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Business Plan Writing in South Africa during 2017 and beyond
Small SA Businesses Surviving 2017 and beyond
2017 is the year South Africa was downgraded to junk status. Last week saw Eskom being reported to have paid out bonuses in excess of 4,2 billion rand and that the average salary of an Eskom Employee was more than R355,000. That is 47,000 people working for Eskom, not being worried about small businesses surviving next week, 2017 or beyond. All small businesses are affected directly and indirectly by the cost of electricity. Firstly directly because it being an input cost and secondly because the cost wears down South African consumer. This was just after the news of the SAA receiving yet another bailout.
South Africa is rich in talent and in educated professionals . Unfortunately most of these people have left Governments employment for various reasons, either willingly or forced. In the past it was often a simple matter of finding better remuneration in the private sector but today it is sadly often for far more sinister reasons like being fired for being honest or standing up for what is right. Some of the government jobs these days pay far more than the private sector. It seems no one paid attention to what happened , and is happening in Greece. South Africa cannot afford this mess and this road it's leaders and their captors have taken them on.
South Africa’s SOE have been captured by a foreign family. As the 2017 ANC leadership conference draws near expected political instability does not bode well for turning the sick Macro Socia Economic Environment of South Africa around.
This week it was announced that the Bokoni Platinum mine in Rustenburg is closing down and that thousands of permanent and contract employees will soon be without work. Besides not having spending money to spend at small businesses there will be very dangerous and hungry poor people in the north getting the message that in Nkandla men from India and KZN are responsible for their misery.
This is the environment in which small South African businesses have to survive 2017 and beyond.
Unless you are not politically connected or already accredited chances of getting a new government tender is slim. Unless you are willing to forego your conscious and join the pigs at the trough by being a tenderpreneur you will have to work smarter and harder to survive 2017 as a small business in South Africa.(You being yourself and your employees.)
The good news is that if you do survive and some of your competitors don’t there will be a bigger piece of the cake to share once the economy turns for the better. Hopefully South Africa will vote for change during the next upcoming political elections. Watch the DA steal my slogan “Vote for change !” While small businesses are waiting for the Macro Economic environment to improve small business owners will in many instances have to take drastic steps at home to survive 2017 and beyond.
Drawing up a list of things one can do will result in an endless list being drawn up but lists are not the answer for small business owners. Reading text books is not what makes a successful entrepreneur. It all starts with an attitude and a vision. But here is a list of some of the important points to consider to survive and steer your business into 2017 and beyond, past the Icebergs of disasters that logic tells us awaits.
The Business Owner (You) : The preparation and change will have to come from you, the captain of the ship…it all starts from within with YOU, the small business owner!
Your attitude and vision need to be both fresh and realistic. You need to remember the reason you started your own small business and what is it that made you passionate about your small business which sustained it to grow into the business it is today. Money hardly ever creates a lasting legacy but passion does. For new entrepreneurs a lesson and for those who made it perhaps a gentle reminder to the real key to business success : PASSION!
If you are starting a new business hopefully you are passionate about your product or service. This passion needs to be complemented with a realistic outlook on the future. If you have been working tirelessly for long hours while your employers have been slacking maybe it’s time for a short break for yourself to regain some energy and perspective. Maybe you have been working too hard inside your business that you have lost your vision for the business by spending some time on top of your business determining your vision and overall strategy. The captain of a ship stands on the deck from where the horizon is visible at the wheel and steers the ship.
You need to make some tough decisions and implement unpopular changes when being a business owner and for that have a clear vision of what lies on the horizon and closer.
So perhaps do reward yourself with that small holiday break and come back refreshed.
Once back at the job, before diving inside your business perhaps get on top of your business and reconsider the value proposition of your business.
What value are you offering your clients beyond that which your competitors are offering? Are you adapting to technological advancements like your competitors?
Are you looking at new opportunities, new trends in the market? Get out of the office and visit some friends and colleagues in the industry. Enjoy the visit and talking about the good old times. You are almost guaranteed to come back with new ideas and opportunities. Others might be closing down having machinery that can be snatched up at bargain prices expanding your own production capacity.
Well someone has to produce or service the markets that can no longer be serviced by businesses closing down!
In the small business environment as your business is growing people are appointed and often a kind of familiarity between owners and employers develop. When the going is good people are given increases but also as time passes just as a business owner might lose his initial passion for the business employees soon forget how thankful they were when they were first appointed. The reality is that you should consider who is working for you at what cost and what you get in return for the wages that you pay weekly or monthly. To survive many small businesses might have to consider retrenchment just like the large Bokani mine announced this week. (And guess who wants to step up and now resolve the mess? The very same Government responsible for the mess!) . They are going to solve nothing, not being able to see its them causing the problem in the first place.
Retrenchment is not the first choice and alternatives should be considered like shorter working hours, motivating employees to be more productive and explaining to them the seriousness of the current economic conditions. All actions should be taken , taking current labour laws into consideration.
