If it’s your dream to start your own business, there are some cardinal rules that, if followed, will help you dodge becoming a start-up failure statistic. Your road to starting your own business begins here.
Starting a small business: Being your own boss
One of the biggest choices a would-be entrepreneur needs to make is whether to walk away from a relatively secure, salaried job in order to pursue their own-business dreams. But the transition from being an employee to being an entrepreneur is a big one and there are things you should be prepared for:
How comfortable are you with risk?
Not only will you need to decide on leaving your job for starting a business, you may also need to fund it with personal savings, taking a loan, or cashing in a retirement policy.
Entrepreneurship by its nature involves a degree of uncertainty, and as your own boss, you’ll need to make some tough and/or unpopular decisions.
The key is to take calculated risk – make sure you’ve done as much research as possible on the industry, your business model, your target market, and financials.
Do you have the right characteristics?
Great entrepreneurs are independent, stubborn, charismatic, resilient, persuasive, able to negotiate, creative, and natural-born leaders. If you don’t possess these traits, it doesn’t knock you out of the game.
Be sure that the kind of business you’re entering suits your personality type. For example, a PR agency will require a business person who is tenacious, out-going, sociable, and loves interacting with people. An accountant, on the other hand, may not require such high social skills.
Are you in it for the love of it?
There will be times when money is tight, when hard decisions need to be made, and when family and personal time gets sacrificed for the business. If the dream you’re chasing is just to get rich, it won’t sustain you very long. You need to eat, live and breathe your passion and dream.
Do you have the right skills?
If you’re leaving corporate, ensure that you have all the necessary skills to run a business, or be prepared to reach out for help. Many corporate individuals have expertise in a particular field but don’t have all the other skills needed to run a business.
Be prepared to learn how to fill the gaps, ask for help, or outsource or hire for the necessary skills.
Have you planned properly for starting a small business?
A start-up may start out of the blue, but no successful business has survived and thrived by winging it all the time. A successful small business starts with a careful plan.
Related: Do You Speak Start-up?
First define why you are starting a business
Is it to be your own boss, to make more money, to gain more independence, to have more time, to sell for millions one day, is it for a steady income, because there’s a gap in the market, or you want to turn your hobby/personal interest/passion into a meaningful business?
Second, come up with a sound business plan
No idea can be realised or made to last without some planning. A business plan is your first port of call to mapping out your business.
Next, who will be part of the business?
Are you a sole proprietor who will run all aspects of the business? Will you have partners in the business and what will they bring to the table? A word of caution: Choose your partnerships wisely – if it’s a family business, be sure there are boundaries in place and that roles are well defined.
Make sure your business partners complement your skills and knowledge with their own. While things may start off well, make sure you have an attorney draw up papers of who’s who and contributed what in the event things go south.
Where will the money come from?
While some businesses can be started with very little, many will need a cash injection to bring them to life. Will you use personal savings, take out a loan, seek investors, court venture capitalists, self-fund and bootstrap the business?
Each option comes with its own pros and cons, so investigate them carefully. Also be mindful and realistic about return on investment – it’s very rare that a business will make back 100% of its start-up capital in the timeframe you initially expect. Be conservative in your estimations.
Pay close attention to running costs
Sometimes it can take up to three years before a business reaches break-even and starts to make a profit. So, while you’re working toward this point, keep your books immaculate, document all outgoing and incoming money. It will help you pin point areas where expenditure can be trimmed and income improved on.
The importance of networking when starting a small business
Networking is one of the most important activities you’ll be involved in when starting your business. Entrepreneurship is a hard game and can be a very lonely and isolating experience for some. By networking with other entrepreneurs, you will learn that your fears and challenges aren’t always unique to you, but just par for the course. Sharing with other entrepreneurs can give you confidence and motivation to keep going.
Networking can also help you land clients by giving you the opportunity to rub shoulders with people who may need your product or service – think conferences, trade shows, industry events – or may put you in contact with people who can provide you with skills, resources and advice.
If you’re not in need of help, networking is a great opportunity to market your company and position yourself as an industry expert. If people get to know you as the industry go-to-guy, you’ll develop a positive reputation, gain trust, and business can follow.
Landing clients: A small business imperative
Without clients, a business is a non-start. So once you’ve got your business plan in order, focus your attention on landing your first client as soon as possible. For some entrepreneurs this may involve taking on clients from their previous job, from networking, or through word of mouth.
For others it may involve finding clients from scratch. If you’re providing a new product or service, make your clients fully aware that it’s a work in progress and that things will improve with customer feedback. You may even want to get your first client by offering a free trial period or at discounted rates.
The object of getting your first client is to get feedback as quickly as possible and develop your offering based on their needs and demands, rather than producing a 100% ready for market offering that doesn’t meet the needs of your target market.
Related: Advice for Starting a Business
Starting a small business: The most common mistakes
Key performance indicators
To help you stay focused during the start-up phase and at the same time avoid tunnel vision, it helps to keep track of Key Performance Indicators (KPIs) you’ve set in place.
