Enter the Sanlam/Business Partners Entrepreneur of the Year competition
by Fred on 27/07/10 at 3:31 pm
1 comment
It’s not too surprising so many South Africans shy away from starting their own business. Statistics show that more than seven out of ten new business ventures will fail within the first two years of starting up. Still – with the right information, and some much-needed encouragement through competitions like the Sanlam/Business Partners 2010 Entrepreneur of the Year® competition, going solo in business needn’t be like bungee jumping with a home-made cord.
According to Jan Steenkamp, executive head of Sanlam Cobalt – the division within the Sanlam Group that caters to the financial needs of entrepreneurs – South Africa lags behind its peers in entrepreneurship activity. Only 7.8 percent of the working population are entrepreneurs – half of what we should be seeing given our level of economic development. Why is entrepreneurship so vital? More entrepreneurs will boost job creation (South Africa already has one of the highest unemployment rates in the world) and that in turn feeds through to economic growth.
So what are aspiring entrepreneurs here doing wrong? We are making a number of basic mistakes that can be avoided with a little bit of knowledge, says Steenkamp. That’s also where the Sanlam/Business Partners Entrepreneur of the Year® competition comes in. The competition – open to all South African SME entrepreneurs – aims to encourage entrepreneurial growth, by rewarding the success stories. Business Partners has already received more than 200 entries – outstripping the expectations of both Sanlam and Business Partners.
So how does an entrepreneur know he has stumbled onto a good idea? According to Steenkamp, “If you’ve got an idea, make sure it addresses a ‘pain point’. In other words, put yourself in your customer’s shoes – and make sure your offering will save your customer money, or offer him a product or service that is unique, even though it might be more expensive. Also, test your idea with objective people to decide whether your idea really fills a gap.” Steenkamp suggests that it is good to have many innovative ideas, but you then need to focus on the ones that might make more business sense by following any major trends developing in the country, and then capitalising on them. In South Africa’s case, that could include keeping a close eye on our electricity generation and distribution or water sources and purification challenges.
A common mistake made by entrepreneurs is underestimating the importance of the business plan. Steenkamp says, “Entrepreneurs often see the revenue opportunities but don’t think through exactly how the business will work.” Having a proper business plan will not only show you how to make money from your idea; it’s also crucial if you want to secure capital from a financial organisation to start your business.
Key to the business plan is completing a cash flow projection, at the very least for 12 months. According to Steenkamp, “Ironically, many ventures run into trouble because the business is too successful and does not have the cash to sustain the growth.” He says that if the business grows quickly but the money isn’t collected from their customers immediately, the business owner can run out of cash to replenish stock sold, pay his suppliers and other costs such as staff salaries and wages. “Cash flow is crucial to manage; you need sufficient cash to pay those who you owe money to.”
An entrant in the Sanlam/Business Partners Entrepreneur of the Year® competition agrees: Kevin Frankental is one half of the brains behind lemon.decor. His company (his brother Ricky is the other half) prints art onto laminate, which can then be used on surfaces like chairs, mirrors or walls. According to Kevin, his company insisted on deposits, and completed their projects quickly to generate sufficient cash to fund the next project. That also kept them on good terms with their suppliers. Lemon.decor is entered in the Small Business Entrepreneur category (a business with turnover smaller than R20-million) and Emerging Entrepreneur (the business must be younger than three years). Other categories are the Medium Business Entrepreneur (here turnover is greater than R20-million), and the main prize, the Entrepreneur of the Year – with overall prize money of R100 000 up for grabs.
Sanlam Cobalt’s Steenkamp has further tips for the entrepreneur: for one, remember there is a difference between income and profit. Also – remember your tax obligations. He suggests you always keep paying over the VAT you collected on behalf of SARS timeously and to beware of spending this on growing your business (entrepreneurs should avoid at all costs falling into arrears with the taxman as it can be very costly due to penalties and interest charges).
Kevin Frankental has the following advice for any entrepreneurs: “The best advice I ever got was that it’s not only about building the ship, but about keeping the ship steady, and going in the right direction.” He says entrepreneurs should focus beyond growing their business, to ensuring the business is well run.
So what characteristics should the winner of the Sanlam/Business Partners Entrepreneur of the Year® competition have? According to Steenkamp, he’d look at “a person who has the idea, who has the ability to make the idea a reality – in other words turn a profit and grow the business – and a business owner who understands how to empower other people to work effectively in the business, thereby creating capacity for growth.”
The closing date for the competition is 31 August. For more information click here.
Fred Roed is the marketing guy in the Ideate crew. He runs a web marketing company called World Wide Creative and loves writing about people out there doing marketing right. View more articles by Fred.
Marc
Jul 29th, 2010
Gosh I would love to run into these SME’s where the problem is making too much money!
This energy around the various SME competitions is fantastic and the multiplier and momentum effect should not be ignored. As South Africa starts looking at these various SME’s as a vital part of the economy and they start gaining some traction as we come out of the recession, the economic landscape is likely to be very different.
Now we just need to see the jobs being created!