Early-stage entrepreneurship: Tips for budding business owners to make it through the first few years

Five out of seven small, medium and micro enterprises in South Africa fail in the first year.  Photo: Getty

Five out of seven small, medium and micro enterprises in South Africa fail in the first year. Photo: Getty

PERSONAL FINANCE


Entrepreneurship has been hailed as the key to South Africa’s economic recovery – and the good news is that all signs point to an upswing.

According to the Global Entrepreneurship Monitor (GEM) 2021/22 report published by Stellenbosch Business School, there has been a significant increase in early-stage entrepreneurial activity among South Africans aged 18 to 64, with “early-stage” defined as the norm. has been carrying on trade or business for less than three years.

Claire Klassen, a consumer financial education specialist at Momentum Metropolitan, says the emergence of this new wave of entrepreneurial activity, micro-entrepreneurs and laterals, is born out of necessity.

“In the wake of Covid-19, unemployment in South Africa has risen dramatically as many businesses have been forced to close or lay off staff. Young people have been hit the hardest as they tend to work in sectors devastated by the pandemic, such as represented the service, hospitality and retail industries. With less work experience, they were often the first out the door when jobs were cut.”

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Klaassen says that South Africa is naturally resourceful, and with the income that is essential to survival, many have begun to look for new ways to make ends meet.

Interestingly, the GEM report also assessed social attitudes towards entrepreneurship, revealing that 81.8% of respondents think entrepreneurship is a good career choice, while 20% of those not in business intend to become an entrepreneur.

While this is encouraging, five out of seven small, medium and micro enterprises in South Africa fail within the first year. We need to have enough runway to see this current boom in early-stage entrepreneurship translate into tangible economic benefits. We are in a period of window of opportunity and it is make or break time.

Claire Klassen

So what resources are there for budding entrepreneurs to help them succeed?

Klassen offers some advice for those looking to start their own business or start a side business.

Be financially aware

It is important to have good financial knowledge and understand what is involved in running a business.

“A pot of savings is important to cover basic start-up costs, such as an emergency fund or ‘buffer’ to keep the lights on when your business takes a downturn.”

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There are free online tools to help you increase your financial knowledge. Do it with Majolas is a free online financial literacy course with the latest edition focused on entrepreneurship.

“It teaches key financial concepts that entrepreneurs need to understand, such as how to create a business budget, tips for negotiating with suppliers, and the importance of developing a solid business plan – all wrapped up in an engaging, easy-to-follow narrative format.” ,” Klassen explains.

“Metropolitan also has a Facebook group, MetroKickStarz, which is dedicated to helping young and emerging entrepreneurs through its financial education program. I recommend that aspiring entrepreneurs join this community, which provides them with a space to communicate, share ideas, and access valuable knowledge and other resources for free.”

He adds that it is important for entrepreneurs to determine their personal and business budgets and not mix the two.

“Seeking the advice of a financial advisor will help you make better decisions and protect your business.”

Learn from those who made it

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Klassen suggests that those who want to start their own business do research on the same companies or businesses that have been successful.

It’s important to understand why they work, what sets them apart from their competitors, and what they do well – or not so well.

“Learn more about the founder and research their habits. Do they believe in continuous learning? Perhaps there are some principles or philosophies that guide them. Understanding what it takes to successfully start and run a company—and the small daily habits that set you up for success—will make a significant difference in the trajectory of your own business,” he says.

There are free conferences and networking events related to specific industries; A quick online search allows you to determine what’s available in your community.

“Participating in these events provides you with an invaluable opportunity to connect with and learn from experienced business leaders.”

Take advantage of available financing options

The public sector has introduced a number of initiatives to benefit business owners.

“For business financing, visit the Industrial Development Corporation website or the Small Business Development Agency website.”


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