Starting a business in South Africa is not an easy task. One of the reasons is that ZAR days are coming to an end soon at least according by research done by China. However there’s still a possibility to make it if you follow these business tips:
In this “5 Step By Step Guide : How to Start a Business in South Africa” we chat about documents needed to start a business in South Africa. All it takes is a single good idea to kickstart your journey entrepreneurship and set you down a new path. Starting your own business has many rewards, highlights and aspirations, but before you get ahead of yourself (and let your mind wonder to the moment you’re selling your business for millions), there is some real work to be done. And it starts with building the right foundation of which to starting your business, and in doing so, ensuring that you have a model for success.
When starting a business, it helps to follow a list of steps, to ensure that you are heading in the right direction and ticking all of the right boxes. One missed step could be detrimental to the success of your new venture and result in plenty of frustration and disappointment. We want you to avoid that at all costs!
Getting Started – Idea Generation and Validation
Step 1 will get you thinking – and is the foundation of your business. Many entrepreneurs in South Africa make the mistake of thinking that all they need is passion to get started but it is the planning and hard work thereafter that is the difference between success and failure. Successful entrepreneurs have many common characteristics and traits, but none more important than the ability to solve a problem. Solving a common problem is the foundation for a great business, and if common enough, it’s likely that people will be willing to pay for your solution.
Whilst some entrepreneurs stumble on their ideas by chance, others have to work long and hard for their breakthrough. There are many ways to come up with a great idea. 1) Ideas based on your personal knowledge and experience – what frustrates you or effects someone you know. 2) Generate an idea from existing models – what has worked in another country or a different context that could be applied to your market? 3) Combining multiple existing solutions in the marketplace. Idea generation is a tough exercise, but it’s very doable.
Once you’ve come up with a solid idea, you need to validate (or test its viability). This means you need to ask for honest feedback from as many people as you know and measure their responses. There are many ways to do this, like surveys, focus groups, interviews or online forums – but most importantly – this feedback has to be unbiased (so your mom, best friend or close business associate are not adequate). Try and get feedback from your future potential users. If they say the idea is a good one, and provide insight as to the likely use of your solution, then you’re on to something!
Set up a Business Strategy in South Africa
Step 2 is about putting your idea into action – it’s not about thinking anymore – it’s time for planning the way forward. Writing a business plan can be intimidating, time consuming and more complicated than it necessarily needs to be, when you don’t have the right information and resources.
A good business strategy in South Africa incorporates a list of features: such as your mission/vision, the amount of capital you will require, the skills you will need to tap into, the products or services you will be providing, understanding your competition, understanding your route to market, building a customer profile and importantly – identifying your USP (what makes your business unique?). As you set up your plan, make sure that you have fully researched your market as well as your industry, and as such, you know who you are targeting. Your business plan will be somewhat pointless if you don’t do this research as you will end up focusing on the wrong customers!
Step 3 is all about pricing your ideas. A big hurdle for many new large and small businesses in South Africa is figuring out how to set the price for products and/or services. Factoring in things like time, effort, the raw materials – makes pricing a science. And with cashflow being one of the primary killers of SMMEs in South Africa, a mistake with your pricing could end up cutting your profit by more than you can handle. Understand your Cost of Sales (a term describing what it costs your company to deliver a product/service) and what margin to apply to your products. Then, understand your value, competitive positioning, and sales forecasts. At times, you may even need to charge less (or more) to position your brand positively in the mind of your customers.
Budgeting/forecasting and funding capital
No business person can predict the future, but everyone can plan for it by using the data they have available to them.
From determining your capital input to figuring out your day-to-day expenditure and possible income, step 4 is all about the importance of budgeting and forecasting and how to master these processes.
When starting out, we recommend creating a spreadsheet of your start-up costs: estimates of running expenses, marketing costs, staff, and anything that you can put a number to. Don’t exaggerate your numbers – but don’t undervalue them either. Most businesses need to apply for business finance in South Africa, and so the accuracy of their budgets is very important.
When you have the total start-up costs, you can start looking for business finance in South Africa (e.g SMME Funding). This funding can come from banking institutions, partners, loans or private capital straight out of your savings account.
Articulate your mission
Start with a powerful mission statement that is short, easy to remember, conveys the reason you are in business, is exciting and evokes emotion. It should encapsulate who you serve, what you do, and the outcome you are looking for. Your mission statement is focused on what you are doing today and on your purpose and reason for existing.
Mission statements typically answer the questions:
- What do we do?
- Whom do we serve?
- How do we serve them?
Examples of powerful mission statements include:
- TED: “Spread ideas.”
- Tesla: “To accelerate the world’s transition to sustainable energy.”
- LinkedIn: “Connect the world’s professionals to make them more productive and successful.”
- Nike: “To bring inspiration and innovation to every athlete in the world.”
A personal mission statement might look something like this: “My mission is to use my talent of writing/teaching/singing to uplift and inspire others.”
Develop your vision
While a mission is an aspirational guide and sets a direction, a vision statement inspires you to set specific goals and accomplish certain things for tomorrow; your vision is about what you would like to achieve in the long term.
To demonstrate the difference, compare Google’s mission statement (“to organize the world’s information and make it universally accessible and useful”) with its vision statement (“to provide access to the world’s information in one click”).
Define your values
Reflect on your brand values and what you stand for as a business. They should define how you conduct your business, especially in difficult times. If, for example, one of your values is “integrity”, and you act with dishonesty, your brand value will be badly eroded.
Typically, a values statement will contain three or four values sets, such as “integrity, reliability and transparency”, “our people are our greatest asset” and “leadership and innovation” (these are the values of Flow Communications, where I work).
You can then break those down further to inform how you will implement them, by stating, for example, under the first value set of “integrity, reliability and transparency”:
- “We pride ourselves on the quality of our work
- We deal with our clients, our stakeholders and our people with the utmost transparency
- We acknowledge mistakes honestly and without defensiveness, and rectify them promptly”
Map out your business strategy
Ideally, map out your business strategy on a single page. This is sometimes called a “business model canvas (BMC)”, and there are several free templates available on the internet.
Your strategy should encompass all aspects of your business, including your mission, competitive landscape, key partners (e.g. suppliers), key activities, value proposition, important resources, customer segments, channels to market, cost structure, revenue streams and impact.
Think short, medium and long term
It’s a good idea to develop separate one-year, three-year and five-year strategies. The one-year strategy should be the most fleshed out, with specific goals – for example, increases in revenue or profitability, development of people and culture, the introduction of new products and services, and so on.
Your strategy should define your business goals clearly, according to SMART (specific, measurable, achievable, realistic and time-bound) objectives.
Good strategy is informed by research. What are your competitors doing better than you? What areas of your business should you hone, change or grow? Are there ideas for new products and services you could easily develop?
Are some of your services and products ageing and losing their relevance, which might give you insight into how to allocate resources in the future? What are clients asking for that you aren’t giving them?