Whether you’re an SME looking for new ways to enhance your business or you’ve found yourself stuck in a 9 to 5 job dreaming of setting up your own company instead, the reality remains the same: building a booming business from the ground up in South Africa is no easy feat. Indeed, with Trade and Industry Minister Rob Davies quoted on record declaring that five out of seven small businesses fail within the first year, statistics alone are enough to encourage you to give up before you even begin.
That’s why today, the financial experts over at Learn To Trade are showing you exactly what it takes to achieve entrepreneurial success through establishing a profitable business amidst a struggling South African economy.
Why are businesses failing?
So first things first, in order to establish a functioning and prosperous small business, you need to first understand why so many fail, learning from the mistakes of others in order to better your business practices. The most common reasons businesses fail to make it over the one year hurdle are:
- Bad money management – A comprehensive understanding of money management is vital to the sustainability and growth of any SME, especially in a weak economic climate. In the early days especially, consider reinvesting all profits into your business to build equity
- An insufficient business plan – Small businesses can enjoy a period of organic growth after emerging from a spontaneous gap in the market, however, without a thorough business plan and market strategy this growth becomes unsustainable in the long run
- Uncontrolled growth – Though an initial hyper-growth may seem like a small business owner’s dream, outgrowing your resources and skills is a very real problem that will hinder your sustainable growth. Once more, the need for a carefully crafted strategy is of significant importance here
How do you ensure your business doesn’t make the same mistake?
The primary goal for any SME is organic and sustainable year on year growth. Which effective business practices you choose to implement to ensure this growth will vary depending on your industry and business type, but some fundamental methods are proven successful across a multitude of sectors:
- Look for an investor – Backed by realistic business projections and well-balanced books, look to seek external financing from venture capitalists, banks or angel investors. Any investments you can secure will serve as financing options for business expansion
- Consider franchising – A viable option for businesses thoroughly systemised, franchising allows you to expand in a manner less capital-intensive . Ensure you have full confidence in the replicability of your business before taking this costly plunge
- Revisit your business plan – Revisiting your business plan and financial strategy after a period of sustained success is an effective way of achieving organic growth when changes are implemented correctly. Diversifying your product or service portfolio, negotiating a merger or acquisition with another small business or opening another branch of your business are all viable options depending on the context of both business and industry
Is there any support available?
The voyage into entrepreneurship can sometimes feel like a one man fight, so knowing where to turn for a helping hand is key.
No small business owner is bound to have all the answers, especially if it’s their first real exploration into the industry. As such, look to educate yourself thoroughly through attending industry seminars and seeking guidance from more experienced business mentors. Alternatively, organisations such as the Small Enterprise Development Industry (SEDA) and the Department of Trade and Industry (DTI) provide advice and guidance to enhance the skillsets of South African business owners, encouraging the sustainable success of small businesses in the process.
John James is a content writer for Learn To Trade, the foreign exchange education and learning specialists – offering a range of training courses to help people understand the currency trading market, as well as its opportunities and risks.