Entrepreneur of the Year® competition celebrates Christo Botes, executive director: Business Partners Limited

The Lifetime Ambassador Award is bestowed on an individual who has spent a notable period of their lives in the service of entrepreneurs and/or contributing to the success of the Entrepreneur of the Year® competition sponsored by Sanlam and BUSINESS/PARTNERS.  

This is the first time we are bestowing this award and the Entrepreneur of the Year® competition team believes that they could not have selected a more deserving person.

The recipient of the 2018 Entrepreneur of the Year® Lifetime Ambassador Award goes to Mr Christo Botes – executive director at Business Partners Limited.

Botes is a wise and humble person who has been an integral part of the competition since it was introduced 30 years ago. He is the voice of reason in any boardroom where he participates. He is an advocate for entrepreneurs and always wants to see them succeed.

Botes’ vision and leadership has seen the competition grow from being an internal competition for Business Partners Limited to being a premier national competition for recognising entrepreneurs in the SME space.

His tireless efforts involve reviewing each entry that lands in our inbox and assessing it not only with the aim to the entrepreneur becoming a finalist but to also see that entrepreneur grow as well.

Every year he visits each of our competition finalists in order to understand them and their businesses better and to provide feedback to judges where they may have missed an important aspect of the business.

Under his leadership the Entrepreneur of the Year® competition has unearthed entrepreneurs and celebrated finalists and winners from as far as the dusty streets of QwaQwa to the skyscrapers of Johannesburg.

Ten tips for increasing diversity in your workplace

When businesses start up, they are often small, tightly-knit groups of pioneers that come from the same background, even from the same family. This works very well in the early survival stages of a venture, but as soon as the business reaches a more stable post-survival growth phase, the founders have the opportunity to look around a bit more widely, and to diversify their workforce.

Those who don’t, forego the richness of varied ideas and run the risk of stagnating, and remaining small and insular. But human resource diversification, like any process of change, can be uncomfortable and risky, says Kgomotso Ramoenyane, Executive General Manager of Human Resources at Business Partners Limited. She offers the following ten tips for entrepreneurs who want to bring diversity into their businesses in the right way:

1. Ask yourself why

Start with examining your reasons for wanting to diversify your staff. If you only want to do it in order to score B-BBEE points so as to get more business, chances are that you are going to find it a frustrating exercise that is likely to strengthen the prejudices of those in your organisation resistant to the idea.

But if your reasons are based on true long-term business advantages of diversity such as more creativity and innovation, increased productivity and opening up new markets. The reasons orders your thought processes and gives you a set of priorities with which to work.

2. Set your targets

You can introduce diversity into an organisation in so many different ways – age, gender, race, sexual orientation, religion, abilities – that you cannot do it all at once. Pick realistic targets aligned with your reasons for diversifying.

3. Get buy-in

One of the key dynamics of human resources diversification in a business is increased interaction and collaboration between diverse people. It would be odd, and most likely doomed to fail, if you were to start such a process without first gaining the collaboration of your existing team around the idea, the reasons for it, what to expect, and how it is going to be rolled out and measured. 

Given that most small business owners might not have the experience with this process, it might be a good idea at this stage to consult one or two of the organisational change experts available in the market to assist.

4. Recruit according to your plan

If you hold out for the perfect candidate with just the right profile, skill set and aptitude, you are probably not going to make much progress. On the other hand, if you are simply going to appoint token candidates, the project is not even worth starting.

5. Integrate the differences

Recruitment is just the start of diversifying your staff. The whole point of human resources diversification is to forge different perspectives and experiences into a rich, vital team. It takes a lot of work from management to embrace differences and obtain maximum performance levels from a diverse team. It means listening to many different inputs and taking them all seriously, without necessarily throwing out every established way of doing things nor having to try to find a perfect compromise about every issue.

6. Encourage mentoring and coaching

New recruits can always do with some mentoring and coaching in any business. Someone brought in from a different background and experience to the dominant culture of the company is likely to benefit even more from support in the beginning. Pairing such new recruits with experienced members of your staff in a mentorship relationship can go a long way to help form the new bonds that lie at the basis of the idea of diversity.

