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issue one March 2005 A practical guide for small business owners Starting your business In this issue: Managing your business Failing to plan, or planning to fail? Business plan guidelines and tips on 02 Getting the basics right Have you got what it takes to run your own business? Ask yourself 22 Financial foundations Leasing vs purchasing, financial admin and management – and what most small business owners ignore these questions technology that does it for you! in their planning 04 06 Which structure suits your business best? The ins and outs of being a sole 32 Legal requirements Tax compliance and tax trimming tips; legalising your software proprietor, close corporation, or Pty (Ltd) 39 Insurance essentials What needs to be insured? 08 Costs: How much are you in for? Determining start-up costs; hidden You'll be surprised! costs; calculating actual profit; and managing cash flow efficiently 41 Marketing your business Low-cost ways to promote your business 12 What assistance is available? What banks want and what they offer; government incentive schemes 44 Real life Why a 34-year-old tobacconist and grants; venture capital; and business turned to e-commerce equity funding 16 Untangling technology How to decide what infrastructure 48 Real help Where to learn more – must-see websites, useful contacts and training you need and which hardware, opportunities software and connectivity products you shouldn't be without 28 35 Record-keeping for small businesses Getting a handle What to keep, where to keep it, and how on human resources long to keep it for, PLUS what the Electronic How to find – and keep – good staff; Communications and Transactions Act labour law essentials; get the most means for small businesses from your teleworkers The Small Capital practical guide for small business owners Making small business is proudly brought to you by: work in South Africa Do you own a small business, or are you an entrepreneur 01 with an idea that you can't wait to get off the ground? Well, you are in good company. Small, Medium and Micro Enterprises (SMMEs) contribute around 40% of South Africa's gross domestic profit and employ more than half of the private sector work- force. It is estimated that as much as 80% of new jobs in world economies are being created by SMMEs, making small business a key player in the future growth of our country. This Small Capital handbook is the first in a series of practical guides that offer clear explanations, logical suggestions and expert advice for small business owners in South Africa. This issue focuses on starting and managing your business. It contains the tips, tools and "must-have" references you need to save time, share know- ledge and secure maximum returns on your small business investment. WIN WIN An MWEB Business Adviser The opinion(s) view(s), information, article(s), reference(s), competition(s) or offer(s) kit, or a WIN (the "Material"), contained in this publication are published without any responsibility whatsoever on the part of Real Business, Fujitsu Siemens Computers, MWEB Business, 12-month Microsoft and Standard Bank (the "Sponsors") or Words'worth (the "Publisher"). The Material contained herein is based on the best available information at the time of website package 47 publishing. The Sponsors and Publisher hereby disclaim responsibility for any Material contained in the publication which may be incorrect, unacceptable or inaccurate, and A complete Fujitsu Siemens shall therefore not be held liable under any circumstances, for any loss, damage, costs, expense or injury (including without limitation direct, indirect, incidental, special, Computers home office workstation 31 27 One of 100Small Business Kit punitive or consequential loss or damage) which loss, damage, costs, expense or injury results from a reader or other third party, utilising any Material herein. copies of the Microsoft Getting the basics right You've got the office, the chair, a million-dollar idea and you're raring to sign up your first new customer. But have you 02 really got what it takes to run an efficient business? Starting an entirely new business is uncharted your time and follow through on details. territory for most people. It offers great rewards, but equally high risks – around 80% of all new Are you willing to work long hours? When small businesses fail within the you own a business you're committed to it first five years. Wanting to be your 24 hours a day, seven days a week – particularly own boss isn't enough to make during the first few years. you successful and, before you set up shop, you need to think hard Are you good at making decisions? As about whether you have the right a sole owner you will have to make decisions temperament, leadership skills, quickly, under pressure and on your own. support system and dedication to be an entrepreneur. Do you plan well? Research indicates that many business failures could have been avoided Evaluate your strengths and through better planning. Good organisation of weaknesses by honestly answer- financials, inventory, schedules and production is ing the following questions: the oil that keeps any business engine running smoothly. Are you a self-starter? You need to be able to develop Do you have the strength to stay and drive projects, manage motivated? Running a business can wear you down, especially when all the responsibility is becomes profitable, which could necessitate on your shoulders. It takes strong motivation lowering your standard of living. and passion to survive a slump in business, or periods of burnout. Do you have a network of friends or The associates