Small business owners will tell you it is not easy to make it through the first few years. However, with entrepreneurship critical to the country’s economic recovery, we need people who will take the risk and start their own small businesses.
“Entrepreneurship is hailed as the key to South Africa’s economic recovery,” says Claire Klassen, consumer financial education specialist at Momentum Metropolitan.
According to the Global Entrepreneurship Monitor (GEM) report 2021/2022 released by the Stellenbosch Business School, there has been a dramatic rise in early-stage entrepreneurial activity among South Africans between the ages of 18 and 64.
Early-stage is defined as ‘setting up a business’ or ‘operating a business for less than three years’. Klassen says that the emergence of this new wave of entrepreneurial, micro-entrepreneurial and side-gigging activity is borne from necessity.
“In the wake of Covid-19, South Africa’s unemployment rate increased significantly, as many businesses were forced to close or retrench staff. The youth were hardest hit, as they tended to be overrepresented in sectors ravaged by the pandemic, such as the service, hospitality and retail industries. With less work experience under their belts, they were often the first out the door when companies made job cuts.”
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Small businesses to earn income after Covid
However, South Africans are inherently resourceful and with earning an income critical to survival, many started to look at new avenues to make ends meet. Interestingly, she says, the GEM report also assessed social attitudes towards entrepreneurship, finding that 81,8% of respondents felt that entrepreneurship was a good career choice, while 20% of those who were not in business had entrepreneurial intentions.
“While this is encouraging, five out of seven small, medium and micro enterprises (SMMEs) in South Africa fail within the first year. We need sufficient runway to see this current rise in early-stage entrepreneurial activity result in tangible economic benefit. We are in a window period of opportunity and it is make or break time.”
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It is important to have good financial knowledge and an understanding of what is involved in running a business, she says.
“A pot of savings is critical to cover essential business start-up costs, as in an emergency or ‘buffer’ fund that will help ensure the lights stay on when your business goes through a slump.”
You can use free online tools that will help boost your financial knowledge, such as Making it with the Majolas, a free, zero-data online financial literacy course, with its latest edition focused on entrepreneurship.
“It teaches key financial concepts that are essential for entrepreneurs to understand, such as how to draw up a business budget, tips for negotiating with suppliers and the importance of compiling a solid business plan, all packaged in an engaging, easy-to-follow storytelling format.”
Metropolitan also hosts a Facebook group, Metro KickStarz, dedicated to helping young, budding entrepreneurs through its financial education programme. Aspiring entrepreneurs can join this community, which provides them with the space to interact, share ideas and access valuable knowledge and other resources for free.
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Learn from those who made it
Klassen suggests that you research similar companies or ventures that were successful, as it is important to understand why they work, what sets them apart from their competitors and what they do well, or not so well.
“Find out more about the founder and study their habits. Do they believe in continuous learning? Perhaps there are certain principles or a philosophy they live by, which guides them.
“Understanding what is involved in successfully starting and running a company and the small daily habits that set you up for success, will make a significant difference in the trajectory of your own business,” she says.
Video: Thahasello Mphatsoe