7. Weed out discriminatory policies and practices:

A diversifying company is likely to come across established practices that unintentionally discriminate against newcomers with differing needs. Staff members in early motherhood might need flexible hours, strict rosters might prevent a worker from attending mosque on a Friday and even a set of stairs might be a formidable obstacle to a staff member with a disability.

8. Start new projects

An influx of fresh blood into a business is a fantastic opportunity for a company to try new projects with diverse teams. It almost defeats the object of diversification if the intention is to stick to business as usual.

9. Look for commonalities

One way of weaving the differences between diverse employees into a rich tapestry is to focus on the opposite – the things that they have in common. Pointed discussions of shared interests and values, and planned activities to emphasise those will help to forge the bonds.

10. Celebrate successes

Diversifying is a difficult and uncomfortable process. It is therefore important to not only to fight inevitable pockets of resistance and come down firmly on individuals who cause unnecessary friction, but also to emphasise the positive by celebrating every milestone towards a truly diverse workplace.

Tips for small business owners to keep their employees motivated

Zig Ziglar, renowned American author and motivational speaker said: You don’t build a business. You build people and people build the business. As a small business owner, the up-keep of staff morale is vital to keep employees motivated so that they can contribute towards building and growing your business.

Employee motivation is based on providing an appropriate blend of rewards such as recognition, remuneration, relationships, security, and challenges of new projects and a sense of doing something worthwhile. Addressing these different aspects of employee motivation, makes employees aware of the opportunities available to them in the business and in the process they feel that they can influence results by their actions and follow their ambition.

Another way to successfully motivate employees is for small business owners provide clarity regarding the goals for the business and what is expected from their employees. The goals set for the company need to be turned into achievable goals for the people working in it. If employees can see how their success contributes to the big picture, they will feel motivated and part of the team.

With this in mind, it is important to give everyone a chance at success. For example, a bookkeeper is more likely to stop debtors taking liberties if they know why this matters so much and are responsible for bringing the figures down.. If employees understand problems, they often come up with solutions themselves.

When it comes to praise and criticism, it is imperative to let employees know when they are doing well and when they are doing badly. Remember, feedback is given to improve performance, provide lessons and build employees’ motivation and confidence in their capabilities.

In order to be clear, business owners should say exactly why they are congratulating an employee or wanting to help them improve. However, it is imperative to avoid getting personal. Describe the negative consequences of an action, rather than criticizing and then encourage the employee to brainstorm how better results could be achieved.

Small business owners should identify which employees have the capacity to learn new skills, and increase the variety of tasks to make the work more stimulating. Giving employees the chance to shoulder more responsibility increases their sense of involvement. This is to avoid losing talented employees due to them being under-utilised, frustrated or bored. In order to know which individual employees are ambitious and which are content to stay in the same jobs ask employees the key question: ‘If you could improve just one thing about your work situation, what would it be?’

The attitude of the business owners towards their employees is key when it comes to motivating employees. Below are additional pointers for small business owners to consider:

1. Treat employees as partners in the business

Keep them informed about business performance and management decisions and ask them for their input on decisions that affect them. Create a good working environment and provide training and resources for their job.

2. Build an atmosphere of trust and teamwork

A company run on defensiveness and fear is an unpleasant place to work. Employees will avoid making decisions in case they are wrong, so accept that mistakes are an inevitable part of the learning process and encourage people to ask for help when problems arise.

3. Keep communication open and honest

Schedule regular appraisals to review progress, problems and plans. Encourage employees to do most of the talking during these sessions, by using open questions like: ‘How well do you feel you are doing?’

4. Take an interest in employees’ lives

Without interfering, be prepared to discuss things your employees are interested in. Listen actively, and be consistent and fair in your approach.

5. Build team spirit with regular briefings

Hold daily or weekly meetings to plan work, establish goals and discuss any special events and deadlines. Share any news and problems and give employees credit for their contributions and achievements.