KPIs are used to measure performance and success in your business, and help you towards your business goals. These can be as simple as 100% customer satisfaction, zero injuries on site, or minimal defects, for example.
Each KPI should be constructed with a particular purpose in mind – the KPIs for finance will be different to KPIs for sales, for example. Some kinds of KPI include: Marketing, production, IT, supply chain management, finance, business government, sales, etc.
Focusing on high-impact tasks
With limited amounts of time and energy given to each day, week, month and year, it’s important to assess your business goals, set realistic milestones and plan accordingly. It is of use for every entrepreneur to do some research into the 80/20 principle: Where 80% of the results come from 20% of the causes.
Focus on your best customers, on selling and improving your best selling product or service. Enable your best staff to do better – fundamentally focus your attention on high impact tasks rather than being bogged down in emails for example.
Types of small businesses
Are you ready to start your business? Here are three kinds to mull on:
- Consultancy – If you have expertise in a particular field, you can start a consultancy providing professional expertise to those who need it.
- Part-time – Believe it or not, you can start a business while being employed at the same time. This kind of venture will be quite demanding, but also worthwhile as you will be able to determine whether your business idea is ready to support your financial needs before cutting off the monthly salary. It is advisable that your employer be aware that you’re running a side-line business, as most employers will support you in your entrepreneurial endeavours provided that it’s not infringing on your work time and the company’s resources.
- Hobby – if you’ve got a personal interest or hobby that can be used to create a profit, then you have a potential business in your hands. Make sure you do your market analysis though and carefully evaluate the amount of time and capital required and versus the income you can gain.
Related: Start A Part Time Business
From here, evaluate whether you can run your business from a home-office, whether you’ll need to rent office or manufacturing space – and can this space be shared with another business, and whether you’ll need staff. Will your staff need to be full-time, part-time, temp, or even a virtual assistant, and will they need training and/or specialised skills to assist you and your business?
When hiring staff, ensure that an employment contract is drawn up with all terms, conditions and expectations in writing, that it is signed by both you and the employee, and that it conforms with the Basic Conditions of Employment Act.
Small Business Savvy: Why You Need Negotiation Skills
Work on your negotiation skills and you will see your business grow from strength to strength.
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.
Win A Business Makeover With Retail Capital To The Value Of R250 000
Retail Capital is giving SMEs an opportunity to win a makeover to build their brand with an investment of R250,000.
Retail Capital is giving SMEs an opportunity to win a makeover to build their brand with an investment of R250,000. During the summer campaign, SMEs are encouraged to share the vision of how they would like to see their business grow, and led by a team of experts, Retail Capital will work with the winning SME to help make their vision come true.
While South Africa’s economy is not faring well, Retail Capital CEO Karl Westvig remains optimistic about the country’s retail and hospitality sectors. “We are seeing some green shoots, with an increase in turnover in these sectors – starting from the end of September. Economic conditions remain very tough, but businesses seem to be trading well into October and we’re hoping this continues into the festive season trading.”
According to recent statistics from Statistics South Africa (Stats SA), South Africa’s retail sales rose by 5.5% year-on-year in August 2017, following a downwardly revised 1.6% gain in the previous month and above market expectations of 2.3%. It is the biggest gain in retail trade since August of 2012.
Related: How To Raise Working Capital Finance
“I do believe that these sectors will see an improvement during the summer season. But, key to this will be for small business owners to ensure that they have the right amount of stock, adequate cash flow, as well as other systems in place to meet the ever-changing needs of customers,” says Westvig.
For many small businesses, however, continually adapting to market changes requires cash injections that they don’t often have.
The prize includes the following:
- Business plan/consulting
- Marketing strategy
- Design and branding
- Website and social Media and,
- R50k capital to gear your business.
Westvig explains that the summer campaign tagline ‘Your Vision. Our Belief’ really speaks to why Retail Capital first opened its doors. “Our goal is to see the potential of small businesses and to work with them in making these become a reality.”
He adds that the idea is not to simply help one business during the campaign either. Westvig points out that one of the biggest challenges that small businesses face in the sluggish economy is enough foot traffic through their doors. “Generally, the main hurdle in creating brand awareness and projecting credibility of their establishments boils down to establishing a strong online presence.”
“One of the first ways that South Africans identify a business or service provider that they want to work with is over social media – even in a country where the digital divide has traditionally separated the technological haves from the have-nots,” he says.
He explains that companies that don’t have a social media presence are running the risk of being overlooked entirely. “They may attract customers in their own community with signage or word of mouth, but to grow a business, they need to expand their reach – and that’s where social media comes in.”
But, the reality is that resource and time constraints mean that for many SMEs, social media is not prioritised. “Unfortunately for the average small business owner, they don’t have the time or expertise to get connected.”
Understanding the importance of having an online presence, Retail Capital has also committed to developing the digital presence of all campaign entrants. This would include setting up each entrant’s digital presence on platforms such as Google, Facebook, Twitter, Tripadvisor, Zomato and any others that may be relevant to their specific market or industry.
