Turning a small business into a success

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You may have a great business idea, but is it making you money? Personal finance expert Maya Fisher-French shares the journey of one of the Absa/City Press Money Makeover Challenge contestants as a businesswoman.

Bellah is a single mom of three and runs her own construction company. She’s always had an entrepreneurial spirit and during lockdown has found innovative ways to keep the money flowing by making biltong. She’s also been buying garden equipment to expand her maintenance offering.

While Bellah is never short of new ideas, she’s struggled with financial management and cash flow. Last year her construction business had a turnover of R1,3 million, but she had no idea whether she was making a profit. When she joined the Money Makeover Challenge, her business had a significant overdraft and her personal finances were heavily reliant on credit.

Bellah has been working with Absa financial adviser Stacey Coulson and senior enterprise development specialist at Absa Elton Govender.

Despite the Covid-19 lockdown, Bellah has been able to implement many of their recommendations, placing her in a stronger position now that she can return to her business full time.

Understand your business financials

With any business it’s important to treat yourself as an employee and pay yourself a monthly salary. Your salary is what you use to meet your personal expenses. Focus on living on this salary and not drawing cash from the business to meet your personal needs.

If you treat yourself as an expense in the business, you have a better idea of whether the business is profitable. You need to keep a proper set of accounts for the business.

“Bellah has started an income statement on each project to ensure she can calculate her expenses and profits per deal,” says Govender.

Other expenses in running the business such as the finance on her bakkie, petrol, maintenance and insurance costs should all be included as business expenses and allocated on a pro rata basis to each project.

Having a clear cost of each project will enable her to provide better customer quotes in future. One of the major problem areas in construction is underquoting when you don’t have a handle on your true costs.

Find efficiencies

You need to outsource certain roles, especially if they’re not your strong point. Hiring an accountant, for example, is important especially if you’re not a numbers person or are too busy finding new business. A good accountant ensures you’re managing your cash flow and tax – the benefits of one will outweigh their costs.

However, there are times when bringing jobs inhouse can create significant efficiencies.

Bellah had outsourced all her jobs to subcontractors and Govender identified that by employing her own team she improved her margins. The team needed to be signed up with the department of labour, South African Revenue Services and with UIF, however, not having to split her profits with subcontractors will soon generate better profits.

Find new markets through social media

Bellah was primarily focused on word of mouth. She needed to reach a wider market and started a Facebook page for her business, including references. She’s linking to other Facebook business pages and has started to receive enquiries from Facebook.

Having a website is also a good idea, but don’t get fooled into paying a fortune for one to be developed. There are many low-cost or free web-design platforms such as WordPress that allow you to build a website. There are also many online tutorials to help you navigate the process.

Insurance is non-negotiable

When facing financial difficulty there’s always the temptation to cut down on insurance cover, Coulson says, yet this increases the risk to the business. Bellah’s bakkie is needed for business and if it were to be in an accident or stolen, she wouldn’t be able to operate and would owe money on a vehicle she no longer has.

Shop around for better premiums or increase the excess to reduce the premium, but not having cover shouldn’t be an option.

Tips for moving your business forward

  • Separate business and personal expenses.
  • Account for all your income and expenses down to the last cent.
  • Look for savings in your expenses, every bit counts.
  • Set long-term goals for your business and then break them down into smaller goals with timelines on when to achieve them.
  • When things go wrong, which will happen, have an impartial support base off which to bounce ideas on how to overcome setbacks.
  • Spend time thinking about the future and new product lines for the business so the business grows.
  • Don’t fear starting other businesses based on needs identified. This will diversify your income streams.
  • Use social media to advertise your business and remember that clients will also use the platform to reflect poor products or service from your business.

For more insights, follow #CPMoneyMakeover on social media.

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