if they do not allow employees to take leave. Planning for peak and off peak periods in businesses is a critical part of drafting job specs and these conditions must be communicated to staff early on.
The cost of poor leave management will contribute to the company’s leave liability i.e. the amount of leave an employee is owed is noted as a liability in the general ledger. Annual leave that employees do not take is a hidden expense for a business that if left unattended, will accrue and create cash flow problems for the business.
Employers are advised to make use of a leave management tool that enables both the employer as well as their employees to keep track of leave days owed to employees and brings some automation in to the process.
The Basic Conditions of Employment Act ensures that all employees are “entitled” to a minimum of 30 days (for a 5 day workweek) and 36 days (for a 6 day workweek) paid sick leave.
According to Occupational Care South Africa (OCSA), absenteeism costs the South African economy around R12 -R16 billion per year. This equates to around 15% of employees being absent on any given day. The answer isn’t to go on a witch hunt throwing policy at employees and demanding doctor’s notes for even a few hours off work (employers are not allowed to breach medical confidentiality by requesting a diagnosis on a sick leave note).
Alternatively, employers can be proactive in managing absenteeism by monitoring leave reports monthly and quarterly taking regular health interventions (e.g. flu shots) before a peak sick leave season e.g. before winter. Maintaining a positive work environment where employees feel acknowledged and are encouraged to perform goes a long way in keep workers present and absenteeism on the low.
Is Unmanaged Stress Killing Off Our SMMEs?
Most SMMEs don’t make it past their first year. This is worrying for an economy in which SMMEs are a vital part of growth. A range of reasons are given for what is stifling these businesses, from financing to access to markets, but one factor has been completely overlooked: Stress.
It is now widely understood that Small Medium and Micro Enterprises (SMMEs) are key to a country’s economic- and employment growth, but something is amiss in South Africa. Our SMMEs are just not doing what they should and understanding why this is – and fixing it – will be critical to the future success and sustainability of the economy.
The common conversations around SMME failure rates point at six main culprits: (1) access to funding, (2) access to markets, (3) infrastructure challenges, (4) scalability, (5) tough regulations, and (6) skills/education. The problem is that we have known about these for years, and for all the efforts to address them, we are unfortunately not seeing the growth in the sector that is needed.
A recent survey by the Small Business Institute (SBI) and the Small Business Project (SBP) put the number of formal SMMEs in South Africa currently at just 250,000. These numbers are alarmingly low – especially when compared with international benchmarks. SMMEs in Organisation for Economic Co-operation and Development (OECD) countries, make up 95% of businesses, and employ between 60%–70% of the working population, contributing up to 60% to GDP. In South Africa, while SMMEs make up 98% of the business population, they only employ 28% of the nation’s workforce, according to Chris Darroll, CEO of the SBP.
And yet the government continues to pin its hopes on the SMME sector. Initiatives like the DTI’s Invest SA and the South African Investment Conference this October, that claims to have attracted billions in foreign investment to the country, have foregrounded the role of SMMEs in economic revival. And the Government’s National Development Plan aims to have SMMEs contributing 90% of job growth by 2030. It is likely that more money will be channelled into support for the sector, to join the billions that have already been spent on incubators and initiatives to help small businesses.
This is a good thing, but it is not enough. The numbers speak for themselves. To date, none of these initiatives has borne much fruit and this signals that we may be overlooking something fundamental. Our collaborative research at the UCT Graduate School of Business suggests that what is being overlooked is something that most of us find difficult to define, or even talk about: Stress.
Stress is under-acknowledged by most people, personally and professionally, and for varied reasons. And this can have devastating effects. If ignored in business, the human devastation is likely to have larger scale effects on job loss, workforce disengagement, health-related days off, impaired teamwork, sub-optimal decision-making, lowering of productivity, and ultimately fuelling a declining economy.
While access to finance and markets, infrastructure and scalability challenges, tough regulations, and not enough educated and skilled employees are all valid hurdles tripping up SMMEs, the fact is that they are perfectly normal hurdles to have in a competitive, emerging economy. Our research reveals that good leaders, who are able to get their businesses over each encountered hurdle, are also able to manage their personal negative stress and harness their positive stress.
Stress can, generally, be quite motivating, however it is generally accepted that there are three kinds of stress: (1) positive stress, which is chosen and does not last very long (like writing an exam), (2) tolerable stress, which is unexpected and lasts a little longer, but then stops and there is time to process, and (3) toxic stress or distress. Toxic stress is tolerable stress left to run on and on without end, without rest and without time for healing and processing. It is this third and debilitating kind of stress that business leaders are likely to experience, and in SMMEs it can be even more severe.