“As a partner to many SMEs in South Africa, we are continually looking at new and innovative ways to help provide them with the much-needed support in order for them to realise their visions. SMEs need to be supported with initiatives like targeted education and training, supportive legislation, and funding opportunities that collectively help them grow our national economy,” says Westvig.
Who we are and what we do:
“More than R1.25 billion has been extended to a range of businesses including food trucks, hair salons, restaurants, spas and franchised retail stores. Many of these businesses have not been able to raise funding in any other way, other than to go to unscrupulous lenders,”says Karl Westvig, the CEO Retail Capital, a company that provides working capital with the help of innovative lending technology.
“We have also estimated that for every R160 000 we lend, we create a new job. This means that 625 jobs have been created purely by enabling small businesses to get the funding they need for working capital requirements or expansion opportunities.”
Retail Capital’s system, which enables it to advance funding to small businesses, based on real time information on credit card transactions, is providing a new funding alternative to entrepreneurs who have previously been turned away by banks. Because it is able to get actual sales information, it can approve funding immediately, and allow for flexible repayment options based on sales cycles of the particular businesses it is funding.
“This creates significant opportunity for small business owners to focus on their business and grow volumes or look for expansion opportunities rather than spend their time frantically trying to repay debt or keep the business alive after debt repayments have eaten away at any cash reserves they might have had.”
Retail Capital funding is repaid by it taking a percentage of a business’s recorded credit or debit card sales, with repayments fluctuating in line with their business cycle. This has the effect of ensuring that it isn’t overburdened with debt.
“In the past six years since starting the business, small businesses have had the benefit of R1 billion in funding they would have been unable to get through traditional channels,”says Westvig.
Against the backdrop of recessionary conditions in South Africa, Retail Capital’s client information reveals growth in informal sector turnover across a number of industries.
“We believe that growth in the informal sector is outstripping that of the formal sector,”says Westvig.
As a large proportion of the businesses it funds are women- and black-owned, there is evidence that entrepreneurs who have previously been excluded from access to finance are now enjoying success now that their access to finance problem has been solved.
3 Ways To Find Ideas For A New Business
Every business starts with an idea, a vision for a product or service that the business then brings to life.
Every business starts with an idea, a vision for a product or service that the business then brings to life. Sometimes, the greatest ideas and the most successful businesses can spring from some unlikely places. So if you’re hunting for some fresh ideas for starting a new business, try these tricks to get the wheels turning.
1. Ask People What They Need
A good product or service will fill a gap or meet a need that is not being met yet. So if you need a fresh idea, start by asking people what they need. Of course, you don’t just want to stop random people at the shopping mall and ask them what kinds of products they’d like to see. You need something a bit more targeted than that.
Related: 10 Business Ideas Ready To Launch!
So start by picking a niche group of consumers that you would like to reach. For example, you might decide you want to create a product or service to help make teachers’ jobs easier. So reach out to some teachers and ask them what kinds of problems the encounter most, and what kinds of things would help them. Odds are, they’re going to have a lot of answers.
Entrepreneur Sam Ovens started his first business out of his parents’ garage, and he did it by solving a problem for a very specific group — property managers. He reached out to this niche of consumers and learned that they spent a lot of time juggling notes and photos for the various properties they managed. So, Sam created an app that made it easy for property managers to take photos of properties, add notes, and send the documents out to their clients. The app, SnapInspect, was hugely successful and launched Sam into a multi-million dollar business career.
2. Find Something That Bothers You
If you don’t have someone else to ask, ask yourself what some of your pet peeves are. What’s something that you put up with, just because it seems to be the norm, but that you secretly wish you could fix? Find what that one thing is, and fix it. Odds are, there are other people who have the same problem, and they’ll pay you to fix it for them too.
For example, one young college grad was irritated by something very simple; he didn’t feel like there was a quality no-show sock for men. As a young professional himself, he wanted something that he could wear with his slacks and dress shoes, but it seemed that the only option for professional socks were long. So he started a Kickstarter campaign, and he raised $50,000 to start producing quality no-show socks.
This simple desire to fix his own pet peeve led Kory Stevens to found Taft Clothing. The line now produces high-fashion men’s shoes, and the business now boasts millions of dollars in sales. Plus, Kory has those no-show business socks he wanted for himself.
3. Make a Cheaper Product
Certain products and services simply have a high price tag. But if you can find a way to take an existing product or service and provide it for a steep discount, you have a recipe for a successful business. Consumers always want to save money, and if you give them the chance to save money on a product they already use, they’ll take it.
One example of this is an eyeglasses company called Warby Parker, which was launched in 2010 by four friends who attended the same business school. They looked around and noticed that most prescription glasses were selling for $300 or more. So they decided to offer the same kind of product for just $95. Since the company’s launch, Warby Parker has grown to 100 employees and is still expanding.
The opportunities for new business ideas are all around you. If you know where to look, you could end up with the next big thing in the business world.
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