Remember you cannot legally retrench one person and appoint another person at a lower wage. Discussing retrenchments are how serious the current and future economic conditions for small businesses in South Africa are. (Not that it has been ever been easy to successfully run a business.) If you are a new small business you should take utmost care when employing people in strategic positions or in any position in your small business for that matter. As you take consideration for the macro- and micro economic environment your business operates in you should also consider the economic realities your employees are faced with. Arriving at work with the new motor vehicle while pleading poverty does not pass the eyes and mind of even the lowest paid worker. Workers who perform should be rewarded. Even small businesses should consider incentive schemes to motivate employees. Without incentives one cannot realistically expect to attract, motivate and retain the best people.
Unfortunately unless you have planned well and have made provision for retirement by investing in annuities or having some of your assets vested unencumbered in a trust your very retirement will often be in danger when your small business is threatened. When starting out a business one should ideally separate your retirement planning, your home finances from your business finances. Unfortunately many business owners do not make provision for retirement outside their small business. Business is unpredictable and one does not want to work until your death. With today’s advances in available medical treatments life expectancy for some have increased to the extent that age 55 or 65 is no longer considered a realistic retirement age unless you are willing to accept a serious decrease in your lifestyle.
If your personal finances and your business finances are closely interlinked like is the case for most small business then you should seriously consider your personal finances and debt and what potential impact it can have on your small business during difficult economic times. Very often small businesses close down or are sold at far below market value in forced situations not because the small business itself is unprofitable but because the lifestyle of the owners are too expensive. This can be the worst situation to find yourself in because after losing your business your private finances could quickly follow suit.
Tough economic conditions like South Africa 2017 and beyond will see some of your competitors closing down. Who is going to be servicing the clients of those businesses which has closed down.? Yes even in bad economic situations new opportunities will always present themselves. How can you get hold of that client list?
Then there is always the more traditional ways of marketing like revisiting your website and developing some fresh content. Hopefully you do have an ongoing website development plan in place like adding new client testimonials, examples of recently completed projects.
Perhaps now more than ever it is time to consider advertising with Google Adwords. Have you calculated the cost of acquisition of a new client via the different possible channels. Perhaps you and your agents or employees target the same shrinking pool of clients. The difference is that you have to pay the ongoing cost of marketing via third party channels while doing direct market yourself and gaining your own clients only involves a once of cost of either time or money which essentially the same thing. People easily speak of Return on investment (ROI) but seldom speak of a Return on time (ROT). That’s not the case of rich successful people who have made enough money. They measure ROT, the return they get on the time the invest into different projects.
When last did you get into your car or picked up the phone to speak to your important clients. If you own a service delivery business like web design why not visit a client and give away some free time. You might get a referral by just pitching up and helping with your time. Are you asking your happy clients for referrals for new business or have you forgotten the basic principles of sales and marketing while you were enjoying good fat years? Well hit the road and you might even loose some body fat!
You should have a serious marketing strategy for your business and budget for marketing. But no will need to be clever and compare the cost of employing an agent or sales person and weigh it up against a well organised Google Adwords campaign. Which expense will last? That is what is menat by understanding the cost of acquisition of new clients.
Do the list thing : Manage those expenses
When last did you have a critical look at your expenses on your income statement or your expenses at home? At home we might have to reconsider adding to that expensive wine collection your friends drink for cold drink when they are over for a braai. Be brave and discuss the planned expensive holidays for next year with your wife/husband who truly might be living on a different plant than you. (The / husband was added for political correctness.)
Maybe you have a long time supplier you have a good relationship with but maybe it has been a one side relationship over the years and are you able to get the same products or services cheaper.
A lot of businesses still have not optimised their communication expenditure by taking out the correct plan or structure for data and voice needs. Try get hold of an expert who will not confuse you but save you on your phone bill. People actually make cheap phone calls over data / the internet these days. Your branches should be synced with the same network to reduce costs.
While managing expenses down one has to plan and budget for maintenance, capital replacements and expansions or you might find yourself with no production capacity in the future. For a very small business owner this can simply mean to budget for your vehicles regular service.
The principles outlined in this article equally applies to the guys in big business. While small business owners might not have the capital like big business at least they do not have the red tape involved with decision making. It’s much easier to take decisions in a small business and this also applies to managing your expenses.
Taxes : Manage the tax man
Any article on small businesses in 2017 in South Africa without mentioning taxes would be incomplete.
One the negative side if your business is not tax compliant a surprise audit by SARS could see your business close down and you facing criminal charges.
On the positive side many small businesses can benefit from being taxed as a small business corporation where one is taxed at a lower rate than the normal company tax rate. If not educated about South Africa’s tax system for small businesses then at least familiarize yourself with Small Business Corporation Tax.
One should perhaps consider getting a second opinion from another accountant or auditor for tax advice. It can be that your auditor is so spooked to comply with the legal requirements of an audit and drafting financials that they fail to consider advising their clients of legal opportunities to pay less tax.
Perhaps you are simply paying too much tax?
Current income tax regulations requires that provisional tax be paid based on actual calculations. This does not need to be a nightmare and should be relatively easy provided your books are kept up to date and include a budgeted cash flow and income statement. All small business owners should learn how to budget and how to draw up a monthly cash flow. While it is ok to get help from an accountant you should own that budget. This cash flow planning together with other financial0 marketing planning and personnel planning, value added proposition considerationsmake up what is called your business plan.
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