By Abram Molelemane and Anton Ressel
Research shows that the most stable economies in the world, including Switzerland, Finland and Singapore, share a common trait – they have invested heavily in developing the SME sector in their respective nations. As a result of their special focus on helping small businesses to grow, they have managed to encourage innovation, create more jobs and decrease their crime and poverty levels. Sadly, not enough countries are following this lead – globally, about 80% of all new businesses fail within their first five years.
A recent article in The Herald by Caiphus Kgosana reveals that five out of seven small businesses started in South Africa will fold in the first year. This is against a global average of one out of two small businesses that fold in the first year.
South Africa is not alone in this. According to research, every year 470,000 new businesses open in Brazil, but 43 percent will close their doors before their third anniversary. Furthermore, in his article in the Business Journal, author G Scott Thomas writes that in America within a recent two year period 170,000 businesses are estimated to have closed, and the list goes on.
Support and resources available
But all is not bleak; in South Africa, the good news is that there is plenty of business support, and a Government that at least tries to assist the SME sector to grow. In its Interpretive Guide to the Codes of Good Practice, South Africa’s Department of Trade and Industry states that “Jobs cannot be created without the growth of the small business sector. This will only be achieved if small businesses are assisted to grow, develop and graduate from micro and survivalist entities to become sustainable, job creating enterprises”. (p.82)
While passion and hard work are recognised as vital aspects to help business owners thrive, a solid support system and access to learning, skills development and mentorship are often the difference between success and failure. This is where business support and Enterprise Development providers come in. ED companies provide small and emerging businesses with the necessary infrastructure and strategic guidance, as well as an environment in which information, experiences and ideas can be freely exchanged. They also offer an increasingly important solution to corporates looking to bolster their BEE Scorecards through ED and Supplier Development.
Done properly, good business support programmes bolster the entrepreneur’s skills and knowledge base, better preparing them for business in the open market. To cut a long story short; a good small enterprise development programme works to strengthen entrepreneurial management skills through capacity building and training, and this translates to the adoption of good workplace practices in micro, small and large enterprises.
Many organisations and individuals engaged ‘in the trenches’ in enterprise development and support to emerging entrepreneurs report increasingly positive signs of a renaissance in entrepreneurial activity, in contrast to the bleak reports. Incubators and ED specialists such as Aurik, Fetola, Raizcorp and others are doing sterling work, and programmes like Legends and SAB Kickstart have delivered some impressive results. The sharpest of business owners use a combination of offerings – free Govt support and proven, results-driven ED providers.
One success story is Legends participant Molefinyana Seqhala, Founder of Seqhala Open Projects. This fast-growing electrical consulting and construction firm was started by Seqhala, a qualified electrician who identified a gap in the market for a multi-service provider of electrical, building, maintenance and security services, in response to what he saw as domination of the market by one or two established players. In the past four years, Seqhala has grown a promising business – he has purchased several work vehicles, increased his turnover by over 800% and currently employs 15 people, with plans in place for expansion into manufacturing of building and related materials. A little over five years ago, Seqhala was an employee working for one of his competitors.
Seqhala equally credits his hard work and the support he accessed from Fetola’s Legends programme for the mentorship, training and advice he received to help his business thrive.
The real McCoy – choosing the right business support
Although there is plenty of support and resources available, it’s worrying that every second person you meet these days seems to offer Enterprise Development services or is a business support practitioner or consultant of some description.
“Enterprise Development is a task for people with proven ability and experience in generating and growing sustainable businesses. It is not enough to focus on the theoretical domain of the Business Plan or the business training programme, nor to simply apply specialist financial acumen; a successful ED programme requires a practical, ‘insiders’ understanding of the organisations they are trying to assist,” explains ED specialist and Director of Fetola, Catherine Wijnberg.
She poses five key questions that can help the ED, Supply Chain, Procurement or Transformation manager choose the right ED provider:
1. Evidence. What evidence is there to show that this provider can achieve the required Enterprise Development results, such as business growth, job creation and business longevity?
2. Reputation. Does the provider have the reputation for delivery and a proven history in ED? Do they display responsibility and reliability? Do they have a history of ethical and open relationships? Is this someone you would like to be associated with?
3. Open. Is the provider open to your input, scrutiny and genuine partnership? Is this a partner or simply a ‘tick-box’ solution?
4. Verified. Is there evidence of verifiable results that can be used to verify BBBEE scorecards? Do tracking systems guarantee certification outcomes?
5. Added Benefit. What added benefit can this provider bring to the company? Cross-marketing, media, new business development?
Whether you are a business owner looking for help, or a corporate leader wanting to invest in ED solutions that will have a genuine and lasting impact, finding the right business support partner who has taken all that learning from the School of Hard Knocks and used it to develop programmes and support that are practical, holistic and needs based, is worth its weight in gold – not just to your organisation on an individual level but to the nation as a whole. While government-funded programmes and incubators have achieved good through-put in numbers, the fact that they are seldom staffed or run by actual entrepreneurs should make one wary of the quality of information they provide.
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About the writers:
Abram Molelemane is a journalism graduate from the Tshwane University of Technology. He has written for various publications such as Wealthwise magazine and Reckord newspaper. In 2011 he was nominated for the Reckord print journalist of the year award. He is currently employed as the media officer at Fetola (www.fetola.co.za )
Anton Ressel is a Senior Consultant at Fetola and has over 15 years experience as an entrepreneur, trainer, business developer and mentor in the emerging business sector. A published writer for Sawubona, Business Day, fin24, Entrepreneur Magazine and many others, Anton is a Director of the Fetola Foundation as well as co-founder of Streetwires, one of South Africa’s largest and most successful social enterprises.