The importance of motivated and inspired employees is crucial to the success of any business. As such, small business owners should make sure to continue to build on the employee management approach in order to retain great employees and for the business to survive and thrive.

Nine tips for entrepreneurs to attract investors and secure funding

The Global Entrepreneurship Monitor South Africa 2016/2017 reports that two-thirds (67%) of small businesses closed in 2016 either because they were not profitable, or because they encountered problems in accessing financing. Access to finance is not only a significant constraint for early-stage entrepreneurs in South Africa, but also problematic for established businesses. However, contrary to what many entrepreneurs believe, there are various financiers and investors with funding available who are eager to invest in South African entrepreneurs which too often is not effectively accessed or tapped into.

Many excellent business ideas never get past the ‘spreadsheet stage’ because entrepreneurs cannot find the right investor for their specific business model, or do not manage to convince investors because the true potential of their business idea is not effectively conveyed.

Business owners who are seeking finance should conduct thorough research on different financiers before approaching them. Understanding the specific criteria of the investor or financier and matching their investment preferences to the entrepreneurs’ business saves not only time and effort, but can improve the success rate and result in a funding proposal that is aligned to both the needs of the financier and the entrepreneur.

It is also important for entrepreneurs to realize that investors often invest more than just money into a business, they are often prepared to invest time by advising and supporting the entrepreneur behind the business –and this can only happen if the partnership between the two parties is a good match.

Finding the correct investor and successfully pitching your idea is a valuable business skill that can be continually enhanced. Entrepreneurs should consider the following suggestions to improve their success rate in raising finance:

1. Get connected and network. Investors are out there, and they are usually only one or two people away from those with whom you regularly do business. For example, accountants or suppliers can often recommend potential investors that may be a suitable fit. Emphasise the “work” in “network” by investigating your options and asking for referrals.

  1. Prepare a sharp and concise story outlining the purpose of the funding you are applying for (to start, expand, restructure, etc.). Investors need a clear and well quantified idea of what the money will be used for, as well as realistic financial projections that support the business’ ability to repay the debt or provide a return on investment.
  2. Know all the aspects of your business and incorporate the key points in your business plan especially your industry analysis and market segment identification. The more concise and crisp the business plan is the better. A compelling description of the core product or service being offered by the business is vital, how unique is it compared to other suppliers in the market and is there a demonstrated and proven need for the product or service; and is there sufficient market potential to make the investment worthwhile?
  3. Always have a detailed business plan ready. Not only will it help to solidify the knowledge mentioned in the previous point, but you will be able to send or present the plan quickly if a potential investor wants to have a closer look. This will help to convince them that the business owner is prepared.
  4. Understand the current state of the business. Investors want to know where in the life cycle of the business you find yourself and whether the business owner and the support team understand the industry in which the business operates or will operate. Knowing the background and business experience of both the entrepreneur and the support team, and the current state of the business can provide a level of comfort to the investor regarding their investment decision.
  5. Have an online presence. It is almost guaranteed nowadays that an investor who is interested in a business idea will do a background search on the internet. Therefore, it helps to have a good website and a strong presence on social media in which the entrepreneur’s successes are highlighted – not only in the current business, but in previous ventures and jobs. Most astute investors interrogate both the strengths of the business idea and the prowess of the entrepreneur.
  6. Be prepared to pitch in person, often investors will request a follow up meeting which includes a detailed presentation of the business plan, profit projections and industry insights. Be prepared for this request and have a more detailed presentation available in advance.
  7. Once contact has been made with a potential investor, stay in touch, even if it is just to ask for advice, such as how a proposed investment can best be restructured. The entrepreneur should also be open to feedback from potential investors. It is important to show investors that you are open-minded and adaptable. Chances are that the investors you are pitching to can enhance your idea with their advice, whether they decide to invest in your business or not.
  8. Have a realistic exit strategy for the investor. The investor’s thinking is likely to be around whether they can make the best return possible on the investment, so this point should be included in the exit plan. The time frames that most investors work with are between three and seven years.

