A bright future for small business

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Results from the 2015 National Small Business Survey released by the National Small Business Chamber (NSBC) show the continued resilience of South African SMEs in the face of economic challenges.

The annual survey canvassed 18 500 small businesses throughout the country, providing valuable insight into current trends and sentiments in the sector. “One of the more significant challenges facing small businesses is the inability to further develop a customer base in order to boost top line growth,” notes Mike Anderson, NSBC founder and CEO. This year’s survey found that some 57% of small businesses cited a lack of funding and insufficient cash flow as the biggest obstacle preventing growth, closely followed by poor sales at 52%.

“Cash flow is of vital importance to the health of a small business. Enhanced efforts to encourage and promote best practice between government, larger organisations and their SME suppliers will go a long way in ensuring small business continues to play a role in growing the South African economy,” says Anderson.

According to Anderson, small business is the mainstay of our economy and the future of job creation. He says two thirds of the working force is employed in the small business sector. The small business sector contributes to 50% of the GDP.

Looking at some of the most common challenges faced by SMMEs in South Africa, Anderson says as per the findings of the 2015 National Small Business Survey, which is powered by the NSBC, the biggest challenges are lack of funding and/or insufficient cash flow, poor sales (the inability to build a customer base and boost top line) and competition from large businesses.

So what does the recent National Small Business Survey’s results indicate about South African SMMEs’ resilience in the face of tough economic climates? “What has become more and more obvious is that small business entrepreneurs are taking responsibility for their own success. There is less talk about external challenges, such as economic factors, taxation and bank charges and more talk about internal factors. Business owners realise more than ever that if they possess the right ingredients and adopt the key success factors, their own success will be realised. These factors include: passion, perseverance, persistence and the ability to keep going and to never give-up,” Anderson says.

He does however point out that the challenges facing small businesses are consistent with the rest of the world. There are places of course where there is more instability than other places. This contributes to a more challenging climate to operate a small business.

According to the survey, the Western Cape is the fastest growing region in South Africa for SMEs, while Gauteng remains the largest. The bulk of small businesses in South Africa operate in the manufacturing and business services market with 14% of respondents each, followed by IT and professional services at 12% and 11% respectively.

The 2015 survey also shows that small businesses have a considerable interest in marketing themselves more effectively. 37% of respondents stated that if their business were to receive a R100k cash injection, it would be used towards marketing efforts. Similarly, 43% of small businesses place sales and marketing as a key area in which they require the most assistance, with business and strategic planning following with 30%. In addition, 32% of respondents believe that failure to market their business has been their biggest mistake thus far.

Despite hurdles on the path to growth, a substantial 78% of small business surveyed plan on hiring more staff in the next year, an encouraging finding given that the vast majority of business respondents have only been operational for three years or less. This is also despite many small businesses citing regulations that make it costly to terminate poor performing staff, as well as the high costs involved in recruiting and skilling quality staff as the primary stumbling blocks preventing them from employing more people.

“The future of the South African economy and the future of job creation are inextricably dependent on small business,” confirms Anderson. “This is why small business matters, and why supporting small business should be a priority for all South Africans. Ordinary citizens can play their part by identifying and supporting local small businesses, knowing that going small has a big impact on the country’s economic future.”

Anderson further points out that Government should lead the drive to create a more meaningful environment for SMMEs to prosper. “There is always more that can be done. Government should identify, support and form strategic partnerships with the major role players that have a proven track record in fostering the growth and sustainability of the SMME sector,” he says.

When asked about the importance of marketing when comes to growing small business in South Africa, Anderson says the biggest challenge for small businesses right now is the inability to build a customer base and grow top line. He says marketing is the key element of success for every business.

“Getting customers and making sales is everything for a business. If this is right, cash will flow and if there is cash you can fix anything---technology and HR. South African SMMEs need to focus a great deal more on this. This also takes the pressure of unnecessary borrowings,” he says.

With a growing popularity on workers’ rights discourses happening around South Africa, how can SMMEs find the right balance between cutting costs and ensuring proper benefits for its staff? According to Anderson, in order to succeed, every small business needs to be brutal on the money. As he puts it, sales are always less than expected and expenses are always more than planned for. This, he says, results in less profits and even losses.

“The success of every business is dependent on the team within the business. Contributing staff need to be rewarded and poor performing staff must be removed from the business. This in itself is costly and time consuming. High performing team members need to be financially rewarded in accordance with industry standards. Other attractive benefits don’t need to be costly. Respect, a healthy working environment and personal recognition are key factors,” he says.

So what can ordinary citizens do to further assist the growth of small business in South Africa? “Every consumer should play a role. Shop small business and support local small businesses must become a habit for all. The NSBC, through its initiatives, constantly mobilises the nation to go big by supporting the small. By supporting local small businesses, these businesses will grow infrastructure and employ local people. This is meaningful nation building and the solution to unemployment,” Anderson concludes.

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