who could provide outside Are you willing to invest? True entrepre- financing? Insufficient capital is a key cause people 03 neurs put their money where their mouths are, of small business failure. If you are not able to and this might mean using personal savings or obtain enough funds from a bank, you may need issue property. to rely on funds from friends and family. Most start-up business are funded this way. Have you considered the possible impact How well do you get along with different on your family? Starting a business can be If you can answer YES to most of the above personalities? Business owners need hard on family life. The strain of a spouse who questions, then you may have the potential to to develop working relationships isn't behind you 100% may be hard to balance join the ranks of successful SMME owners. If you with a variety of people including against your new business demands. There also can't, you need to consider whether starting a customers, vendors, staff, bankers and may be financial difficulties until the business small business is the best solution for you. professionals such as lawyers, accountants or consultants. Can you deal with a demanding client, an unreliable vendor or a cranky employee in the best interest of your business? Small It is estimated that more than 1,5 million self-employed people constitute the SMME sector, contributing about 40% of the total remuneration in South Africa. business According to the Companies and Intellectual Property Registration Office, there are 880 000 registered CCs and 340 000 registered companies. makes a big Micro/informal businesses appear to make up most of the SMME sector. According to the South African Revenue Services there are 510 000 registered VAT vendors. difference Small businesses employ approximately 55% of the country's labour force.* *From www.smallbusinessonline.co.za Are you failing to plan, or planning to fail? A business plan is crucial to the success of any business. This plan is simply a 04 step-by-step exercise in forward thinking. A sound business plan should contain crucial budgets and cash flow forecasts that will show how much profit you can expect your business to make, how much finance you will need and the risk involved. This helps to demonstrate your business idea, how you want to implement it and the long-term viability thereof. The importance of a comprehensive, well thought-out business plan can- not be overemphasised. Much hinges on it: outside funding, credit from suppliers, management of your operation and finances, promotion and marketing of your business, and achievement of your goals and objectives. Inadequate business planning Over-investment in fixed assets reasons Insufficient capital Poor credit arrangements Lack of management experience Personal use of business funds why small Poor location Competition or lack of market knowledge businesses fail Poor inventory and cash flow management Low sales/not pricing properly Surprisingly, many entrepreneurs drag their feet Your business plan should do the following: when it comes to preparing a written document. Identify the target market by defining your audience; the size and scope of the market; They argue that they don't have enough time, or details about competitors; your pricing and marketing strategies. that the market changes too fast for a business Explain the benefits of your product or service, how it is unique and its appeal to plan to be useful. But just as a builder won't customers. Include information about your company's location and how that location begin construction without a blueprint, eager will benefit your business. business owners shouldn't rush into new ven- Show that you have effective management – people who not only have the necessary 05 tures without a business plan. A business plan is business skills, but who also work effectively together. your roadmap to success. Focus on the future by attempting to develop forecasts of relevant business trends over the next three to five years. At the same time, do not be too optimistic in estimating Before you begin writing your business sales potential. Allow for the best, worst and most likely scenarios. plan, consider four core questions: Highlight current and potential problems and show how they will be overcome. This What service or product does your business helps you avoid problems and boosts your credibility with investors and lenders. provide and what need does it fill? Develop a financial plan that includes a capital equipment list, a balance sheet, income Who are the potential customers for your statements or projections for three years, cash flow statements, break-even analyses and loan applications. product or service and why would they pur- chase it from you? For a business toolkit to see you through the planning stages, see How will you reach these potential www.bcentral.co.uk/betterbusiness/default.mspx customers? Where will you get the financial resources to start your business? Don't reinvent the wheel … See www.standardbank.co.za in the business banking section, under the Success in business is never automatic. It isn't The Standard Bank heading "starting a business". strictly based on luck – although a little never website offers a detailed • This guide includes automated financial business plan template hurts. It depends primarily on the owner's fore- calculations and spreadsheets. for prospective small sight and organisation. Even then, of course, • It is also in the bank's preferred format. business owners: there are no guarantees. Starting a small busi- ness is always risky, and the chance of success is slim. Planning is crucial. Which structure