How to raise profit margins without losing customers

The beginning of the year is the ideal time for small and medium enterprise (SME) owners to explore additional revenue streams and other means of increasing their profit margins. However, this process is expected to still present some challenges for SME owners owing to South Africa’s economic environment, which while showing some slivers of hope, is not out of the woods yet.

While the South African Reserve Bank (SARB) has increased the country’s economic growth outlook from 1, 2 to 1, 5 for 2018, the economy has not yet recovered which makes it difficult for local businesses to secure avenues for increasing their profit margins. The SARB outlook is also far from the 5% required to meaningfully impact poverty and unemployment.

These challenging conditions in relation to raising profit margins were confirmed by an analysis of the Quarterly Financial Statistics (QFS) released by Statistics SA over the 10 years between 2006 and 2016. The report found that the average profit margin for the South African formal business sector declined, from 0, 09 between June 2006 and September 2008 to 0, 05 between December 2013 and March 2016, showing that each unit of turnover generated less profit in the later period.

While this decline in average profit margin appears to be quite minimal, it is important to remember that SMEs only account for a portion of the formal businesses surveyed and were likely the hardest hit during this period. Smaller businesses tend to be more vulnerable to sustained periods of low economic growth and increasing costs, compared to larger businesses who have the financial resources to sustain shrinking margins.

For SMEs to sustain themselves, business owners should consider the following strategies for improving their profit margins for the new year:

1. Find out what your customers value

It is vital to understand how customers perceive value, and to what extent your business can raise prices while still retaining its customer base; this can be done by engaging with your customers through conversations and surveys. Once there is an understanding of what customers value, business owners should work on meeting these customer expectations.  Business owners should also identify their unique selling point as this will help the business stand out from competitors, it could be superior service or quality.

2. Acquire new customers

The most straightforward method to improving profit margins is to acquire new customers from existing markets or industries, away from other players and competitors in the market. The quick and easy solution to attract new customers within an existing industry, is to reduce prices. However, given the increased competition to retain and attract customers, this can increase the risk of ‘price wars’ within a certain industry, resulting in profit margins coming under further pressure which business owners are advised to avoid. Understanding what customers value, as mentioned above, presents business owners with information they can use to attract new customers by responding to their requirements. Acquiring additional customers may not improve your gross margins but should improve your net margins.

3. Get comfortable with costing structures

Understanding costing structures and income and expenditure is crucial to managing and driving profit margins. Profit margin is made up of variable and fixed costs. Variable costs are incurred when producing or selling a product, while fixed costs, such as rent and wages, are payable regardless of whether the business sells anything or not. It is important for business decision-makers to consider these costs when pricing products or services, in order not to compromise on their projected profit margin.

While reducing prices may bring in more customers, overheads such as rent, remain the same, putting more pressure on margins. Similarly, raising prices could improve profit margins, but increases the risk of being priced above the market and potentially driving customers away.

4. Manage variable costs

It is also important to acknowledge that increasing prices may not be viable due to the reality that many business owners operate within the confines of limited economic growth and decreasing customer spending. As such, effectively managing variable costs – like utilities, raw materials and labour – is the next step when reviewing profit margins.

For example, business owners should aim to negotiate discounts with current suppliers or explore the use of alternative suppliers that can provide the same products or service at a lower cost without compromising on quality. To save on utilities such as electricity or water, a business can make a more conscious effort to utilise these resources more effectively. In terms of labour, businesses can incentivise staff to become more productive and deliver greater output during the same hours. Another avenue is ensuring the business has sufficient security and adequate stock controls in order to minimise theft.

5. Don’t lose sight of your business plan

Whichever option a business owner may choose to maximise their business’ profit margins, it is imperative to refer back to the business plan regularly as this might unearth ideas the business owner may have long forgotten. This should secure long-term business success, especially during trying economic conditions.

