2014 is likely to be the year in which South African business owners emerge from a survival mind-set, to one of preparing for a new era. Small business owners should prepare the business for expansion, which will be achieved through steady income growth.
This is the view of Gerrie van Biljon, Executive Director of Business Partners Limited, who says that his opinion is backed by various surveys which suggest improving confidence among local business owners.
He refers to the most recent results from the Business Partners Limited SME Index, conducted among SME owners, which revealed average confidence levels of 71% that their business will grow in the next 12 months. This is echoed by other surveys that show steady increases in confidence levels amongst established small and medium businesses.
Van Biljon says that in order for other South African SMEs to join the changing tide and strive towards income growth, certain strategies should be considered going forward.
“Cutting costs is a good survival technique but this is not the way SME owners build a business in the long-term. It is therefore time to start putting income growth strategies in place again.”
He offers the following advice to SME owners looking to turn the year ahead, into one of growth:
- In a dynamic and changing environment, continued changes and updates are imperative. Review the business model and ensure that it is still relevant and will serve the purpose going forward, as what worked in the past is no guarantee of success going forward. This may mean adding new products, services and ranges to the business that complement or replace its existing offering.
- Faced with severe electricity hikes and budget constraints on the one hand, and business expansion on the other, it is time to look at doing things slightly differently. Consider alternative energy and use electricity smarter.
- Unfortunately, there is no alternative for vehicle fuel yet, and the weakness of the rand makes each trip to the petrol station more painful than the last. Counter strategies can include: better trip planning, the use of telematics to improve the fuel consumption of a vehicle fleet, or even partnering up with other businesses to share transportation costs.
- The current weak rand is a major boost for local tourism businesses and exporters. The time is right for these businesses to think about how to protect their existing market and expand it. On the other hand, businesses heavily dependent on imports are being compelled to look at alternative suppliers, and need to adjust their prices before it is too late.
- This may be the year for buying property, either as an investment or as a business premises. Despite a recent hike, interest rates still remain low, and many regard property prices low enough to consider investing in this asset class. Provided you do careful planning and proper due diligence, the timing to be in the property market may be the right one.
- Do a spring clean of your business relationships. Aim to strengthen those that have worked for you, and change those that haven't.
- While in New Year's resolution mode, why not dust off old insurance policies and make sure they are up to date. Reassess all short-term insurance needs, key-man insurance and structured buy-and-sell agreements with business partners. It helps to make use of the services of a trustworthy insurance broker to assist with the process.
- Continue to review the many incentives available at the Department of Trade and Industry for growing businesses. They include: research grants, support for the commercialisation of new ideas, productivity improvement projects, investment in new machinery and grants for staff training programmes. These incentive schemes can be complicated, so it may be better to approach one of the many consultants who specialise in helping businesses access Government subsidies. They tend to work on a success-fee basis, so the risk is small.
- It is early days for the Government's newly approved youth wage subsidy, officially called the Employment Tax Incentive, but it is certainly worth a look at if a business planning to add to their staff complement. Also ensure that your accountant has considered whether the business qualifies for the Small Business Corporation tax, or even Turnover Tax.
- Plan carefully so that expansion does not distract from maintaining quality service to loyal clients who stuck with the business through the last few difficult years.
About Business Partners Limited
Business Partners Limited is a specialist risk finance company for formal small and medium enterprises (SMEs) in South Africa, and selected African countries. The company actively supports entrepreneurial growth by providing financing, specialist knowledge and added-value services for viable small and medium businesses.