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The Big Trap of Small Business

If what you are offering is relevant and needed then your customers will force you to grow.

Vusi Thembekwayo

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Discovery Ltd was started in the year 1992. Its turnover is R34 billion & market capitalisation is over. R57 billion.

Curro Holdings Ltd was started in the year 1998. Its turnover is R487 million & its market capitalisation is just over R9 billion.

Yet in the same time countless entrepreneurs have started their own small businesses and more fail than those that succeed. You’d be forgiven for thinking that the founders of companies like Discovery, Curro, First Rand, GijimaAST and BCX are all geniuses. They’re not. They just understand that if a business is not scalable and is built to inherently “stay small”, then it will die.

Related: Want to Start a Business but Questioning Your Passion? Try This

So why is South Africa so deeply focused on creating small businesses?

Why do we have a legislative framework that seems to encourage and even incentivise entrepreneurs to stay small and fly under the radar?

There are few fallacies about starting and running a large business that many entrepreneurs have that need some correcting:

1. Its harder to run a big business

I sit on the board of several very large businesses. I am a partner in a private equity outfit & often engage with business leaders when are looking for opportunities to buy into businesses. Not only that, I have run a R500 million a year business and today influence over R4 billion in capital.

The task of running larger business is more complex but is not of itself harder. The effort is the same. You often work the same hours, manage similar issues and have to answer the same burning questions around the future and you will get there.

What changes as you move from small to medium and then medium to large is the “complexity” of the business. There is a deeper interdependence of factors and the stakes are higher but the effort is the same.

2. I want to own everything. I am the boss of me.

Too many small business entrepreneurs actually think they are “free”. If you have to go to work and be at the office to make a living then you are not free, you simply have the illusion of freedom with higher responsibilities than corporate employees.

Sometime ago I realised that I needed a better pool of talent in my business. I needed deeper insight, better technical expertise and more proven track-records. But I couldn’t hire these people into the business.

 

Related: 10 Ways Entrepreneurs Think Differently

Not only could I not afford them, but I would never be able to get the best out of them as conventional “employees”. So decided to create a floating shareholding structure through which “key people” could have equity in the business apportioned by the percentage contribution to the bottom-line.

This is hard because having other shareholders means you must ensure that corporate governance is in place and that apply the very same “corporate-rules” that you left employment for. However, this was the best decision I ever made.

I couldn’t have hoped for a better team and the business has grown 121% on average every year for the past 3 years. This year we are on track for a 208% growth in top-line revenues. This is not because I am smarter or working harder but rather I gave a portion of my business away to people that were best able to help me create wealth.

Caution: taking your time choosing these people. It is not a decision to betaken likely. Test the out first. Give them tasks. Give them an opportunity and see what they deliver. Too many people have learnt how to “interview” well.

3. Hire cheap. It’s just a job.

This is the Achilles of most entrepreneurs. Hiring the cheapest person in an effort to contain costs often leads to other “implicit and non-direct” costs like bad workmanship, poor quality of work, tardiness, laziness, disengagement and the myriad of HR issues that follow this type employee. These also happen to the hardest people to fire. They are bad at their jobs so as a survival tool, they have had to be good at labour relations.

When it comes to developing your business in the early days, then the laws are “first brains in seats then bums in seats”.  Get the right people. Pay them correctly. Inspire them to believe in the future. Give them ownership of the future and watch them WOW you.

In the end, no small business ever changed the world by staying small.

Related: 3 Reasons Your Business is Dying

Mr. Vusi Thembekwayo has been an Independent Non-Executive Director of at RBA Holdings Ltd. since May 14, 2013. Mr. Thembekwayo has already collected numerous accolades and awards as businessperson, entrepreneur and international public speaker. Mr. Thembekwayo completed a PDBA and a course on advanced valuation techniques with the Gordon Institute of Business Science and completed a Management Acceleration Programme (Cum Laude) with the Wits Business School. His speaking achievements include the international hit talk “The Black Sheep” which he delivered to the Top 40 CEOs in Southern Africa, addressing the Australian Houses of Parliament and speaking at the British House of Commons. To add to this, Vusi speaks in 4 of the 7 continents over 350 000 people each year.

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Small Business

Small Business Savvy: Why You Need Negotiation Skills

Work on your negotiation skills and you will see your business grow from strength to strength.

Amy Galbraith

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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.

Related: Manie Spoelstra On Why Negotiation Is The Genesis Of Entrepreneurship

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.

Final thoughts

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.

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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

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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.

Related: 6 Great Tips For A Successful Shark Tank Pitch

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.

Win A Business Makeover with Retail Capital

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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.

Harald Merckel

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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.

Related: The 10 Best New-Age Business Ideas You Haven’t Heard About Yet

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.

Related: 11 Uniquely South African Business Ideas

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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