Ten financial tips for business owners in hard times

Financial management naturally tends to slip down the list of priorities for business owners when the economy is booming, finance is cheap and clients are plentiful. But when the tide turns, your ability to control your finances, especially your cash flow, becomes probably the most important survival tool available to the entrepreneur.

Veroshen Naidoo, area manager at Business Partners Limited, suggests ten ways for business owners to improve their finances during a downturn:

1. Consolidate your debt

It is easy for business owners to pile up debt during the good times – a credit card or two, a property bond, machines and vehicles bought with various asset-finance loans, generous lines of credit at suppliers and a ballooning bank overdraft. All of this can become crippling when the crunch comes, and one way to survive is to look for a financier that can consolidate it all into one loan with a long enough term to make the instalment affordable. You’ll probably end up paying more in interest, but at least you can survive the dip.

2. Take a panga to your expenses

The expenses in a business coming out of a boom time can always be slashed without necessarily hurting its core health, and when you think you cannot possibly cut anymore, go through them once again to find ways of doing more with less. Incentivise productivity and cost reduction among your staff, and invest in cost-saving systems such as GPS devices for your vehicles or insulation to bring down your electricity bill.

3. Monitor your debtors

The worst time for bad debt is during a downturn because you need every cent to keep afloat, yet the likelihood that your debtors might default is so much higher, because their businesses are also struggling. Focus on collections, rethink your credit policy and tighten your vetting processes before granting any more credit.

4. Relook your business plan

A business plan compiled in the fat years is of little use during a downturn. Often, survival depends on much more than tweaking the projected sales figures, but rather requires a radical rethink of your strategy. Discard the old plan and start working on a new one from scratch.

5. Negotiate with your financiers

As awkward as it is, start communicating early and frankly with your financiers about your situation. They know that nearly all of their clients are struggling. When you show them that you are one of their clients who is proactively making plans to survive, the chances are better that they will support a rescue effort, for example through a loan-repayment moratorium or even through an extension of your overdraft.

6. Manage minutely

A downturn requires intense hands-on management, with great attention to detail, simply because there is no room for the kind of errors that can slip in when you step away and manage your team with a light touch, as you can during boom times. Even if you are consistently a hands-on kind of manager, double down on it during the darkest days.

7. Negotiate with your suppliers

Even though your suppliers are very likely, just like you, to become wary of extending credit terms during hard times for fear of bad debt, there is still a chance that they might be willing to accommodate their best clients.

8. Look towards your neighbours

When work dries up and your team and machines stand idle it might be worth looking in places that you wouldn’t normally consider. The more established firms in your industry may well be over-committed and would happily pass over-flow work on to you, or they might find it convenient to outsource a certain type of smaller client to you.

9. Try support programmes

If you haven’t tried government incentive schemes and support programmes yet, now is the time. Don’t expect a flock of angels that will swoop to your rescue. Government programmes work slowly, but it might just be the thing that gets your business going again when the economy picks up one day.

10. Keep looking for business opportunities

Some of the best business opportunities arise during downturns. Competitors go bust, leaving huge gaps in the market. Consumers look for alternatives and are often more open to break their loyalty to their usual suppliers and service providers. The pressure of the downturn on your peers may open them up to the idea of a merger which can ensure the survival of both businesses, and take you to the next level even before the economy picks up again, as it always will.  

Are you thinking of scaling your business?

We discuss when it is the right time to do so

The urge to convert and scale up a small business to a medium to large enterprise is one of the most common goals among business owners. However, contrary to popular belief, scaling up a business is not just a goal for most entrepreneurs, but also a necessary step to running a business successfully.

Many entrepreneurs incorrectly believe that their business will grow organically, and that the necessary resources can simply be added to match current demand. However, once a business has grown to a certain size, the owner must consciously choose to scale up rather than simply reacting to a growing market share.

When facing this cross road of whether to scale up or not, there are a few things business owners should first consider:

1. What is the true reason for wanting to scale up

Businesses often want to scale up to become self-sustainable, but starting this process without the necessary preparation and research can be detrimental for a business, as growing too fast can backfire.

