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How do I know if I have what it takes to be an entrepreneur?
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You do not need to be born an entrepreneur. You can learn the business skills, but it is important to be strong emotionally and psychologically. Enthusiasm, determination, a vision for the feature to be independent, to call the shots, so to speak, must be part of your make-up. It is also important to have a spouse, family, friends and other support groups who believe in your vision, and who you can depend on when times get tough.
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Where do I get information on business matters?
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The internet has a wealth of information, but it is sometimes difficult to ascertain whether the information is sound. Rather speak to other business owners who have been around the block, get reputable web sites from them. Join a local business network which meet on a regular basis to exchange war stories and subscribe to reputable magazines such has "Entrepreneur", "Your Business", "Business Brief" and "Succeed". There are also various niche magazines which are aimed at small to medium enterprises in a certain industry. Watch out for advertisements on business seminars in your area – many of them are free of charge.
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I have a business idea that seems viable. What is the next step?
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- Test your idea. Do a bit of informal market research among your intended customers. Is there a market for your intended products or service? What are people prepared to pay?
- Know if you have competition in your area, make sure you know what they do/sell and how they do/sell it.
- What can you do to give you the competitive edge e.g. Better pricing, convenience of access to the products/services.
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My business idea is a new product. How do I protect it?
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- You need to register the patent rights. You can do it with CIPC (Companies and Intellectual Property Commission), or
- Invest in a reputable Intellectual Property lawyer.
- It is also advisable to register the name of your product as a Trademark, so that no one else can use it.
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If I'm a sole proprietor, do I have to register my business?
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Although you do not have to register as a legal entity, you still have to register with SARS for income tax purposes and for PAYE if you have employees working for you. Also, if you do more than R 1m turn-over a year, you must register for VAT (value added tax).
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Where do I register my business?
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You can start by searching if someone else has not registered you r chosen business name already, on www cipc.co.za. There are a number of forms to be submitted via your accountant to finally incorporate your business.
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What is the best, a Pty (Ltd) or should I just be a sole trader?
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Sole proprietorship and partnership
Advantages
- There are no formalities required in setting up these types of entities. Generally a partnership will be governed by a written partnership agreement. An agreement in writing is not essential, but advisable.
- Conversion to a private company is a relatively straightforward process.
- Losses incurred in the business can be set off against other incomes of the partners.
- All profits or losses will vest with the owners in their personal capacity.
Disadvantages
- There is no limit to the liability of the sole traders or partners. In the case of a partnership, partners are jointly and severally liable for the debts of the partnership. This means that if the partnership fails to pay its debts, they become jointly responsible for the debt.
- The undertaking will be as creditworthy as the owners and will enjoy a commensurate ability to expand and raise finance.
- A partnership is restricted to a maximum of twenty people, except in the case of certain professions.
- There is less flexibility in transferring ownership.
- In the event of death, permanent disablement or retirement of the sole trader or a partner, there may be difficulties in maintaining the business structure.
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If I want to buy an existing business, how do I evaluate if it is a good proposition? Who can help me?
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Bob Power in his book: ”How to buy a small business” says;
"It must be noted that here are no standard methods for valuing a business. The valuation does not equal price...Valuation is sometimes defined as - any price is right as long as the business can pay for itself over a reasonable period of time: The buyer must aim to recoup his money within two years." In other words, if the profit is R200k per annum, the price should be around R400k.
Placing a value on a business depends to a great extent on the negotiating skills of the buyer. Each business is different, and the way it has been managed may have an impact on it value.
Approach a reputable business valuator, accountant or business consultant to help you.
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What sources are available where I can learn more about different business opportunities?
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- As a start you need to decide: do I start a business from scratch, do I buy an existing business, or do I buy a Franchise?
- For Franchising opportunities, contact FASA (Franchising Association of South Africa)
- Business opportunities are also widely advertised in the press and in industry magazines such as Your Business and Entrepreneur.
If you want to start out from scratch, it is important to observe, do research and talk to people. Get an idea of where the gap in the market is. E.g. if there are already 3 restaurants in the street where you want to operate, it is not a good idea to open a fourth one, unless the economic climate displays a trend that can accommodate another one!
Stick to what you know, and what you’re good at when starting a business, if you are not a people’s person, a business in the service industry will not work for you or your customers!
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Why do I need a business plan?
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If you want to attract investors, whether it is a bank, or a private individual, you need to have a business plan which will show them that you have a sound business strategy, and a vision for the future - at least for the first five years.
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Where do I find an example of a business plan?
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There are various web sites where you can get templates for business plans, and also sample plans to down-load. Try google as a search engine or go to www.sanlam.co.za/businessplanbook.
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Who can help me with my business plan and what does it cost?
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By all means get help. There are various consultants out there who will be willing to write a business plan according to “what the banks would like to hear”..
However - do not let the consultant write your entire business plan - you need to be involved to understand what it is about, and how you need to plan your goals for the next couple of years. It is almost impossible to follow someone else’s direction. Your intended investor will also very quickly pick up that you do not know what’s going on, and you will lose all credibility.
Before you start writing your business plan, there are quite a few preparatory steps to gather the relevant information. The Business Plan book will help you to structure your thoughts.
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I have some collateral or can get someone to sign surety for me, where do I go for financing?
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It is always good to start with your bank, with whom you already have a relationship.
There are also plenty of other institutions who would consider financing a start-up business, some of them might want to acquire a stake in your venture. Use credit guarantee schemes such as the one that Khula Enterprise Finance provides.
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My bank does not want to help me with a small business loan. Where else can I go?
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There are various other institutions that you can approach, for example Business Partners for loans in excess of R200k, the Department of Trade and Industry, the National Youth Development Agency (if you are between 18 and 35 years old), Zimele Investments or Khula Enterprise Finance.
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My partner and I need a third person to buy into the business - how do I put the word out there?
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Advertise it as a business opportunity in business/ industry magazines. Use your networks, such as the local Chamber of Commerce, and other Business to Business groups. Make sure that you do a thorough due diligence investigation of al interested parties.
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I've heard of "angel investors". What are they, and where do I find them?
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Angel investors are people who invest money in start-up companies. They are usually willing to take risks and demand little or no control in the piece of business they own. Angel investors can be people you know, or do not know. Those you know might form part of your business network e.g. suppliers/vendors, employees, customers. Those you don’t know can be made up of professionals, managers in the corporate world, bored with their jobs who want to invest, or other entrepreneurs. The latter group you will be able to find via advertising, networking or business brokers. Angel investors are normally interested in “blue sky” opportunities – i.e where there is realistic true potential.
The SA venture Capital and Private Equity Association publish a directory of members and their investment preferences.
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Will Sanlam help me with a small business loan?
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Sanlam unfortunately does not offer funding for start-up businesses. However we are able to facilitate funding for expansion and growth of established businesses. Click here for more information.
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What type of transactions can be financed?
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- Working Capital
- Black Economic Empowerment Transactions
- Equipment
- Commercial and Industrial Property Franchise
- Business Acquisition
- Contract Guarantee
Find out more at Business Partners.
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