The struggle is real: Only 10% of SMEs are making it in these tough times
CAPE TOWN – By 2030, the government wants 90% of all formal jobs to be created by SMEs. Yet, while they are considered the solution to our economic and employment problems, it is our small businesses that in fact need the lifeline.
This as business is only good for 10% of them. The rest are being knocked by a financially stressed customer who has pulled back on purchasing (55%), unreliable and expensive utilities (47%), rising operating costs (58%) and late payments, affecting their ability to trade. So reports the Retail Capital Roll With The Punches Survey released on Wednesday.
“Small businesses are burning the midnight oil to keep the lights on and our people employed. They’re your local woodworker, craft beer distiller, the face of the shisa n’yama, and poultry farmer. They get up every day and fight the good fight, to feed their families and bring home the bacon, all the while trying to contribute to our economy. But it’s not easy. Our entrepreneurs are operating in an extremely challenging environment,” says Retail Capital’s CEO Karl Westvig.
These hard knocks are taking a toll on our SMEs and they need support to stay afloat. But help is not always at hand, especially from the banks: 58% ranked banks among the least likely to support them.
Technology and rapid digitisation is also affecting our SMEs, with a noteworthy 32% saying that it is a threat to their business. “Many small businesses don’t have the luxury of looking at digitisation, they are focused on sustaining their current businesses. Given the majority of SMEs employ fewer than 3 people, keeping up with technology is the last thing on their minds. They often don’t have time to work on their business vision, or plan too far ahead as they are tied up in the operational daily grind. Unfortunately missing this trick could affect their sustainability and longevity,” says Anni Wilhelmi from the Women President’s Organisation.
To make ends meet SMEs often self-sacrifice, taking a salary cut before implementing short-time or retrenching (58%). This as in a small business, “relationships with staff are often more intimate and they are aware that when they retrench an employee, they retrench an entire family,” comments Arifa Parkar from the Western Cape Business Opportunities Forum.
About 13% also start a side hustle to diversify income streams, or identify a gap in the market where there is demand, often in niche industries. So while 17% of SMEs are in retail, specialist services (15%), construction (9%), hospitality (6%) and owned restaurants (5%), the majority are running small businesses such as own a biscuit brand, sell bags and perfumes, print labels, offer vehicle finance and childcare and even manufacture tutu sets.
More women are also starting their own businesses with 65% of the survey identifying as female, “11 years ago when I started the National Small Business Chamber, only a few members were women. Now they’re dominating the SME sector,” comments the Chamber’s CEO Mike Anderson.
Of this, Anni Wilhelmi says, “Entrepreneurship gives women an equal standing in society and allows them to create financial freedom. This then enables them to lift their families out of poverty. Women entrepreneurs also have a significant impact on children: as when they have more flexibility in their own business they are able to raise healthier children, environments for children are safer when there is financial freedom and education becomes better. I strongly believe that these women are nurturing future entrepreneurs and this financial freedom makes an impact on the economy.”
Our entrepreneurs are also putting in the graft, with a noteworthy 82% saying that hard work is the most essential characteristic of being an entrepreneur. 60% said having a good attitude was key, and 53% claimed that commitment was critical. Qualifications were seen as way less important. “If you keep going and never give up you will arrive where you want to be. If you are passionate and take a knock and you come back again, have resilience and a good attitude you will keep going. If you have a bad business model or it isn’t working, change direction. There is no straight curve, and it’s important that business owners understand that,” advises Mike Anderson.
There is no doubt that being an entrepreneur is an extremely difficult endeavour, especially when times are tough and it’s hard to make ends meet. But they have grit, and many have survival strategies up their sleeves such as: Keep overheads low, recruit carefully, deliver products on time and as promised, negotiate the best prices with suppliers, and get on-board with new technologies.
It’s also important to seek assistance,” says Waheed Adam from The Entrepreneurs’ Organization. “Growing up as a black South African, I didn’t know how to access support services, but I did seek a mentor to gain knowledge from. There are so many mentors out there and many of them will do it for free. We didn’t have the internet in 1988 when I started my business, but now it is so much more accessible than it was. Don’t walk the long and hard journey when there is so much support available.”
Karl Westvig concludes by saying that, “The report’s data provides a sense of how brutally tough it is out there. My advice to small businesses is to dig deep, there are no shortcuts. It’s going to be hard, but put in the time and ride it until you come through on the other side. What happens now doesn’t mean it will happen in six months’ time. I think we have gone to as low as we can go. Once SMEs see hope, they will see through the curve.”
Content supplied by the Retail Capital.