South Africa sits with various challenges that affect our economy. The real solution to the country’s unemployment is scalable entrepreneurship i.e. new businesses starting and growing rapidly ultimately creating sustainable employment – these are not survivalist or life style businesses.
The disciplines of successful scale-ups create a positive systemic impact – it encourages a focused approach aimed at proactively managing a business through its growth path. “Lessons from global gurus on the science of scaling up present us with key disciplines, the rigorous application of which enhances the odds of success” says Mike Vacy-Lyle, CEO FNB Business.
He adds “that over 50% of the top 1% of businesses get stuck at a common point on their growth path. This point of “stuckness” does not manifest as a temporary circumstance which simply corrects itself over time or with a mediocre level of effort. The consequences of many businesses’ inability to navigate out of “stuckness” are grim. Avoiding getting stuck altogether or finding an escape route requires significant effort and skill from the business leadership”.
Vacy-Lyle shares some of the principles businesses can adopt to help steer them to the next level of their growth path.
A lack of focus results in a lack of progress in most circumstances. It is important that businesses don’t over commit themselves and to carve out time to apply sufficient focus on areas that require it.
The road of business growth is littered with businesses that failed by entering new business lines, markets or committed cash flow on acquisitions. It is important to not only use turnover growth as a measure of business success.
Build a culture and management system to execute. Execution becomes exponentially harder as the business headcount grows. Make sure you have clear roles for people and proper accountabilities.
Build an A-team
Attract and retain talented people and help them thrive. Not all critical start-up team members will succeed in senior roles in a large and growing organisation. EQ is always more important than IQ.
Harness your Board
Many entrepreneurs are resistant to the idea of a Board, yet research shows that all successful scale-ups have built and maximised the use of a Board.
Strong scale-up leaders know the limitations of having fewer decision makers that are deep in the detail and biased by short term pressures.
Systematise customer delight
Scale requires shifting from operations as a series of projects, to operations as a set of systems and processes. The business processes need to be built around and supportive of consistently delivering great customer experiences.
Measure and reward customer service and not just sales growth.
Manage money militantly
Decisions that are not informed by accurate financial insight and businesses cases are expensive. It is important to build a robust financial function that is able to generate such insight. The returns on investing into sound financial systems and resources are high.
You need a disciplined monthly management account reporting process and an organisation that is lead by well thought through businesses cases.
Wealth comes through scale, and scale generally requires capital at some point. Capital comes on its own terms- learn the rules and language of investors and make the business attractive to investment.
Bring your A-game
Leadership needs to consistently perform at a high level and remain aware of less obvious detractors from peak performance such as insufficient rest, an unhealthy lifestyle and high stress levels.
Most successful entrepreneurs have a lifestyle interest that keeps them energised.
Leaders in a business need to operate with a mindset which seeks success for the business and which makes decisions prioritising the business needs over personal views.
“Scale ups require a focused mindset backed by a series of measured decisions and efforts to ensure that a business continues to grow – think big” concludes Vacy-Lyle.
Top Sectors For SMEs In 2019
“As such, SMEs in the construction, communications and electrical fields are all likely to benefit from supply and sub-contracting agreements over the coming years.”
While the South African economy has been underperforming for a number of years, the first positive signs of turnaround started to become visible by the second quarter of 2018, and by the end of the third quarter, data supplied by Statistics South Africa showed that the economy had indeed grown by 2.2 percent, compared to the previous quarter. This uptick is expected to have a positive effect on business confidence in 2019.
This is according to Jeremy Lang, regional general manager at Business Partners Limited (BUSINESS/PARTNERS), who says that certain business sectors have already seen an increase in opportunities for small businesses and start-ups.
“While these sectors will not be without challenges, the following four industries are likely to offer the best opportunities for small and medium enterprise (SME) owners to grow their enterprises in the coming year.”
The World Travel and Tourism report 2018, revealed that the direct contribution of the travel and tourism sector to South Africa’s GDP has been projected to rise from R136bn in 2016 to R197.9bn by 2028 – set to make up a total of 3.3 percent of the country’s total GDP, says Lang.
“Although this sector experienced some setbacks in 2018, such as the drought in the Western Cape and stricter visa regulations for children entering the country, both the water restrictions and visa regulations have been relaxed and the sector is once again poised for growth,” he says.
Statistics South Africa has credited this industry with being the biggest driver of growth in the country’s GDP, having expanded by 7.5 percent in September 2018, says Lang. “To bolster this, Government has made a concerted effort to stimulate small business growth in this area with initiatives such as the Black Industrialist Programme and the SA Automotive Masterplan.”