suits your business best? There are several ways to structure the legal ownership of your business, depending on the nature of the business, the number of people involved, management capabilities, personal risk and your future plans. Sole proprieter/sole trader: This is best the sole employee. Income accrues directly to suited to a business that is not fixed asset-driven the owner and there are no complicated statu- (ie, is service-based) and in which the owner is tory returns other than meeting basic legal and How to Purchase CC registration forms from a local stationer, or download them from the CIPRO website (www.cipro.co.za). ® egister Choose a name for your corporation, plus a second and third option in case your first choice is already registered. If you have access to the Internet, you can check this by using the name search function on www.cipro.co.za/home. your CC Reserve this name by filling in form CK7. Then complete the founding statement form (CK1) in duplicate. Obtain written consent from a certified financial accountant to act as your accountant. All CCs in South Africa are Certain payments must be submitted with the forms (usually under R200) and can be done via direct deposit, governed by the Close electronic transfer, credit or debit card, or in cash. See the CIPRO website or call the CIPRO call centre on Corporations Act, which 0861 843 384 for details. is administered by the Send the forms, letter and proof of payment to the Close Corporations Registrations Office, Box 429, Pretoria 0001 Companies and Intellectual or Block F, The DTI Campus, 77 Meintjies Street, Sunnyside, Pretoria. Property Registration If the corporation name is approved and all the formal requirements are met, the Registrar will allocate your CC a Office (CIPRO). number. This must appear on all your business documents in addition to the letters CC after its name. tax requirements. The disadvantage is that the separate legal identity without the formalities of business is not a separate legal entity, so the the Companies Act that governs (Pty) Ltd com- owner is liable for, and can be sued for, the busi- panies. This structure is ideal for for a business Tax ness's debts. If the owner of the business dies, that purchases stock on credit. A CC can have the business ceases to exist. between one and 10 members, each of whom Partnership: Based on the same principles owns an agreed percentage of the business and who is liable for managing it properly. A CC can't implications 07 as a sole proprietorship, this structure allows be owned by a company or be a subsidiary of A sole proprietor is taxed as an you to have up to 20 partners who share another CC or company. A CC (rather than its individual, so the more your business responsibility, skills and liability. A partnership members) can sue and be sued. earns, the more tax you pay. requires a contract to formalise each person's All partners in a partnership are taxed contribution to the business, their responsibili- Company (Pty) Ltd: This is also a separate as individuals on their share of the profits. ties, profit share, means of resolving disputes, legal entity in which directors are protected from The more they earn, the more they pay. disability/death insurance, and what procedure individual liability. A company can make shares Close corporations offer tax benefits in will be followed if the partnership changes or is available to staff as a private company (Pty) or to that you can keep retained earnings in the dissolved. Finding funds for a sole proprietorship the public as a limited company (Ltd), and these business and delay the payment of tax. or partnership depends on the security that the are easily transferred from one owner to another. However, CCs pay a fixed rate of tax on individual owner/partners are able to provide. (Pty) Ltd companies are subject to an annual every rand of profit earned. audit. This is the best legal structure for people (Pty) Ltd companies pay a constant rate Close corporation (CC): This is a popular and who ultimately want to sell their business to a of tax regardless of income level, and are widely used structure that gives a business a large competitor, or list on the stock exchange. subject to an annual audit. WHAT IS … a trading trust? WHAT IS … a cooperative? A trading trust is created by a deed, under which property This is a separate legal entity that provides limited liability is held and managed for the benefit and profit of the and conducts business for the benefit of its members. Its beneficiaries named in that deed. It is not a separate legal members are also, to a large extent, its customers. For entity from its trustees, but is regarded as such for tax and example, cooperative societies or companies are used transfer duty purposes. Trustees must be authorised by the extensively in agriculture for the supply and distribution of Master of the High Court. Trading trusts are appropriate for farming supplies and products within farming communities. businesses such as property development enterprises. R+R+R+R+R How much are you in for? = During start-up phase, the small business owner needs funds for once-off start-up costs as well as at least six months of 08 working capital. Plan for things to cost more than you think, RRRRemember those and include this budget in your business plan. little extras Calculating start-up costs 2. Start-up inventory (if yours is a product- Your start-up budget should also If you are not sure what your expenses will be, based business). allow for initial monthly operating expenses, such as: make finding out part of your due diligence. 