Tips for SME start-ups

Cape Town - Establishing a small business is the most rewarding – and challenging – career move you could make, according to Viresh Harduth, vice president: new customer acquisition (start up and small business) at Sage Africa and the Middle East.  

The freedom of being your own boss comes with a number of trade-offs, including mountains of admin, more responsibility, and a lot more to lose – especially in the early years, he cautions.

"Small and medium businesses (SMEs) represent 40% of all South African businesses and will account for 90% of all new jobs by 2030. Clearly, small businesses have a crucial role to play in economic development and job creation," says Harduth.

"Yet 70% to 80% of small businesses in South Africa fail within the first five years, for reasons including funding constraints, not having a clear business plan, and poor inventory and cash flow management."

In his view, many entrepreneurs are caught off guard by the demands of running a business. Often, they don’t realise that they need to be a "jack of all trades" – at least in the beginning – until they can scale to a point where they can hire more people or outsource certain business functions.

Initially, entrepreneurship is demanding of your time and relentless on your skills and resources.

Harduth offers a few survival tips:

Build a safety net

Before you start your new business venture, build up your savings to carry you through the first tough months and to cover any unexpected expenses.

The last thing you want is to be racking up bank debt in the first few months of operation.

Be frugal

Work from home or from shared office spaces to save on rent and other operating costs. Benefits of shared working spaces include fast connectivity, opportunities to bounce ideas off of other entrepreneurs, professional looking meeting rooms, and coffee on tap – you’ll need all the caffeine you can get in those early months.

Keep a tight hold on the purse strings and only spend money on equipment, team members, and supplies if absolutely necessary.

Keep an eye on your numbers

Cash flow management is arguably the most important consideration for any new business owner. Having sight of exactly what is coming into and what is leaving your business account will help to identify where you can streamline operations and save money.

Conduct a break-even analysis – a calculation of the sales targets you would need to meet to cover fixed and variable costs – and identify areas where you can cut costs.

Automate as much as possible

You’re not only a new business owner. You’re an accountant, a marketer, a strategist, HR manager and an administrator. That’s a lot to have on one plate.

"It’s hard work building an empire. But if you gear all these administrative and financial tasks towards delivering the best product or service you can, and matching that with excellent customer service, then you already have a firm foundation," he concludes.

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