These are undeniably tough times. In South Africa, the road to economic recovery in a post-pandemic world has been a bumpy one, given the turbulence of the geopolitical climate and the volatility of global financial markets. Thousands of small businesses across the country have felt the impact of these factors, perhaps more acutely than their larger counterparts.
Unfortunately, in an environment where only a small percentage of small- to medium-sized enterprises (SMEs) survive past their first year, many local entrepreneurs are faced with what may seem like insurmountable obstacles.
However, the first step in learning how to become a successful entrepreneur in South Africa is to find practical and proactive ways to take action. These are four of the greatest challenges facing small businesses and expert advice on how to overcome them.
Keep your cashflow in check
Cashflow is and will most likely always be, the most difficult challenge for small business owners. Getting a handle on your cashflow can be done in two key ways. Firstly, consider ways in which you can reduce the amount of cash flowing out of your business. You can reduce your expenses by automating manual processes, using free or affordable technology tools for tasks such as invoicing, basic accounting, monthly payroll, social media posting, appointment scheduling and even customer service.
The second way to improve your cashflow is by increasing your income. Ask yourself how you can set up multiple revenue streams by diversifying your product or service offering or look at other methods like upselling, creating product bundles and reaching out to new target audience groups.
Focus on setting up a stable supply of energy
The deteriorating energy crisis is undoubtedly at the crux of why many small businesses are struggling to stay afloat. The bad news is that as experts suggest, loadshedding will persist for many years to come. The good news, however, is that by investing in alternative sources of energy, you can tick two boxes. Firstly, you can ensure a consistent and predictable supply of power and secondly you can also make your small business more sustainable, by investing in renewable sources of energy like solar.
To help businesses access the funding they need to invest in alternative energy systems, Business Partners Limited has established an Energy Fund for SMEs. Taking out a loan may very well be the solution to long-term financial viability. Business owners are therefore advised to spend some time exploring and researching their options and making it their priority to ensure they have contingency plans in place to mitigate the impact of loadshedding.
Diversify your supply chain
The Ukraine-Russia conflict catalysed a ripple effect across multiple sectors on a global scale. The rising cost of fuel is one example of how this has translated into higher costs for consumers and businesses on the ground. To avoid unnecessary business interruption, SMEs need to have a backup plan that helps them keep their options open when it comes to sourcing raw materials from suppliers.
The best solution may be to open accounts with a few different suppliers for the same materials and maintain those relationships. In the long term, this will assist small businesses in negotiating prices and provide a plan B when plan A falls through.
Make human capital a number one priority
According to the most recent Business Partners Limited Q4 2022 SME Index, a quarterly survey, small businesses feel six percent less confident (64 percent) that they will find the right staff to facilitate the growth of their businesses, compared to the previous quarter (70 percent).
However, by focusing on developing a positive company culture, human resources is where SMEs can really shine. Now is the ideal time to look at how you can remind your team about the advantages of working for a small business. You could, for example, offer a large degree of flexibility around working hours, talk to your staff about the career progression opportunities that lie ahead as the business grows, be more attentive to their individual needs and provide a more relaxed working environment.