Entrepreneurs need to persevere

Entrepreneur of the Century

The desire to succeed by South Africans has resulted in an entrepreneurial culture, which continues to grow at an encouraging rate that is vital to fuel economic development in the country in 2012 and beyond.

While people can learn the principles of entrepreneurship, I think it is very hard to train someone to be an entrepreneur. The steps and the risks needed to succeed in your own business cannot be taught. Ultimately, building a successful business and a legacy is about passion; having a vision and sticking to it.

Starting a business and finding the right concept and vision is a gruelling process.

via Entrepreneurs need to persevere.

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5 Biggest Challenges Facing Your Small Business

Small Business Summit 2011 Pre Event Photo 1

Starting a business is a big achievement for many entrepreneurs, but maintaining one is the larger challenge. There are many standard challenges that face every business whether they are large or small. These include things like hiring the right people, building a brand and so on. However, there are some that are unique to small businesses – ones most large companies have grown out of long ago. We’ll look at the 5 biggest challenges in this article.

Client Dependence

If a single client makes up more than half of your income, you are more of an independent contractor than a business owner. Diversifying the client base is vital to growing a business, but it can be difficult – especially when the client in question pays well and on time. For many small businesses, having a client willing to pay on time for a product or service is a godsend.

Unfortunately, this can result in a longer term handicap because, even if you have employees and so on, you may be still acting as a sub-contractor for a larger business. This arrangement allows the client to avoid the risks of adding payroll in an area where the work may dry up at any time. All of that risk is transferred from the company to you and your employees. This can work out fine provided that your main clients have a consistent need for your product or service. However, it is generally better for a business to have a diversified client base to pick up the slack when any single client quits paying.

Money Management

Having enough cash to cover the bills is a must for any business, but it is also a must for every individual. Whether it is your business or your life, one will likely emerge as a capital drain that puts pressure on the other. In order to head off this problem, small businesses owners must either be heavily capitalized or be able to pick up extra income to shore up cash reserves when needed. This is why many small businesses start out with the founders working a job and building a business simultaneously. While this split focus can make it difficult to grow a business, running out of cash makes growing a business impossible.

Money management becomes even more important when cash is flowing into the business and to the owner. Although handling business accounting and taxes may be within the capabilities of most business owners, professional help is usually a good idea. The complexity of a business’ books go up with each client and employee, so getting an assist on the book keeping can prevent it from becoming a reason not to expand.

Fatigue

The hours, the work and the constant pressure to perform wears on even the most passionate individuals. Many business owners, even successful ones, get stuck working much longer hours than their employees. Moreover, they fear that their business will stall in their absence, so they avoid taking any long breaks away from work to recharge. When fatigue sets in, the weariness with the hours and the results can lead to rash decisions about the business, including the desire to abandon it completely. Finding a pace that keeps the business humming without grinding down the owner is a challenge that comes early (and often) in the evolution of a small business.

Founder Dependence

If you get hit by a car, is your business still producing income the next day? A business that can’t operate without its founder is a business with a deadline. Many businesses suffer from founder dependence, and this dependence is often caused by the founder being unable to let go of certain decisions and responsibilities as the business grows. Meeting this challenge is easy in theory – a business owner merely has to give over more control to their employees or partners. In practice, however, this is a big stumbling block for founders because it usually involves compromising (at least initially) on the quality of work being done until the person doing the work learns the ropes.

Balancing Quality and Growth

Even when a business is not founder dependent, there comes a time when the issues from growth seems to match or even outweigh the benefits. Whether a service or a product, at some point a business must sacrifice in order to scale – this may mean not being able to personally manage every client relationship or not inspecting every widget.

Unfortunately, it is usually that level of personal engagement and that attention to detail that makes a business semi-successful. Therefore, many small business owners often find themselves tied to these habits to the detriment of the company’s growth. There is a large middle ground between shoddy work and an unhealthy obsession with quality, so it is up to the business owner to navigate the company’s processes towards a compromise that allows scale without hurting the brand.