2. Upscaling is a lengthy procedure that involves complex introspection at almost every level

Business owners should be cautioned against the temptation to grow too quickly, and should aim rather to grow sustainably to ensure that the business continues to be a viable operation. As part of this sustainable growth there should also be a good balance between the management of regular operations and the expansion.

3. A change in mind-set is needed

Apart from the various processes and measures that need to be put in place to grow a business, it is crucial that business owners also adapt their mind-set.

Small business owners need to stop thinking and acting like a small business, but rather as a medium-size business and be cognisant of the fact that forward planning and measures – from anticipated turnover and management structure, number of jobs that can potentially be created and improving business processes – will need to be addressed in order to achieve the business results needed to run and maintain a larger scale business. Planning for revenue growth is a good example of the necessary forward planning that needs to be considered, as growing revenue by 10% is considerably easier when you have an annual revenue of R10 million in comparison to turnover of R30 million.

4. An execution strategy needs to be carefully assessed

While a brilliant product or service offering can increase competitiveness and grow market share and revenue, a clear and achievable execution strategy will ensure ongoing success. A business owner will need to deliver on his/her intent of taking the business from a small operation to a mid-sized business.

5. A clear idea of cash flow and accurate forecasts must be in place

With growth and expansion, larger volumes of money and transactions will need to be closely managed.

Most importantly though is the need to return to the original vision of the business. Having a clear vision in mind makes internal and external changes less distracting from the broader business goals.

Side note:

Have you consciously chosen to scale up your business? Make sure you tick these 4 key boxes before embarking on your expansion strategy:

  1. Set goals: Business owners should create a list that details why they have made the decision to scale up their business. These should also be linked to the business’ goals, with at least one overall long-term goal (achievable in 15 – 25 years), as well as short-term goals (achievable in 3 – 5 years) which will serve as tangible measurables for the long-term goal.
  2. Have an implementation plan: This plan should list actions that must be taken with responsible persons allocated to each action. Empowering the team of staff to manage their own tasks and responsibilities is vital, and business owners should take heed to equip all staff to effectively work toward one, collective goal.
  3. Analyse the finances: Before embarking on an expansion journey, entrepreneurs are advised to increase their financial reserves. Each business’ cash conversion cycle should provide a good indication of how long an investment takes to convert into a return – the shorter this timeframe, the better.
  4. Communicate: One of the most important aspects during an upscaling journey is to communicate with staff throughout the process. Business owners should keep the whole team informed of the vision, strategy and steps of the process. This will ensure that all parties feel involved and are encouraged to work towards achieving this one common goal.

No business is too small for a proper budget

Many business owners mistakenly think their operation is too small for a formal budgeting process. The budget (of sorts) that many business owners keep inside their heads is often more like a basic recipe, and is usually inadequate to deal with the constant change that every business is subject to.

This is according to Jeremy Lang, regional general manager at Business Partners Limited, who says that no business is too small for the discipline of hammering out a formal budget – which needs to be used daily in the management of a business.

He says that proper and thorough budgeting is beneficial to a business as it clearly impacts on its long-term growth prospects. “Business owners who compile and use formal budgets know well in advance when cash will run out and can plan for it. They can also plan properly for business expansion and their financial decisions are often based on carefully thought through facts and figures. In short, budgeting gives them financial control over their businesses.”

Lang says that a business owner must ideally budget at least once a year for the 12 months ahead, but in order for the exercise to be in any way meaningful, the process must meet a few crucial requirements:

  1. The business owner must be involved in setting up the budget. This exercise provokes thought (on the part of the business owner) and it assists in planning once he / she sees the detail. One shouldn’t be leaving a budget up to a bookkeeper or accountant.
  2. An annual budget that is drawn up only to be kept in the bottom drawer means nothing. The value of a budget comes to the fore only when a business owner constantly reviews it, consults it, adapts it and compares the forecast figures with the actual figures – at least once a month, in order to identify material variances.
  3. A budget based on actual figures from previous cycles is a good platform to start with.