He adds that businesses in the manufacturing sphere could therefore likely see significant opportunities in the form of outsourcing contracts and new partnerships with large corporates.
“The debate around land expropriation has occupied most of the discussions surrounding the agricultural sector in 2018, with some questioning growth prospects of this sector. However, this industry has a lot of growth ahead of it, as demonstrated by its 6.5 percent growth over the last three months of 2018,” explains Lang.
“Further to this, the industry is also already taking significant advantage of seven climatic regions in South Africa, with the export of a wide variety of high quality fruit and vegetables increasing substantially,” he points out. The recent outbreak of foot and mouth disease that has resulted in the suspension of the country’s FMD-free status will however significantly impact meat exporters.
In terms of opportunities for SMEs, he says that these may most likely be found in the rural and underdeveloped regions, where the need for resources like efficient transport, state-of-the-art cold storage, better irrigation and private power generation will be key to making agriculture projects more productive and competitive in the export market.
Data and information technology
Connectivity and information technology infrastructure are both crucial to business and employment growth in South Africa, says Lang.
“With many municipalities and the Western Cape government committing to providing all of its residents with free data as part of a plan to expand public Wi-Fi network access, it is clear that this is also becoming a high priority on a state level.”
It has also been reported that South Africa is awaiting the arrival of three international data centres, and large players in the communications sphere, including Vodacom, Telkom and Vumatel, are making huge strides in drastically growing the country’s fibre optic backbone, he adds. “As such, SMEs in the construction, communications and electrical fields are all likely to benefit from supply and sub-contracting agreements over the coming years.”
In conclusion, Lang says that as South Africa’s economic growth has started to turn around, business owners should keep their ears to the ground as 2019 is highly likely to be a year of opportunity.
Herman Mashaba To Talk On City Of Jo’burg Job Creation Initiative
Herman Mashaba to talk on City of Jo’burg job creation initiative at 2019 Business Day TV SME Summit.
Leading organisations at the SME Summit
SME Insurance Checklist For New Year
Malesela Maupa, Head of Product and Insurer Relationships at FNB Insurance Brokers, advises SMEs to consider the following factors when reviewing their policies.
Business owners who are planning for the year ahead should not overlook the importance of reviewing their insurance policies to ensure they are adequately covered against insurable risks.
Malesela Maupa, Head of Product and Insurer Relationships at FNB Insurance Brokers says, every year businesses face unique challenges ranging from credit and market risks, technological disruptions, compliance, operational and regulatory risks, amongst others. As a matter of precaution, insurance policies should at least be reviewed or updated once a year.
He advises SMEs to consider the following factors when reviewing their policies:
- Employee movements – if there are any employees who have left or joined the company, ensure that your policy is updated accordingly.
This type of cover normally depends on the role and contribution of the employee to the business. For instance, directors may be covered for Key Person Insurance and Directors & Officers Liability insurance.
- Protest Actions – this year is the national election year and leading up to elections we can expect to see an increase in the frequency and severity of protest actions, riots and strikes. Thus, it is essential to ensure that adequate special risks cover is in place from the South African Special Risks Insurance Association (SASRIA).
SASRIA provides cover to both individuals and businesses against special risks like civil commotion, public disorder, strikes, riots and terrorism at affordable premiums.
- Cyber risks – it is essential to communicate with your insurer or broker and find out if there are any new risks that your business should be protected against. Cyber incidents continue to be a major risk for businesses especially in the SME sector. Over the last couple of years there has been a major increase in the number of reported cyber incidences.
More businesses are now facing increased cyber threats due to their increased dependency on technology, relating to their internal and customer data being compromised by fraudsters. It is therefore essential to have some form of cyber risk insurance cover and/or enhancement of data security protocols.
- Regulatory changes – every year there are a number of regulatory changes that impact businesses directly or indirectly, which may result in fines and penalties for non-compliance.
- Natural catastrophes – the increase in the frequency and severity of extreme weather conditions, coupled with intensifying natural catastrophes will continue to have a significant impact on businesses.
Businesses should ensure they are adequately protected against these risks to avoid incurring sever financial losses.
- Business changes – should a business consider moving to a new location, purchasing new premises or venture into new business activities, these types of changes could have a major impact on its risks profile. As a result, the policy needs to be updated accordingly.
- New and Enhanced products – An innovative culture has taken over the insurance industry and ever so often we see the introduction of new products or the enhancement of existing products. Get in touch with you broker to advise you on any new products that might add value to your existing insurance portfolio.
“Reviewing your policy regularly gives you peace of mind knowing that you can focus on running your business effectively, without worrying about unforeseen risks,” concludes Maupa.
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