The Bottom Line

These are challenges, but not death sentences. One of the worst things a would-be-business owner can do is to go into a small business without considering the challenges ahead. We’ve looked at some things that can help make these challenges easier, but there is no avoiding them. An important step in overcoming a challenge is knowing the size of that challenge. Besides, a competitive drive is often one of the reasons people start their own business and every challenge represents another opportunity to compete.

via 5 Biggest Challenges Facing Your Small Business.

Impact 2012 budget will have on business owners

LONDON, ENGLAND - NOVEMBER 01:  George Osborne...

Although Minister Pravin Gordhan’s 2012 Budget Speech (SA’s first-ever R1 trillion budget speech) received mixed reactions from the public. He repeatedly made a point that in order for the country to effectively address inequality and poverty, a partnership between government and the private sector was critical. He also revealed a number of tax-related changes that will impact and affect small business owners.

According to Kobus Engelbrecht, Marketing Head for Sanlam Business Market, the key change of the budget speech is the implementation of dividend withholding tax on 1 April 2012. This will bring an end to secondary tax on companies, and entails that dividend withholding tax at 15% will be paid on any dividend paid out to the shareholders of the company. The Minister further announced that businesses with a revenue of less than R1 million are likely to be given the option of making payment for turnover tax, VAT and employees’ tax at twice-yearly intervals from 1 March 2012. Businesses that make less than R1 million would be able to file a single combined tax return on a twice-yearly basis. This means that the number of returns required for these taxes will fall from about 18 per year to only two per year.

“The tax exclusion amount on the disposal of small business when a person is over the age of 55, will go up from R900 000 to R1 800 000. The market value of assets allowed for small business disposal for business owners over the age of 55 will increase from R5 000 000 to R10 000 000,” says Engelbrecht.

Some of the key aspects of the National Budget in relation to individuals

Karin Muller, Head of Sanlam Growth Market Solutions, shares some insights:

• Minister Gordhan mentioned personal income tax relief of R9,5 billion. The majority of this will go to lower income earners.

• The most talked about items on the budget speech (on social networks) are the so-called “sin taxes”: tobacco products will increase between 5-8%. A 750ml bottle of spirits will cost you R6 more (a 20% increase) and a 340ml can of beer will cost 9c more (a 10% increase).

• More capital will be spent on nursing institutions and the rebuilding of five tertiary training hospitals.

• Currently there are not enough incentives to make the public save and Minister Gordhan proposed a new saving mechanism to help. This is still a proposal and a discussion document will be published in May 2012. The mechanism will enable you to save without paying tax on the returns you earn, which will surely enable many South Africans to make their savings work harder.

• If you’re under the age of 45, you can deduct up to 22,5% of your income if you contribute towards your retirement, irrespective of whether you are saving in a pension or provident fund (and irrespective of whether you or your employer makes the contribution). These deductions will, however, be limited to a maximum annual deduction of R250 000 for people younger than 45 years and R300 000 for people older than 45 years.

via The impact the 2012 budget will have on business owners – Men’s Lifestyle, Sports, Health, Fashion Tips & Business Network | Destiny Man.

SA business growth choked by rules and red tape

Singapore Chinese Chamber of Commerce & Indust...

OVERREGULATION and red tape are the biggest constraints to business expansion in SA, according to a survey by accounting, audit and advisory firm Grant Thornton.

The survey was based on the views of CEOs, chairmen and business owners in the fourth quarter of last year.Red tape was now as pervasive a problem in SA as in other Brics Brazil, Russia, India, China and SA countries, Grant Thornton Durban managing partner Deepak Nagar said yesterday.

The survey found 37% of privately held business owners in SA cited red tape as their chief constraint, followed by a lack of a skilled workforce, at 36%.

Durban Chamber of Commerce and Industry CEO Andrew Layman said the results were “spot on” and SA’s regulatory environment, for small businesses in particular, needed to be reviewed.

The increasing complexity of regulations such as additional tax or governance requirements, labour issues, black economic empowerment, the time taken to register companies or change directors’ names was stunting the growth of business, Mr Layman said.

