Few South Africans will claim to be unconcerned about the country’s current economic climate. This is especially true for job seekers battling to find work – the latest unemployment rate was recently announced at 27.7%. For some, the answer lies in creating their own small businesses. This entrepreneurial spirit will not only create employment for them, but a growing SME (Small and Medium Enterprises) can ultimately boost the economy and create future employment for other young South Africans. However, the process of starting your own business can seem daunting, as around 70% – 80% of businesses will fail within the first five years.
There are many reasons why SMEs fail. Lack of business skills, an inadequate market for your service, a poor business plan or poor money management can all contribute to the failure of your startup. Rather than leaving you to learn through experience, we’ve looked to the success of big businesses to guide new business owners through many of the pitfalls that catch them out in that first year. Here’s what we’ve learned:
Establish processes early on
The first few months, sometimes even years, of your new business will be chaotic as you work hard to perfect your product or service, find potential clients and make those sales. Often this will happen to the detriment of internal operations. Prioritising the setup of work-flow processes, division of responsibility and operational guidelines at the beginning will flag any potential issues and save you time and money in the long run.
Build a strong brand identity
A common mistake that small business owners make is trying to be everything to everyone, which is guaranteed to set you up for failure. Instead, focus on building a strong brand personality that potential clients and customers can identify with. That way, you’re building a following of people who only want what they know you’re good at providing.
Invest in technology
Even if you are on a tight budget when you first start building your business, it’s important to know when spending money is actually an investment. Certain technologies such as accounting software and project management tools seem like an unnecessary outlay, but will streamline work and simplify your operational processes. Plus, planning ahead means you won’t have to replace all your systems once the business expands.
Keep an eye on the competition
Unless you provide an entirely new or unique product or service, your business will exist within a larger industry, competing with others for a portion of the profits. Understanding your competitors can help you identify your own strengths and weaknesses, and tailor your strategy to fill the gap in the market. As well as keeping up-to-date with trade journals, press releases and annual reports, check in on their social media pages to gauge the satisfaction of their current clients. You may uncover a way to improve the overall customer experience for your customers.
Three big business mistakes to avoid:
Over promising and under delivering
You are more likely to retain business by exceeding expectations than selling a promise that you can’t fulfil. Client unhappiness almost always grows from expectations that aren’t met.
Undervaluing your staff
As a small business, especially when starting out, your employees will be your strongest asset or greatest weakness. If they feel undervalued they’ll be less likely to contribute the success of the company in any meaningful way.
Large corporations, even successful ones, struggle to adapt to change in the markets. Use your size to your advantage – be ready to adapt and innovate as your industry evolves to stay ahead of your competitors.
First time business owner? This handy cheat-sheet will ensure you cover all your bases when starting out:
Disclaimer: The advice contained on this blog is for general purposes only and does not take into account individual circumstances, objectives or financial needs. Accordingly, readers are advised to seek appropriate advice from licensed professionals prior to making any investment, or taking up a financial product or service.