3. Cash reserve to support the company during • Rent/mortgage payments Research similar businesses in your industry and the early months before sales reach break- • Website hosting even levels. aim to uncover any general expenses that you • Equipment leases or loan might not have thought of. If possible, consult a 4. Current assets, such as fixtures and signage, repayments • Salaries/wages lawyer or accountant who has experience with office furniture and vehicle/s (either pur- • Ongoing advertising/marketing small businesses. chase price or down payments). • Insurance 5. Long-term or fixed assets, such as property • Tax payments Typically, start-up costs include the following: and equipment. • Utilities • Transport 1. Expenses before the starting date, such as • Office supplies/consumables market research, registration fees, legal Beware of hidden costs fees, office stationery, design and printing Hidden costs are those you don't see, don't Consider speaking to a business of corporate identity (business cards and always expect, and which seldom feature in a banker for practical advice before you apply for finance. To locate your letterheads), registration of a domain name business plan. In fact, many people don't realise nearest Standard Bank expert, or to and creation of a website, installations and that, while they are pounding away on their arrange for a mobile banker to visit treadmills, the main things holding back the utility connections (if moving into a new you, call 0860 012 345. property). growth of their small business are costs that haven't been factored into the monthly budget. These costs vary, depending on the Gavin Bramley, size and nature of your business, and owner: Unique can include: Wealth (Pty) • Monthly interest on your business Ltd, a financial 09 overdraft (R100 000 at 11% costs services organisation you R934 every month). The interest rate is linked to the official prime rate SUCCESS TIP: and is dependent on factors such as risk Develop referral contacts profile, usage and collateral. "I learnt how to leverage myself by developing mutually beneficial • Bank interest charged by suppliers when you contacts who I could help pay them late. and who could assist me with • Interest lost when customers pay you late, or when you growing my business. Now I have pay a third-party supplier before you have been paid by people who are looking out for opportunities for me, and they your own client for a product or service. do it because they know I'm also • Depreciation of equipment and property. looking out for them." • Maintenance (eg, IT support, vehicle services). • Money lost by spending time on tasks that LESSONS LEARNT "Have some back-up capital to could be outsourced (eg, spending R60 on take a little pressure off yourself a driver or delivery service, compared to an when you start. This allows you hour or two of your time that could be bet- to have natural interactions with ter spent closing a sale). business prospects rather than desperate ones." • Commissions and administration fees (eg, of benefit plans). • Employee turnover is one of the most substantial hidden costs in busi- ness today and is commonly referred to as "the silent profit killer". Remember that an flow problem. Developing a cash flow forecast employee costs more than his/her salary. Factor will indicate the estimated money flowing into in the cost of additional equipment, office furni- and out of the business over a period of time, ture, perks and training. allowing you to set budgets and targets, and monitor performance. You can't always avoid these costs but being 10 aware of them helps you minimise their impact In a new business you don't have existing cash and plan for them in your budget. flow information on which to base a forecast. In the book Up and Running: A Guide to Running Managing cash flow efficiently Your Own Business, local authors Andrew Poor cash flow is one of the major causes of Patricio and Paul Mitchell suggest using the fol- failure in small businesses. You can turn a profit lowing questions as a guideline: but still go bankrupt if your business has a cash Intelligent Keep overheads down: Every Rand counts. If you have a 20% mark-up, then every Rand of fixed costs spent unnecessarily means five additional sales are needed to get back to the same ways to control point. It's easier to save costs than to grow profit, so don't buy new if you can do with second- hand, and don't buy at all if you don't really need it. cash flow Avoid credit terms: Bad debts are the quickest way to sink a small business. Make sure your payment terms are understood and agreed to in writing before a project begins or a sale is made. Debt collection: Follow up as soon as money is due. A new debt is far easier to resolve than an old one. Improve supplier payment terms: Negotiate preferential payment terms, extensions of credit lines or discounts for early settlements. However, don't compromise your relationships with your suppliers – you need them on your side. Keep stock to a minimum: Stock costs money to buy, transport and store. It can also be stolen, damaged or become obsolete. Managing stock sensibly is as important as managing cash flow. • What portion of your sales will be for cash, Bear in mind the following factors: Buying a business if any? • Seasonal fluctuations. The advantage of buying an existing • What purchases will you have to make to • Price increases. business is obvious – most of the start-up achieve those sales? • Emergency situations. pains should be over and it should have an • How much opening stock will you require? • The need to be conservative and realistic. established customer base. But you should still write a business plan – it's the best • How much capital do you have available to • Allow for late payments by debtors. way to get to know the business and to invest in the business? make sure it survives the change of owners. 