5 things to consider when starting a business in these challenging times

It takes courage to venture into entrepreneurship. You need to be resilient and have the capacity to keep going as long as it takes for the business to get off the ground and become financially feasible.

According to UWC, South Africa has a greater start-up failure rate than the rest of the globe, with 70% to 80% of small enterprises failing within the first five years.

‘’Such a statistic can make the very idea of trying to start a business in South Africa seem like an impossibility, because the challenges go beyond navigating the legal and regulatory landscape.

‘’It includes securing funding, building a customer base in a competitive market and ensuring ongoing operations and productivity in the face of persistent load shedding,’’ says Sandra Beswick, the senior business rescue practitioner and director of Fluence Capital.

Beswick adds that, overall, 2022 may be described as a year of recovery, with more than 60% of South African enterprises reporting growth despite the obstacles that emerged.

‘’When it comes to looking ahead for aspiring entrepreneurs, it’s wise to do so with an awareness of requirements and trends, challenges and opportunities, if a new company is ever to succeed.”

Here are Beswick’s five key considerations for starting a business during difficult times:

1. Have a business plan and review it regularly

A complete business plan is essential for any organisation and the ideal starting point since it needs research into your target market, potential rivals, financial predictions, operational specifics, and marketing tactics.

With the numerous problems that South African businesses encounter, it is critical that your business plan be evaluated on a regular basis to guarantee that you and your company stay adaptive in an ever-changing – and increasingly challenging – climate.

2. Tick the legal boxes

Dreams and goals aside, there is a fair amount of red tape involved in starting a business in South Africa.

While legal requirements differ depending on the size and structure of the business, and the industry it’s in, there are a few key requirements. These include establishing what business structure you will use, setting up your tax reference number and registering for the appropriate taxes; getting the right licences and permits to operate; complying with labour laws and taking note of environmental regulations; and maintaining clear financial records from day one.

If you are not certain how to go about fulfilling these requirements, it’s best to consult a professional.

3. Managing your cash flow is as important as finding funding

The number one reason most start-ups in South Africa fail is that they run out of cash, which means managing your cash flow correctly is one of the most important things you can do.

While there are a variety of funding options for South African entrepreneurs to explore, such as government grants, loans, and equity financing, it’s important to understand what you are getting into before signing any documents.

You need to ensure you properly understand the costs involved, the payment terms, if there are any, and how best to manage your cash flow on an ongoing basis.

4. Know your market

South Africa is a highly competitive economy, which means it’s important for prospective business owners to conduct thorough research to identify the target market and understand their needs.

Not only will this enable you, as the business owner, to tailor your products and services to meet these needs, but it can also give you a competitive advantage if you can identify an area of service that’s currently not being met, or not met efficiently, by your competitors.

5. Know when you need help

Starting and growing a successful business in South Africa won’t take a day or two – it may not even take a year or two. Realistically, it will involve a lot of time and a lot of hard work.

Often, throughout this process, you may require the assistance and guidance of experts, such as legal advisers, funding experts, and business turnaround practitioners.

The key to ensuring you get the help you need in the hour you need it is to stay informed about where your business is at. By keeping your finger on the pulse, and continually analysing your progress, you will be able to reach out for assistance timeously to ensure any intervention that is required is more likely to be a success.