South African SMEs represent over 98% of business, employ up to 60% of the country’s workforce and catalyse about a quarter of the private sector’s job growth, according to McKinsey. They’re the lifeblood of the economy, so it’s critical they succeed. Once the first 1 001 days in operation are over, entrepreneurs might start getting a little complacent. But, that’s the time to tighten the reins, reassess a roadmap and streamline efficiencies.
In the current Covid-19 climate, having a clear plan and reassessing priorities are especially important. Now’s the time to be hyperaware of the pitfalls entrepreneurs run into. Here are some of the ways entrepreneurs can address the most common challenges they can face after the first 1 001 days in operation:
- Seeking sources of funding: McKinsey found 36% of surveyed SMEs were not receiving government loans or support, and 25% weren’t accessing UIF or PAYE. This was often because individuals didn’t know they could apply. If you’re a struggling small business owner, reach out and seek advice on how to secure financial assistance. The South African government has listed some ways to apply for additional funding here.
- Prioritising financial planning: Small businesses frequently face cash-flow and liquidity problems. They’re often extremely dependent on clients paying invoices on time. McKinsey suggests it’s crucial to establish the right financial, operational and strategic structures to bolster resilience. Amid the pandemic, it might be time to reprioritise finances and meet with an adviser who can deliver a financial roadmap for sustained ‘health’. It might also be necessary to scale back ambitious plans and focus on the company’s core offering.
- Seeking alternatives: With Covid-19, many businesses have had to take drastic measures and switch to alternative suppliers, distribution channels and even entirely new products and services. Not harnessing the power of e-commerce, for example, could be detrimental in a time when consumers are online more than ever before. Adaptability is the name of the game.
- Scaling at the right time: A common mistake many entrepreneurs make is trying to scale at a fast pace before the foundations are really in place. Another issue is hiring too soon. While it’s admirable to want to create job opportunities for others, it could also be detrimental if the business isn’t ready to support this. Growth is, of course, often dependent on hiring. But hiring too soon could dampen growth. It’s about getting the balance right.
- Avoiding owner trap: When your business is your baby, you might find it very difficult to trust anyone else to lead it. And that’s a big problem. McKinsey found that many SMEs struggle to move beyond a restrictive owner mindset, often because strong performance management and operational systems aren’t in place. Avoid the owner trap by hiring the right people for well-defined roles with clear KPIs. Then have the confidence to delegate decision making. It’s wise to invest in capacity building at the leadership level when you can.
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To find out more about our insurance solutions best suited for your business, speak to your intermediary or visit www.santam.co.za.