The second-biggest constraint to business globally was reduced demand for products — the effect of economic problems in the US and Europe. In SA, the second-biggest constraint to business was a shortage of skilled staff, said Mr Nagar.

Keith Brebnor, CE of the Johannesburg Chamber of Commerce and Industry, said it had become “very intimidating” for young people to start a small business in SA because of the onerous regulatory environment. Dealing with crime and a lack of skills also added significantly to the cost of doing business in SA, he said.

via BusinessDay – SA business growth ‘choked by rules and red tape’

Sole Proprietor

found photo: business leaders

“A sole proprietorship, also known as a sole trader or simply a proprietorship, is a type of business entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business. The owner receives all profits (subject to taxation specific to the business) and has unlimited responsibility for all losses and debts. Every asset of the business is owned by the proprietor and all debts of the business are the proprietor’s. This means that the owner has no less liability than if they were acting as an individual instead of as a business” (Wikipedia).

See more on sole proprietors here: SoleProprietor.co.za

Top retailers avoid BEE partners

Shoprite (South Africa)

Politically connected empowerment’s usual suspects are missing out on a combined market capitalisation of more than R160 billion as they are shunned by top JSE-listed retailers, which have chosen to rather give stakes to their staff and support struggling black entrepreneurs.

A snapshot Business Report survey shows that since the broad-based black economic empowerment (BEE) codes were passed into law eight years ago, at least seven major retailers, most of them among the top 40 largest JSE-listed blue chip companies, have not had empowerment partners.

Shareholder activist Theo Botha inspired the survey.

The companies with no black partners include furniture chains Lewis Group and JD Group, clothing retailers Foschini and Truworths, supermarket groups Pick n Pay and Shoprite and personal care chain Clicks.

This could be because the retailing chains do not feel obliged to chase targets set by the Broad-based BEE Act as they do not rely on state contracts for their survival.

The retail sector, unlike other industries, does not have a transformation charter that would have set targets to be achieved by a particular date.

Suzanne Ackerman Berman, Pick n Pay’s transformation director, said it had always been Pick n Pay’s philosophy that its employees should be owners in the business and, to this end, the company instituted an employee share ownership scheme soon after its inception in 1970.

At the end of February, the Pick n Pay employee share trust held 3.4 million shares in the company. The company recently set up a transformation committee and appointed a senior manager to oversee its broad-base BEE strategies.

The retailer focuses mainly on the preferential procurement and enterprise development elements set out in the Broad-based BEE Act of 2003.

“We believe that empowerment strategies focus on areas where we are able to effect the most change. More than 33 percent of our franchise stores are exclusively black-owned, creating new business entrepreneurs, transferring skills and creating jobs,” she said.

via Top retailers avoid BEE partners – Business News

How to cover your small business

Glass: damage to shop fronts and sign writing at your premises could be costly to repair. Accidental damage to the glass would be covered;

Fidelity guarantee: this is where the business insures itself against losses as a result of employee fraud;

Accounts receivable: a business can insure possible losses if, for example, the business is destroyed in a fire, no records of accounts have remained and the business is unable to establish the amount due to them;

Goods in transit: many businesses transport and deliver goods produced or sold. Make sure that you are covered in the eventuality of accidents or hijackings that could damage or destroy the goods being transported.

via How to cover your small business – Business LIVE

Turnover Tax is dangerous for small business

People filing tax forms in 1920

DON’T BE FOOLED!

Warning: New Turnover Tax from SARS could be SARS’s way of ripping you off!

Remember the saying: When it sounds too good to be true, it probably is!

Why would SARS offer you a New Tax System if they were going to make less money?

Of course they are going to make more money out of Turnover Tax!

And this is how they are going to do it:

They are going to try convince thousands of young small businesses to give up their virtual NO TAX status for one in which they could be liable to pay up to R38 000 EXTRA TAX EACH YEAR!

The only reason SARS can give is that you may need to fill in 7 or so less TAX FORMS!

But who cares?

For R38 000 I’ll fill in 20 extra tax forms!

