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Cape Town - Entrepreneurship is increasingly generating more awareness
in South Africa and while the industry should be a desirable employment option
for most South Africans, there are various challenges that entrepreneurs
entering the market should bear in mind when starting their new venture.
According to Christo Botes, Executive Director at Business
Partners and spokesperson for the Sanlam/Business Partners Entrepreneur of the
Year competition, many think that becoming an entrepreneur will equate to
decreased levels of stress and leaving the constant rat race of the corporate
world behind, when in fact newly established entrepreneurs often find
themselves in a different kind of race, with a different set of challenges.
He says that the first three to five years is a real test of
survival for new businesses as there are various challenges that entrepreneurs
are likely to face when starting their own business
“Common external challenges can include competitors and
financial institutions that refuse to fund your business, while internal
challenges are brought about by factors within a business, such as cash flow,
management skills and industry knowledge.”
An entrepreneur who has experienced some of these challenges
and ultimately overcame them is Warren Graver, founder and director of
Envirodeck, and winner of the 2012 Small Business Entrepreneur of the Year
title, who says that Envirodeck, an industry leader in environmentally
conscious and sustainable decking products, has not always been a successful
business and that he had to overcome a significant number of challenges in the
early years of the business.
“I could not have made worse business decisions than in the
first two years of opening the business, which was doomed by me not focusing
sufficiently on market, product or supplier research.
“The first challenge that I faced was that although I
noticed a considerable gap in the market, I was unsure on how to present the
product to an existing market that I had no experience in. It was also a market
that was very reluctant to change to new products, as timber was traditionally
the only way that decking had ever been done, and it proved extremely tough to
penetrate a market when no one had ever seen or heard of such innovative
products.”
Botes says that a business challenge for some entrepreneurs
can be the ability to forge their idea and opportunity into a business idea.
“Entrepreneurs usually identify a problem or gap in the market where they are
able to offer an alternate solution, but struggle to integrate their solution
into a business plan that ultimately promotes the company effectively and
efficiently to the correct market. It is therefore vital that entrepreneurs
seek guidance and advice when in the initial stages of the planning process.”
Graver says that another challenge he encountered was establishing a supplier network.
“I did not do sufficient supplier research and subsequently
after landing the first shipment, the supplier closed its doors. This error in
judgment on my behalf meant that the initial start-up capital was quickly
absorbed into obsolete inventory that would never be sold even at discounted
rates.”
He also touches on the importance of managing cash flow.
“The most critical element of a start-up business is
managing cash flow versus inventory management, a concept that I failed to
understand and subsequently a year later I had no start-up capital left.”
Botes says that most entrepreneurs face capital challenges a few months into operation as many hope to secure more capital once the business starts to grow. He adds that entrepreneurs should not be discouraged by these challenges.
“Overcoming these challenges doesn’t have to be complicated.
If problems are solved as they come up, rather than letting them escalate to a
point of no return, an entrepreneur will be able to grow and move his or her
business forward.”
In the case of Envirodeck, Graver says the business was saved through continual focus on the gap in the market. “Through intense global product sourcing, supplier canvassing and a life-saving loan, I managed to slowly recover and turn the business around so that by 2009 it had broken even.”
*Share your experience of setting up your own business, or simply ask a question. Our business panel can put you on the right path.