11 • What loans are you going to make from the Regardless of the size of your business, it's bank or other sources? important to do regular cash flow and profit HOW MUCH? There are many ways • What monthly expenses will you incur? projections if you want to maximise returns and of calculating the price of a business. • What capital expenditure are you going to minimise cash flow problems. For a standard formula to calculate make? the worth of an enterprise, see www. standardbank.co.za (in the business • What monthly salary are you going to draw? section, under "starting a business"). Calculating cost vs profit Regardless of the type of business you are Determine your mark-up using this formula: in, the price you charge has a direct effect on the profit you make. Simply put, the lower (selling price – cost price) x 100 your expenses and the higher your prices, the Mark-up = cost price greater your profit margin. Under-pricing will cause your business to fail, while over-pricing Mark-up is NOT the same as gross profit will lose you customers. margin, which is calculated as follows: Set prices by establishing the total cost of the Gross (selling price – cost price) x 100 = product or service provided (including all the profit selling price fixed and variable costs mentioned on the previous pages). Divide this by the quantity of Example: If a can of cold drink costs R1,50 and products produced, or hours spent to establish you sell it for R3,00, then based on the above your cost price. Find out what your competitors formulas, your mark-up is 100%, and your Up and Running: A Guide to Running Your Own Business is are charging, and then decide on a selling price. gross profit margin is 50%. published by Massive Publishing (2000). ISBN 0-620-2615-2. What assistance is available? The hunt for finance is an ongoing challenge for most small businesses in South Africa. Depending on how much you need 12 and what you need it for, there are various funding options to get – and keep you – up and running. Sourcing How does your business look to a bank? The determined by your monthly repayments. first questions banks ask when you apply for a money from loan, are: "How sound is the business plan?" An overdraft is quick and easy to arrange, and your debtors "How strong is the projected cash flow?" "Do aids cash flow management because the cash is Debtor finance involves selling you clearly understand the business, and do you instantly available when you need it. However, your debts (amounts owing to your have the skills to run and manage it?" Banks the interest rate on an overdraft is high and business) to a third party at a discount, also require collateral in the form of cash depos- using it for an extended period adds to your in return for cash. The purchaser then takes over the collection of the debts. its or assets. This gives the bank security in case overheads. Most commercial banks offer this you are unable to repay the loan. It also shows service and pay you an agreed amount your commitment and willingness to take a risk. A business revolving credit plan is a loan (usually 75%) at the time of purchase. where repayments are made in equal monthly Generally they charge a service fee or a percentage of the credit sales. Each A business-term loan is a relatively simple instalments. Once you have paid back a por- bank or factoring company has certain way to secure funds (from about R50 000) for tion of the loan (usually around 25%), you can criteria that your business must meet any period up to eight years, repayable in equal withdraw the funds up to the original limit. The in order to qualify for debtor finance. monthly instalments. This can be used to pur- fixed monthly payments make for easy cash flow If you work with large companies that often pay late, this can be a way of chase assets, fund refurbishments or buy a small planning. improving your cash flow situation. business. The loan period is not fixed and is A medium-term loan has flexible repayment options structured in line with customer cashflow A commercial property loan offers long- term finance for the purchase or building of The challenge In 2002 there were 2,3 million people who and is paid off over two to seven years (some- commercial or industrial premises such as shops, owned non-VAT-registered businesses. times longer, depending on the bank and what offices, warehouses and sectional title units or More than half of these required money best suits your business and cash flow). This is complexes zoned for business purposes. It also to start their business, but only 11 067 suitable for big capital expenses and is usually covers existing residential properties that are (less than one percent) obtained it from commercial banks. linked to the prime interest rate. The size of the primarily used for business purposes and which 13 loan depends on how much collateral you have. have business rights. Standard Bank suggests following these five steps when applying for finance: You can use a business mortgage (up to How to get finance if 1. Download the relevant application forms from www.standardbank.co.za. about R5 million) to buy a "residential" property you don't have collateral 2. Complete the forms that refer to for use as business premises. Normally the loan Most small business owners find start-up capital "building your business plan". is for up to 80% of the property's assessed value from their personal assets, such as savings and 3. Using the notes on this website, and is repaid over 15 to 20 years. The potential retrenchment packages, or by using shares, complete the financial forms. 