Example:

Current system:

Small CC business turning over R999 999 per year

has no profit after expenses and member draws salary of R200 000 and pays R33 430 on salary

R33 430 is the ONLY TAX this business pays

Turnover Tax system:

Small CC business turning over R999 999 per year

has no profit after expenses and member draws salary of R200 000 and pays R33 430 on salary

R33 430 PLUS R37 930 TURNOVER TAX =

R71 360 is the TOTAL TAX this business pays!!

Now please, where is the benefit in that?

Turnover Tax is a SCAM – A scam from the heart of government, trying to rob the struggling, poor man in the street and having the cheek to ask him to thank them for it!!

Our advice: Don’t touch turnover tax with a barge pole.

Government should be sent away ashamed of itself for such brazen greed and deception with its tail between its legs, to go think up some other scam to throw at the rich for a change…

Small businesspeople are going to have to do their calculations VERY carefully before jumping into the turnover tax system boots and all!

Comment: info@turnovertax.co.za

via Turnover Tax is dangerous for small business

Business welcomes audit exemption plan

Annual balance sheet of a State-owned farm, dr...

Image via Wikipedia

Ministers will on Thursday unveil plans to save more than 100,000 businesses at least £600m a year in accountancy and administration costs by relaxing the requirement to conduct a financial audit.

The Department for Business, Innovation and Skills will launch a consultation on proposals to allow more small companies and subsidiaries to decide for themselves whether or not to have an audit.

Business groups welcomed the move, but warned ministers needed to deliver such steps regularly for companies to gain confidence in the government’s deregulation drive.

At present, European Union rules mean that to classify as “small” for accounting purposes, a company must comply with two out of three criteria: having no more than 50 employees, a balance sheet of no more than £3.26m and turnover of no more than £6.5m.

However, to obtain an audit exemption in the UK, small companies must fulfil both the balance sheet and turnover criteria. Under the new proposals, UK SMEs would be eligible for audit exemption by meeting any two of the three criteria, saving an estimated £206m a year. An average audit for a small company costs £9,500.

via Business welcomes audit exemption plan

Register your informal business

Sarah Mathebula, 32, of Diepsloot, runs a vegetable business in the informal settlement and it is her only source of income.

Mathebula, a mother of five, arrived in Diepsloot in 2001. With no education, she started selling sweets, saving every rand.

Diepsloot has an estimated population of more than 250000 and is notorious for street justice, crime, unemployment and poverty.

So for many residents like Mathebula the only way to survive is to start a business.

“I would love to get support from the government or the city authorities to expand my business and get a proper place to trade.”

Mathebula said the relationship between the many small businesses in the area and the new entrants – Somalis and Pakistani nationals – was now good.

She is one of the 400 members of the South African Chamber of Commerce and Industry, who have now been organised to achieve economic growth in the area.

Phineas Letsoalo, project coordinator of the Diepsloot Chamber of Business, said the organisation started in May last year and faced many challenges on its path.

His chamber will be part of the Sacci’s conference, gala dinner and exhibition, that will be held at the Sandton Convention Centre on Monday and Tuesday.

Sowetan, the print media partner of the conference, will give an opportunity to 50 SMMEs and entrepreneurs to attend the convention for free.

To secure a seat contact the convention secretariat on 011-676-3467 or e-mail: sacciconvention@globalconf.co.za and use the Reference SOWETAN. Offer closes today at 12pm.

“The first challenge was the political landscape. You will find that developmental projects go through a political office and often information is not accessible to entrepreneurs,” he said.

He said another big challenge was that businesses were not formalised and do not even have addresses.

This, he said, increase the risk for banks and investors who would identify business opportunity in Diepsloot.

“People do not even Iknow how to register their businesses and they use whatever land is available without going through proper channels. Corrupt officials then utilised this ignorance and solicit rent from these businesses,” he said.

Mathebula said the business community in informal settlements needed to be organised and his chamber has started to engage developmental agencies to assist entrepreneurs in Diepsloot.

via The means to survive – Sowetan LIVE.