Starting and running a successful business must be one of the most daunting tasks ever. With external factors like a recession, government red tape and the unpredictability of markets, it’s no surprise that only six percent of South Africans currently run their own businesses, according to the Small, Medium and Micro Enterprises (SMMEs) Index, which was conducted by economist Mike Schussler for Absa.
The research further revealed that only 12% of businesses that were started in 1994 were still operating today, and that 270 000 businesses out of 1.9 million had only employed around five people. This is a concern considering the high unemployment rate in SA.
Ntshona chats to us about this state of affairs and tips for entrepreneurs.
What is the main reason for only 12% of companies started in 1994 still operating today?
Recent research that we conducted into why businesses fail within the first two years revealed very interesting information. It was not because of lack of technical skills or lack of funding, it was primarily because the business owner didn’t have sufficient business “know-how” to run and manage the business effectively. Whilst they were good at what they were doing, they were lousy business people. The inability to manage finances, do marketing, close sales, manage labour issues and general business admin was their downfall. So they effectively didn’t know where they were making money and what their financial status was.
Is government doing enough to help SMMEs?
The government’s role is to create a conducive environment in which business can occur and thrive. There is still way too much unnecessary red tape facing SMMEs. In Malaysia, it takes an hour to register a business and be up and running – the same cannot be said about SA. On the other hand, whilst government is the biggest supporter in giving work to SMMEs, they are also equally their biggest killers by continually paying them late. When you pay a business six months later, there is no business left – employees are no longer coming to work, your landlord has kicked you out, etc.
What can the private sector do to also assist SMMEs with sustainability?
Firstly, they need to create market access for SMMEs by opening up their supply chains and start doing business with them. They need to understand the impact of choosing to buy local and small and the impact it will have on job creation and economy growth. Best practice globally is to procure from SMMEs as they innovate and deliver quality; in SA we still have to get our mindset right.
Any tips for entrepreneurs who are starting out?
First and foremost, your business has to fulfil a need – there must be a desire for your services or product. Finding a market is going to be your biggest obstacle.
Differentiate yourself – what makes you different, unique and why should people buy from you? Also very important is to understand that what may have brought success previously, may not necessarily be applicable. Times are changing and technology changes what customers require.
Know your business – have reliable information about your business, your costs, your margins and where you are making money.
Love what you do – enjoy what you do and have absolute passion for it. You will at some point in time doubt yourself and your abilities. It’s important to be resolute but realistic as well.