Entrepreneurs and start-up experts weigh in on what they consider most important when launching a new business…
Start-ups are always on the look out for that special ingredient, that extra something, that will help spur their business to success. Here is what our panel of experts have to share regarding what sets competitive small businesses apart:
“People often ask me which sector is the most profitable. When I counter that by asking: What are you really passionate about? Far too many say that they don’t really care; they just want to make lots of money. In my experience, this approach seldom works.
“Starting a new business is a lot of hard work. And because very few businesses are profitable from day one, disillusionment can set in, turning the daily routine into a drag. Given this mindset, how can you hope to infuse your staff with the necessary enthusiasm to provide excellent customer service and help you build your business?
“I believe that unless you have passion for a new venture, it is doomed from the start. Fortunately, the opposite holds true also. A start-up entrepreneur with passion can outsell the largest competitor with ease; before long, profits will follow!” — Kurt Illetschko is a prolific writer on entrepreneurship and franchising. His most recent book Franchising in South Africa – the Real Story, which he co-authored with Eric Parker is available at leading bookstores.
The right source of capital
“Finding the necessary capital is the most challenging aspect of starting up a business. Often entrepreneurs get discouraged or give up on their ideas because they lack funds. A prospective entrepreneur has to raise enough capital to start the business as well as make sure they have the funds to sustain the business before the project breaks even or starts to make profits.
“Self-financing through cash from savings or an equity loan on a home (for those with this type of collateral) is common. Some opt for loans from relatives and friends or raise the capital by forming partnerships.
“Credit card debt is totally discouraged as this might lead the business owner into trouble as interest rates rise. Bank loans are always a better option. The less credit the entrepreneur uses, the less they expose their business to unwanted risks.” — Zanele Xaba, Director for Entrepreneurial Initiatives at Ernst & Young.
Enjoy what you do; be serious about what you do
“I’ll be wearing two hats in answering: as a researcher and as someone with a specific interest in the IT side of things.
“Firstly, enjoy what you do, but be serious about what you do. Our research has shown that the structure or form of business that SMEs start with correlates with how competitive they are. Their choice of business entity doesn’t make them competitive, but is an indicator of how seriously they are approaching starting up. So, for instance, Pty Ltds tend to be far more competitive than CCs because they require higher standards of governance and management. They also cost more to form.
“From an IT perspective, a reliable high speed connection to the internet is essential. Companies that use ADSL are far more competitive than those that use dialup connections. Dial-up becomes more expensive than ADSL at quite a low level; less than 20 minutes use of dial-up a day makes it more expensive than ADSL. With dial-up you have to go looking to see if someone has contacted you, with ADSL you are able to see immediately and have a far quicker turnaround time with customer communications. Having a high speed connection also brings all kinds of options to bear, including voice over IP, online recruitment, a website – and all of these tend to make companies more effective.”
— Arthur Goldstuck is an award-winning author and journalist and managing director of World Wide Worx, which conducts the SME Survey.
Be prepared to put in the time
“New entrepreneurs often underestimate the amount of time they have to invest in their start-up. The idea that you can resign from your eight to five job and start your own business to have more time to yourself is a myth. You may be more flexible, but to get the business off the ground many working hours will be needed.
“Keep in mind that you will probably run the business single-handedly, especially in the beginning. This means doing everything, from answering the phone to running to the bank and dealing with clients and orders. Being this busy will mean sacrificing family time. There will be few free weekends and no paid holidays. To get a new business off the ground, the business owner must set priorities and stick to them.”
— Petro Bothma of Business Partners, a specialist investment company for small and medium enterprises.
Meet a real need
“Starting a new business is complex and many variables can impact its ultimate success. A multitude of factors, when done successfully and together, contribute to the success of an operation. One of the most important criteria for a successful start is that the business is based on a product/ service that meets a real need and/or solves a significant problem for which people are willing to pay a premium, i.e., first focus on providing a superior product, not just on making the most money. There are many products and services out there. They may be fun, cute, cool, unique or technologically awesome, but it’s important to start a business based on the products/services that will really add value to peoples’ lives.”
— Aldrin (Buzz) Beyer, entrepreneur and lecturer at the Gordon Institute of Business Science.
Differentiate your offering
“Too many businesses are started by budding entrepreneurs merely because someone else down the road has a successful operation and they copy it. They offer the same service with no differentiating factors. It is critically important that the offering, whatever it is, has clear and compelling customer benefits. Are these benefits different or superior and what will make a customer part with hard earned money to purchase the offering?
“However, there are many businesses that offer identical products, franchises are such businesses, but the differentiating factor is location and it is this factor which can significantly contribute to the viability and success of the business.”
— Mike Herrington, director of the UCT Centre for Innovation and Entrepreneurship.
Choose the right people
“While there are several critical factors, the people you have alongside you when starting are vital. Capital, having the right idea, exploiting the market opportunity and drawing up an implementation plan come in close seconds. From my experience consulting to start-ups and businesses going through transition, your relationship with the people you work with is fundamental
“These are not always employees; in fact many small businesses are man-alone operations or necessity start-ups. They are the people who support the business owner – from family members to bank managers and professional mentors.
“The business owner’s ability to work with them and get these people involved in the business and working towards a common vision is crucial for success. Expand your thinking and look at your bank manager or the tax man as people to work with, not against.”
— Brent Combrink, mentor and business coach, owner of Promentor and Western Cape provincial chairperson of COMENSA (Coaches and Mentors South Africa).
Now it’s over to you. One of the pointers above may be the special ingredient that sets your start-up apart. Take note of all of them and you will be well on your way to a successful launch.