By Daniel Moritz
Entrepreneurship is not for the faint-hearted – those who succeed need a great deal of grit, resilience, and foresight, especially given the volatile environment the world finds itself in. Here in South Africa, the energy crisis and the flagging economy throw up additional challenges, and as the year rolls to a close, many are understandably feeling tired and frazzled.
But small businesses are pivotal to South Africa’s economic growth, to job creation, and to servicing the country’s consumers. And they are an important part of our social fabric – think of the local restaurant or coffee shop where you bump into friends from time to time.
Still, it’s stressful. Restaurant owners, for example, have faced multiple challenges – from staffing and cash flow issues to demanding customers. Those in the retail space have the upcoming festive season to contend with – balancing supply and demand, stock levels and cash flow. It requires a particular kind of mental strength to face these challenges on a daily basis.
So what’s the solution? In our experience, it’s partly taking care of one’s mental health, but a huge part of easing anxiety and stress means putting solid business practices into place. In short, it’s about planning.
First, ensure you have the right partners – these can be a great support when you need more than passion to succeed. Partnering with the right people can help entrepreneurs to help them make the right business decisions and complement their skill set.
Second, appropriate funding can help to mitigate volatility and uncertainty. Planning for future needs will enable the business to withstand unforeseen shocks and also take advantage of once-off opportunities to grow.
Cash flow is one of the biggest issues small business owners grapple with and can cause significant anxiety. Understanding the root cause can go a long way towards alleviating future pressures.
Taking finance to bridge a cashflow problem, for instance, is not advisable – rather focus on being proactive instead of reactive when it comes to funding. And don’t forget to look beyond the traditional banking system: most entrepreneurs need finance that is simple and agile. This is where alternative lenders and pre-approved facilities can be a game-changer.
Third, get comfortable with your financial metrics. It’s perfectly understandable that you outsource your finance and accounting, but you still need to know what’s going on. Meet regularly with your accountant and ensure you understand what the financials are telling you about your revenue, operating costs, stock, and margin trends. This will allow you to take the necessary steps before you’re in a desperate situation – and ensure both you and your staff can take home a salary each month.
Finally, ensure you are up to date with trends and consumer demand. Invest in innovation and in growing your business so that you can future-proof it and stay ahead – or at least abreast – of the competition. In a very changeable world, stagnating is not an option. By all means take very good care of today’s business, but always have an eye on planning for your business in the short, medium and long term.
One way to do this is to set aside a portion of your profits and ring-fence these towards expansion or innovation. Alternatively, consider a funding solution to invest in improvements – just ensure that the resulting increase in revenue and profits resulting from these improvements exceeds the cost of funding.
Being an SME owner in South Africa is not easy, but with the right support – and the right mindset and planning – entrepreneurs can tackle 2024 head-on and not only survive, but thrive.
Daniel Moritz is the chief financial officer of Merchant Capital.