4. Set up an appointment with a business to convert the property back to residential use bonds on a home and insurance policies as banker and make sure he receives a must be maintained. security. You should be prepared to invest as copy of your business plan at least three days beforehand. To buy, or not to buy? 5. Apart from your business plan, take proof of identification of yourself and your Few small businesses can afford to pay cash for assets such as vehicle and office business partners, proof of ownership of equipment. There are various ways of financing these, depending on your cash flow and the assets mentioned in your business tax situation: plan and copies of your lease or rental Instalment sale: This means you can use the asset from the start of the instalment contract, agreements. Be completely open with but it only becomes yours when you make the last payment. your banker. If you have a poor credit Leasing: You use the asset and pay "rent" to the leasing agent or owner. At the end of your record, give your banker all the details repayment period you may buy the asset, refinance it or continue renting it. and reasons why, and a record of how Full maintenance lease: This is the same as leasing but includes maintenance, eg, of cars or the debt was repaid. computer equipment. Access finance: This allows you to pay extra money into a particular loan account. You benefit from the lower interest charged, but are still able to withdraw that extra money at any point to purchase assets if your business needs them. See page 22 for more pros and cons of leasing much as you can in your business before you expect others to invest in you. However, if you Incentive schemes: Some organisations offer financial incentives such as reduced interest Who else to ask don't have enough security to qualify for a nor- rates and payment terms, bridging finance, There are organisations in South Africa mal bank loan, there are alternatives. import finance and development or rehabilita- that offer finance to SMMEs, from as tion funds. These are usually available if a busi- little as R500 for small enterprises (eg, hawkers) up to as much as R15 Guaranteed loans: Khula Enterprise Finance ness establishes new facilities in economically million and more for big development 14 Limited is a government agency that enables inactive areas, creates significant job opportuni- projects and existing businesses. The local banks and finance institutions to provide ties, beneficiates natural resources or uplifts a Pretoria-based Business Referral and collateral-free loans to SMMEs. Khula will guar- community or environment. Names, descriptions Information Network (BRAIN) runs a national database of agencies that antee up to 80% of a bank loan on behalf of a and contact numbers can be found at offer this type of funding. This list small business that does not have assets to put www.brain.org.za/FINANCING/incentives.html. can be viewed at www.brain.org. up as collateral. To qualify for a Khula-supported za/sections/financing.html. It can loan, you have to meet the normal banking Venture capital and equity funding: This also be obtained from the BRAIN National SMME Information Centre: requirements and provide a 10% deposit. For is the process of securing funds (usually from PO Box 395, Pretoria, 0001. Tel: information contact your nearest bank or phone about R500 000 up to R20 million) through 0860 103 703. Web: www.brain.org.za. the Khula toll-free line on 0800 118 815, or see another company to start or expand your busi- www.khula.org.za. ness. The funder expects higher than average returns and normally obtains equity in your busi- Donors and funding agencies: If your small ness. The SA Venture Capital and Private Equity business involves innovative research and Association (SAVCA) publishes a directory of development or has the potential to make a sig- members and their investment preferences. nificant impact in a particular industry, there are They can be contacted on (011) 885-2666 or agencies that will provide development funds www.savca.co.za. without requiring collateral or repayment. These agencies provide funding via a government department or through a partnership with a major South African company that has an inter- est in the research being funded. For examples go to www.brain.org.za/financing/donors.html. How to start without money If borrowing money from family and friends … Don't quit your day job: Use your current keeping and customer care. These will keep your DON'T be too relaxed about financial income to experiment with your idea. Find out business running while you focus on growing agreements. what prospective customers think of your idea your client base. DON'T ignore the possibility of failure. and whether there is a market for your product. 