Our research suggests that SMME owners tend to set very high, and often lofty, goals for themselves when setting up their SMMEs. And then they are constantly feeling stretched in either striving for these goals or ‘maintaining the course’. This can mean maintaining good business results, maintaining the customer base, where often 20% of the customer base accounts for 80% of the revenue, maintaining employment levels in changing political and economic conditions, maintaining pricing when squeezed for ever-lower prices while delivering good quality products and services, having their integrity challenged, and dealing with clients/customers who are not averse to replacing their products/services.
Another cause of stress for SMME business owners is that they mostly have internal loci of control, meaning that they take personal responsibility for outcomes and results and therefore blame themselves for every failure, and find it difficult to forgive themselves for deviations from intended results. In addition, an innate sense of accountability to their staff and their staffs’ families reportedly weighs heavily on business owners. Many feel similar accountability toward the broader stakeholder groups that their businesses serve.
All of these factors, which many argue are innate to the nature of business, place undue, long-term pressure (toxic stress/distress) on the cognitive, emotional, psychological and spiritual resources of individual business owners. This reportedly leads to drops in productive activity and motivation, withdrawal from relationships both personal and professional, low energy, impaired decision-making and ill health. And it also destroys resilience – leaving business leaders unable to ‘bounce back’ from personal- or business-setbacks, which is part and parcel of life and business. With a debilitated leader, the business is almost always likely to suffer, on a day-to-day basis and also in the long run. Like a virus, stress transfers to others.
An SMME’s success is inextricably linked to having an effective leader. And effective leadership is inextricably linked to effective stress management and self-care. It stands to reason, therefore, that improving the way SMME business owners manage their stress and boundaries could have a significant impact on improving business survival rates.
Along with offering business advice, funding incubators, opening up markets, attracting foreign investors, educating consumers, subsidising and improving infrastructure, the government should be looking at ways to encourage stress management and self-care into the daily operations of small to medium-sized businesses.
We need to get business owners educated about stress and self-care: about how exercise, sleep, diet, meditation, life-balance, self-forgiveness, and other-forgiveness affect them, their staff and their businesses. Effective self-care, of which stress management is a part, will enable business owners to courageously stay resilient in the ongoing stressful situations they will naturally encounter. This may, in turn, help to turn the tide in South Africa’s SMME sector so that it can drive the country’s economic revival like everyone hopes it will.
Many SMEs Start With Great Plans But Fail To Take The Big Leap
Most small-to-medium sized enterprises (SMEs) are aware of the benefits of good governance practice but, faced with limited time and resources, which could be costly in supporting growth ambitions.
- 27% of SMEs don’t have a vision that covers more than the next 12 months
- 45% of SMEs either don’t have a strategy, or one which covers only the next 12 months or less.
The latest global research, inclusive of Africa in supporting small business growth from ACCA, outlines the governance needs of SMEs. It highlights simple but effective practice over vision, strategy and human capital can provide them with greater flexibility, adaptability and resilience as they grow. This a huge factor in the long-term sustainability of the business, if put in practise.
“If you incorporate good practice for running your business from an early stage, your company is more likely to be resilient and is more likely to appeal to external investment,” explains Jo Iwasaki, head of corporate governance at ACCA. It is about leadership directing the company and being aware of factors both within and beyond their enterprise and build resilient organisations in the face pf the changing world.
The research also found that half (49%) of SMEs do not involve anyone external in their strategy discussions, despite the benefits experienced by those that do, which include additional experience and knowledge of the industry/sector (according to 46%), an independent perspective / constructive criticism (44%) and advice on their growth strategy (39%).
“There are a lot of daily concerns for the leaders of a small business, and often the biggest challenge is meeting day-to-day operations and cash management needs while thinking about the long-term future of the company. And while many leaders are keenly aware of the importance of resilience in the rapidly changing business environment and of buy-in from stakeholders, for example funders and employees, there often may not be the time to think or do much about it,” added Iwasaki.
“I hope that this research helps SMEs in focusing on some of the most crucial issues, and can be a resource not just to SMEs themselves but also to policymakers,” concluded Iwasaki.
How vision and strategy helps small business succeed is available at ACCA Global.
Self Development2 weeks ago
10 Secrets To Finding A Job You Love
Performance & Growth1 week ago
How Matt Brown Quadrupled His Business By Becoming A Niche Player
Entrepreneur Today1 week ago
Entrepreneurs Organisation Crowns the Winner of the Global Student Entrepreneur Awards
Entrepreneur Today4 days ago
5 Businesses You Should Start in 2019
Branding2 weeks ago
How A Strong Brand Protects Your Business
Marketing Tactics2 weeks ago
An ‘Outside-the-Box’ Approach to the e-Commerce Unboxing Experience
Hiring Employees2 weeks ago
Are You Hiring A Cultural Fit? Do You Actually Want To?
Business Landscape2 weeks ago
4 Tips To Create A Great Conference / Workshop / Event In 2019