A budget for any business should include at least a sales forecast, a cash-flow forecast, and income and expenditure forecast, a capital expenditure forecast and a balance sheet forecast, says Lang.

He explains that of these, the most important working document for any entrepreneur is the cash-flow forecast. “Without a cash-flow forecast, a business is at a high risk of running out of cash at some point.”

“Many of the common mistakes that business owners make in budgeting has to do with the cash-flow forecast. It is very important that the cash budget takes into account the realities of the business’s debtor and creditor cycles. Business owners must take into account the cash lag from the date of having to pay suppliers to the date on which payments are received from customers.”

Lang adds that often business owners neglect to work taxes such as PAYE, VAT and provisional tax payments into their cash-flow forecasts.

Another crucial part of budgeting is the sales forecast, which needs to be as accurate as possible, says Lang. “One of the greatest strengths of entrepreneurs – their optimism and can-do attitude – can also be a limitation if sales predictions are set too high. Realistic yet challenging sales forecasts should be set.”

He warns that despite its obvious benefits, budgeting is still often neglected by business owners, due to factors such as sudden spikes in sales and increased cash flow, or absolute focus on day-to-day operations. “It is very easy to drop your guard and take your eye off finances and business owners need to guard against these bad habits.”

Lang advises such entrepreneurs to rope in support from an advisor or reputable accountant who could help with drawing up a budget. “The mere step of making an appointment with an accountant helps to enforce the discipline of preparing for the meeting, and taking a step back from the operations to reflect on the finances.”

He says that business owners who struggle with budgeting often find that, once they grasp the basic principles, and become comfortable with using spread sheets, compiling and reviewing budgets do not take much effort. “It is not a complex, nor daunting exercise. All business owners need to do is seek proper advice and support, and then dedicate time to draw up a budget,” concludes Lang.

Simple budgeting is better for a tough trading environment

By Kobus Engelbrecht, spokesperson for the 2016 Entrepreneur of the Year® competition sponsored by Sanlam and Business Partners Limited

Just as the South African finance minister needs to ensure that the national budget is realistic and attainable, local entrepreneurs need to ensure they have their annual budgets in optimal order. The effective planning and prioritising of a budget is one of the most important elements of a business, and key to the future of a business’ financial well-being.

In South Africa, over one in four business exits are due to financial difficulties. This is according to the recently released Global Entrepreneurship Monitor (GEM) 2015 / 2016 Global Report which states that, globally, a lack of profits or finance accounts for more than half of business discontinuances.

Good budgeting sense and awareness will play a pivotal role in leading a business through tough economic and trading conditions. In the current marketplace South African entrepreneurs find themselves operating in, money is tighter than usual. Apart from consumers feeling the pinch and cutting back on their spending, financial institutions are also tightening their lending criteria, making it increasingly difficult for entrepreneurs to access additional funding if it is needed.

During challenging trading conditions, greater attention should be given to budget allocation. Although forecasting and developing a budget in a challenging economic climate can be difficult, it is necessary for the survival of a business.

Extra time should be spent on reviewing and narrowing budgets, as without a well-managed budget, a business can easily find itself in trouble. Not only will a clear budget and targets offer direction at management level, but it will also assist staff at an operational level.”

Here are four ways an entrepreneur can stay on top of their finances in 2016:

Stay in touch:

Market information and research are key ingredients to maximise opportunities and minimise losses. Interact regularly with your clients, employees and suppliers and make a concerted effort to stay up to date with new developments that may benefit, or hinder, your business. If you are aware of what your market requirements are ahead of time, you can minimise incidents of loss.

Buckle up:

By doing a quick inventory check, a business owner can quickly refine excessive costs. These costs may include small items, such as coffee or office printing, or something much larger, such as a work process that could perhaps be conducted in a more efficient method. Entrepreneurs should be encouraged to communicate these cost cutting initiatives to their staff and encourage employees to get involved. Often you find that a business’ employees may not be fully aware what the minor daily expenses at the office can quickly add up after a year, or even in a month, in real terms on the business’ turnover.0

Be Realistic:

Cash-flow needs to be closely managed and should not be rigid in theory to make the entrepreneur feel more positive about the financial future of the business. Businesses need to continue to spend money during this downturn to continue operations, but just at a more sensible rate. Provisions however should be made in the cash-flow to account for economic downturns and how the business will prepare for prolonged periods of a downturn while it waits for the next positive business cycle.

