Small business equals big social and economic benefits
If you care about job creation, you should also care about entrepreneurs in general and SMEs (small and medium enterprises) in particular.
Start-up businesses are crucial to SA’s future growth, creating up to 60% of new jobs compared with 15% of jobs coming from big organisations.
Success for the SA economy means large businesses must buy products and services from as many SMEs as possible. In fact, it is in the interests of big businesses to be obsessed with the creation of markets and not just the creation of jobs.
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There is nothing more useful than extending one’s hand to lift up another. Good business meets an unmet need, or an existing need, better, cheaper and much more efficiently. While the government and the private sector understand this and have together rolled out numerous initiatives to support smaller businesses, much more is needed.
Over my years in many different business roles, I’ve consistently found that when small-business owners are asked what their five biggest challenges are, the number one problem is access to market.
Second, such owners and entrepreneurs need financial literacy skills to enable them to understand the difference between income and profit, among other factors that are so crucial to sustaining a business, including the important role of cash flow.
The third biggest challenge small businesses face in SA is support. What these businesses need initially is access to the value chains of big companies. For most local entrepreneurs this is their first venture into business ownership. While they are good at the thing they do or product they produce, they know nothing, or very little, about the day-to-day running of a business.
The other main challenge faced by SMEs is finance. In as much as there are initiatives to mitigate this obstacle, a lot still needs to be done to ensure entrepreneurs have the support needed for growth and sustainability. This includes counselling, coaching and mentoring.
This is the reason SiSebenza was launched, together with Marc Lubner, Andrew Robinson and Gary Woolf. We’ve started a new SA business that is driving social and economic change by disrupting SA markets.
Former US start-ups such as Lyft and Uber have reached market valuation of more than $1bn in a short period. There are now many such companies in the US — commonly called unicorns — and we are working with some to bring them to SA. Disruptors like this typically stimulate economic growth, create jobs and address high levels of unemployment.
We are now providing shared office space to large organisations and small businesses to encourage networking in SA and elsewhere in Africa. Studies in the US have shown that networking between large and small businesses has raised the survival rate of first-time entrepreneurs and new businesses by 12% after three years.
All businesses start small, and by providing a new or better service well they help themselves and the community in which they operate to create jobs and make the community sustainable and resilient.
If you think you have a good business idea, the trick is to start. Pace yourself, as in the first six to nine months you might need to go without a salary. As you start earning money, pay yourself a consistent salary the business can afford, but at the same time save for a rainy day. You must plan to grow into a big business at some stage. SMEs are not designed to be forever small and should also look at being competitors of established multinationals.
Bonang Mohale is CEO of Business Leadership SA and cofounder and executive chair of SiSebenza.