Many South Africans are starting the path of the entrepreneur – whether they’re setting up a side hustle they hope to turn into a day job, running a solo marketing consulting business from home, working on the next killer SaaS app, or dreaming of turning their small coffee shop into a national franchise.
If you are one of these entrepreneurs starting out on your own with a small business, you are embarking on a challenging but rewarding journey. Here are some tips for entrepreneurs in celebration of Small Business Friday:
- Stay close to your customers.
- Have a business plan.
- Crises and downturns don’t last forever.
- Cash flow is king.
- Adapt, evolve, pivot.
- Invest in people.
Let’s jump into the tips:
Have a business plan
Many entrepreneurs are hustlers by nature – but hustling should not preclude good planning. Every business should have a formal, written business plan to guide its strategy and operations. Your business plan should encompass an analysis of your target market, an evaluation of your competitors, details about your sales and marketing plans, a description of what you do and what makes you different, and realistic business milestones and financial forecasts.
Even if you are not planning to approach investors or financers, sitting down to write a business plan helps you to crystallise your vision. It highlights possible gaps and weaknesses in your strategy. And it gives you goals and targets to guide your progress. Business plans will frequently change, but planning can help you stay ahead of your market.
Stay close to your customers
Conduct desktop research to understand the latest trends in your market can be valuable. But there is only so much you can glean from reading articles about the latest consumer trends or macroeconomic forecasts. To really understand what’s going on in the world, you need to be constantly gathering formal and informal customer feedback, especially if you run a more virtual business where you have less face to face interaction with your clients.
This is especially true in the current environment where the pandemic and the economic downturn are prompting many businesses and consumers to re-evaluate their spending habits. A telephone call or a chat with someone coming into your office, social media research, and email surveys can all be useful ways of gathering insights into what matters to your customers and how their behaviour is changing.
Crises and downturns don’t last forever
Some entrepreneurs have managed to rapidly reinvent their businesses during the pandemic and the national lockdown, but for most of us, it has been an extraordinarily difficult year. There is still little clarity about what life will look like after COVID-19 or when the crisis will be properly behind us. And at times, it feels like it will never end.
Businesses took some drastic steps to survive the COVID outbreak, and most entrepreneurs have had their mettle severely tested. However, it’s important to remember that nothing lasts forever. The businesses that will thrive in the future are those that are thinking beyond today’s survival mode and cost cutting to uncover the next set of opportunities.
Cash flow is king
Cash flow is perhaps the most important metric for any small business to watch. Defined simply, cash flow is the difference between the money you receive and the money you pay out. It might be great to book lots of sales at high profit margins, but it doesn’t help you when you need to pay your suppliers on 30-day terms and wait 120 days or more to receive payment from your customer.
It is not advised that your business pays out more money each month than you receive. You could end up taking on interest-bearing debt to pay your bills or get caught in a spiral of missed payments to your creditors that ends in your business hitting the wall. So, always be looking at ways to optimise your cash flow, including:
- Offering discounts or better rates for prompt payment.
- Looking for expenses you can cut.
- Negotiating better payment terms with your vendors.
- Selling old stock and equipment to raise cash.
- Using accounting software to run regular cash flow forecasts.
Adapt, evolve, pivot
We were living in a volatile environment before we’d even heard of the dreaded COVID-19. Indeed, the pandemic has simply amplified and accelerated many of the things that were already happening in the market. For example, people were starting to move towards ecommerce and remote work, they were already tightening their belts, and their tastes have been trending towards fickleness for many years already.
To be a successful entrepreneur in a time of so much technology change and socioeconomic upheaval, one needs to be adaptable. The entrepreneurs that fared well in the pandemic showed extraordinary resilience and agility; they were able to rapidly reinvent their businesses because they already had a mindset of learning, changing and evolving.
Invest in relationships
We live in a world where many products have become highly commoditised and where many of the things you sell and the services you provide may be fairly similar to those on offer from your competitors. Trying to compete purely on price is a race to the bottom. So how do you differentiate yourself? It comes down to the people you work with.
Great employees who can provide a superior experience to your customers are the best way you can set yourself apart. Even if you don’t plan to hire many or even any full-time people, there’s a good chance you will work with a network of freelancers and partners to get things done. Find the best possible people and build rock-solid relationships with them. It’s a differentiator that endures.