Back to basics:

One of the many reasons it is difficult to keep track of money spent is due to the cashless society that businesses operate in. While a good way to avoid unnecessary and overspending is to make use of cash payments, this isn’t always realistic. Instead, entrepreneurs could treat their budget books as cash payments and log all transactions as and when they take place. It may seem like a tedious activity, but it doesn’t need to be a complicated system – a simple excel sheet could work. Not only does this help to closely watch budgets, but an entrepreneur can also be updated with his business’ transactions daily.

Simple budgeting is better for a tough trading environment

Just as the South African finance minister needs to ensure that the national budget is realistic and attainable, local entrepreneurs need to ensure they have their annual budgets in optimal order. The effective planning and prioritising of a budget is one of the most important elements of a business, and key to the future of a business’ financial well-being.

This is according to Kobus Engelbrecht, spokesperson for the 2016 Entrepreneur of the Year® competition sponsored by Sanlam and Business Partners Limited, who says that good budgeting sense and awareness will play a pivotal role in leading a business through tough economic and trading conditions.

The recently released Global Entrepreneurship Monitor (GEM) 2015 / 2016 Global Report states that a lack of profits or finance accounts for more than half of business discontinuances. In South Africa, over one in four business exits are due to financial difficulties. “In the current marketplace South African entrepreneurs find themselves operating in, money is tighter than usual. Apart from consumers feeling the pinch and cutting back on their spending, financial institutions are also tightening their lending criteria, making it increasingly difficult for entrepreneurs to access additional funding if it is needed.”

Engelbrecht says that during challenging trading conditions, greater attention should be given to budget allocation. “Although forecasting and developing a budget in a challenging economic climate can be difficult, it is necessary for the survival of a business.

“Extra time should be spent on reviewing and narrowing budgets, as without a well-managed budget, a business can easily find itself in trouble. Not only will a clear budget and targets offer direction at management level, but it will also assist staff at an operational level.”

Engelbrecht offers entrepreneurs the following advice on how to stay on top of their finances in 2016:

Stay in touch:

Market information and research are key ingredients to maximise opportunities and minimise losses. Interact regularly with your clients, employees and suppliers and make a concerted effort to stay up to date with new developments that may benefit, or hinder, your business. If you are aware of what your market requirements are ahead of time, you can minimise incidents of loss.

Buckle up:

By doing a quick inventory check, a business owner can quickly refine excessive costs. These costs may include small items, such as coffee or office printing, or something much larger, such as a work process that could perhaps be conducted in a more efficient method. Entrepreneurs should be encouraged to communicate these cost cutting initiatives to their staff and encourage employees to get involved. Often you find that a business’ employees may not be fully aware what the minor daily expenses at the office can quickly add up after a year, or even in a month, in real terms on the business’ turnover.

Be Realistic:

Cash-flow needs to be closely managed and should not be rigid in theory to make the entrepreneur feel more positive about the financial future of the business. Businesses need to continue to spend money during this downturn to continue operations, but just at a more sensible rate. Provisions however should be made in the cash-flow to account for economic downturns and how the business will prepare for prolonged periods of a downturn while it waits for the next positive business cycle.

Back to basics:

One of the many reasons it is difficult to keep track of money spent is due to the cashless society that businesses operate in. While a good way to avoid unnecessary and overspending is to make use of cash payments, this isn’t always realistic. Instead, entrepreneurs could treat their budget books as cash payments and log all transactions as and when they take place. It may seem like a tedious activity, but it doesn’t need to be a complicated system – a simple excel sheet could work. Not only does this help to closely watch budgets, but an entrepreneur can also be updated with his business’ transactions daily.