Being your own boss, an entrepreneur or put it simply operating a small business or starting a new one from scratch is not for the faint-hearted, and therefore requires tons of nerves of steel.
Small Capital, the Practical Guide for Small and Medium Business Owners in South Africa, published by Standard Bank, says: “Starting an entire new business is uncharted territory for most people. It offers great rewards, but equally high risks.”
Wanting to be your own boss is not enough to make you successful and, before you set up shop, you need to think hard about whether you have the right temperament, leadership skills, support system and dedication to be an entrepreneur.”
Johannesburg-based Standard Bank is Africa’s largest commercial bank, with representations in close to 20 African countries, China, UK and Latin America.
Official statistics estimate that more than 1.5 million self-employed people constitute the Small Medium Enterprise (SME) sector in South Africa, contributing to about 40% of the country’s total remuneration.
There are over 1.3 million registered close corporations and close to 500 000 registered companies in South Africa (February 2011 figures), according to the government-controlled company registration agency CIPC, formerly known as CIPRO.
However, all that glitters is not always gold. When statistics reveal that around 80% of all new small businesses fail within the first five years, it shows that there is more than meet the eye behind the litany of these failures.
That is why potential entrepreneurs need to take time to evaluate their strengths and weaknesses by honestly answering the following eight questions, as set out in the Standard Bank business guide:
- Are you a self-starter?
You need to be able to develop and drive projects, manage your time and follow through on details.
- Are you willing to work long hours?
When you own a business you have committed to it 24 hours a day, seven days a week – particularly during the first few years.
- Are you good at making decisions?
As a sole owner you will have to make decisions quickly, under pressure and on your own.
- Do you plan well?
Research indicates that many businesses failures could have been avoided through better planning. Good organisation of financials, inventory, schedules and production is the oil that keeps any business engine running smoothly.
- Do you have the strength to stay motivated?
Running a business can wear you down, especially when all the responsibility is on your shoulders. It takes strong motivation and passion to survive a slump in business, or periods of burnout.
- Are you willing to invest?
True entrepreneurs put their money where their mouths are, and this might mean using personal savings or property.
- Have you considered the possible impact on your family?
Starting a business can be hard on family life. The strain of a spouse who is not behind you 100% may be hard to balance against your new business demands. There also may be financial difficulties until the business becomes profitable, which could necessitate lowering your standard of living.
- Do you have a network of friends or associates who could provide outside financing?
Insufficient capital is the key cause of small business failure.
Amrei Botha, head of SME Banking Africa at Standard Bank, acknowledges that providing access to finance to SMEs has traditionally been challenging in African markets due to lack of financial statements, credit history, credit bureau data and collateral among SMEs.
So, if one is not able to obtain enough funds from a bank, he or she may need to rely on funds from friends and family. Most start-up businesses are funded this way.
Standard Bank, which launched its SME Quick Loan psychometric projects in November 2011, provides financial services to more than 140 000 SMEs across 13 countries in Africa.
*PIC BY BOYTOWN