Making a small business, or any business, work is no mean feat.
This became evident again when Edward Kieswetter, the commissioner of the SA Revenue Service, recently commented to media on the state of the economy. He said that small businesses will take a severe knock due to the effects of lockdown and this will impact the economy significantly.
He commented: “It takes 100 businesses … to create one successful business. So, for every one we lose, we will have to have a hundred if not more entrepreneurs taking the risk.”
Our accounting and business support division at Ascor Independent Wealth Managers can definitely endorse this view. Entrepreneurs are required to build a business in a lacklustre economy that will now perform even worse and of the many that start, only a few will last past five years.
Add to the normal challenges of starting your own business the abnormally high burden of compliance (red tape) placed on entrepreneurs by government, Sars and many of its clients, and you have a job cut out for only the bravest among us.
As the economy slowly reopens, the small businesses that survived the past couple of months without an income or with a reduced income will find it tough out there. Yet there are many that have not only survived up to now, but are even flourishing.
What we have found to be present in all these flourishing businesses are:
Cash is king
As an entrepreneur, you often want to look at the turnover figure or some other metric that indicates growth. After all, we all want to see something that shows forward momentum as a reward for all our efforts and hard work.
But the truly successful entrepreneurs focus on their cash flow. This is not only a sign of health, but it becomes a barometer of your ability to invoice and collect on your work. As Richard Branson says: “Never take your eyes off the cash flow because it is the lifeblood of your business.”
Negotiate like your life depends on it
As a young entrepreneur, you are still motivated by the thrill of the chase. You negotiate on price, service and anything else and you try to squeeze the last bit of value out of clients and suppliers alike.
After a while, your edges become dull, either through all the effort or because your bank balance has grown and you do not feel the need to work that hard anymore.
The businesses that are emerging from hard lockdown on the front foot are the ones that can rekindle that drive to negotiate. Your margins will be squeezed, so try and claw back some of that by negotiating whenever possible.
Adapt and thrive
You have started your business because you saw a gap in the market, bought a franchise that you felt comfortable with or decided to apply your skills to make more money for yourself.
But the world is now a strange place and this lockdown has created new rules that no one could have anticipated. With this in mind, you should not be shy or ashamed to adapt and change or add to your product line-up or value offering.
For instance, the jewellery store close to our offices has started selling disinfectant, which it markets as being safe for jewellery. While it will not replace the income derived from its traditional business, it becomes both a valuable additional income (which pays for the security guard, says the proprietor) and a possible marketing avenue.
Diversify – in the same or another industry
This sounds similar to the above point and in many ways it is. Businesses that have been able to survive previous downturns have diversified into adjacent or event completely different industries.
Do you have machinery that could be used in the off hours to service a different industry? Do you have furloughed staff that can offer their skills, or even just a pair of hands, in another income-generating industry? Or can you even create your own competition to cast the net for future business a bit wider?
Never give up your agency
One should never diminish the challenges faced by small businesses during the hard lockdown. Some have seen their only client close down and others have simply been unable to work at all owing to the lockdown rules.
But flourishing entrepreneurs will always ask what they can do, or do differently, to change their circumstances. Be careful of externalising all the responsibility, as it takes away your options and your energy. Always ask what you can do to rectify or change your circumstances.
Ultimately, the entrepreneurs and businesses that survive apply extra effort to know what is going on in their own businesses and cash flow and those that become creative about the way in which they make their money.
At Ascor, our team of accountants, auditors and advisors have built up a particular skill in serving entrepreneurs. Let us assist you in surviving and thriving in this difficult time.