15 Build up sales before you launch: Ideally, get DON'T ask for more than they can afford Work out (and use!) a business plan: Start a few regular customers before you go into the to do without. working on a business plan as soon as your business full-time, to build up a customer base. DO keep them regularly updated. ideas begin to come together. Develop this plan as your ideas change. Get some suppliers on your side: See DO be open to their advice. whether your suppliers will give you a few Get the paperwork out of the way: Attend months in which to pay while you are starting DO consider being mentored. to all the regulatory requirements early, so that up. This way, you don't have to get loans to buy you don't waste valuable selling time once your supplies. business is launched. See page 32 for details. Start gradually: There may be certain products Get your systems in place early: Don't or services that sell better than others, with less launch before you have systems in place for infrastructure and capital outlay. Start with these things like record-keeping, invoicing, book- and get the cash flowing. Five venture capital basics Before talking to investors to secure additional finance, make your proposal as appealing as possible by following these steps: Build a Make your business Approach the Know Network, management team: plan stand out: right investor: your market: network, network: Experience and the ability Show the potential Don't waste your time Compile statistics, Develop relationships with to grow the company is of your idea. on people who have interview potential attorneys, accountants the number one priority Be concise never put money into a customers and read trade and people who have for most investors. and tell the truth. company like yours. journals. investor connections. From Trend Magazines Inc, (US) 2004 Untangling technology There are countless hardware products that promise to help entrepreneurs do things better, faster and cheaper. But 16 before you rush out with your wallet in hand, make sure you understand the basics … What are you going to use the equipment for, The Central Processing Unit (CPU) controls and what do you need it to be able to do? the speed at which a computer processes Many small office systems are sold as all-in-one information. You'll need a PC with at least a packages, which offer great value but might not 450 megahertz (MHz) processor for tasks like include everything you need. Consider the follow- bookkeeping and using the Internet. For heavier ing and make a list of "must-have" requirements: demands, like graphic design or architectural Know How will you communicate with the people involved in your business? How often will you How will the information in your business be used and shared? If staff need to regularly need to use the phone, fax machine, email or access information stored on different your needs Internet? computers, you might need to network your machines. What systems do you need to operate your business, eg, basic administration, or Do you need to be mobile? How critical is it specialised systems such as graphic design or for you to be able to access information while stock management programs? you are away from your office? What hardware do you need to run these What kind of free help and technical support systems? Different software requires different will you need? Will the vendor you buy from PC operating speeds, memory and storage be able to provide it? capacities. drawings, you'll need 800MHz or more. not a touch-typist. Some machines have a built- essential in mouse (in the form of a trackpad or trackball). hardware Random Access Memory (RAM) is where Choose what you feel most comfortable with. your computer stores the information it is cur- buying tips rently working on. The more memory you have, PCs usually come standard with a 3,5-inch Buy a recognised brand name or from a the faster you can work and the more programs disk drive, as well as a CD-Rom or DVD reputable dealer. you can have open at the same time. Choose at drive. Check that whatever you buy has extra Buy a complete system from one 17 manufacturer, so there are no least 64 megabytes (MB) for basic administrative disc drive slots in case you want to add more arguments about support if things go tasks, and double or more if you're using graph- drives in the future. wrong. Get a next-business-day, three- ics-based software. year, on-site warranty. Sound and graphic cards allow you to pro- Don't cut corners when it comes to The hard drive is where your PC stores your cess and play back sound and images on your your comfort: spend extra on a good work and programs. Most PCs come with at PC. Cards with more built-in memory offer better mouse and keyboard and a large, high- quality monitor. least a 40 gigabyte (GB) hard drive, which is performance. A designer, architect or computer Be wary of cutting-edge technologies or adequate for a basic office machine. The rule of animator, for example, would need a high-end new releases. They cost more and may thumb is to buy the biggest you can afford – the graphics card that is able to process more col- have bugs that need to be worked out. smaller the hard drive, the sooner you will have ours and information at the same time. Your needs will grow. You may only to upgrade your machine. need a word processor now. That's Avoid "clones". Unlike branded machines (eg, almost guaranteed to change within Large monitors, or screens, make for easier Fujitsu Siemens Computers), the companies the life of your hardware. viewing but are also more expensive. Sizes range that manufacture and sell clones do not invest Don't buy cheaply and plan to upgrade. It's a much better investment to buy a from 14 inches to 21 inches (the diagonal meas- in extensive research and development. They quality system that will give you service urement) and most people are comfortable with source components – often at the lowest cost for three-to-five years. a 15- or 17-inch screen. possible – from several suppliers. While clones From www.geekgirls.com/basic_choosing_hardware.htm are generally slightly cheaper than branded com- Choose a keyboard and mouse based on puters, their long-term reliability is questionable. For information on trends, services and hardware solutions specifically for the small comfort and ease of use. Ergonomic keyboards Clones can cost you more in the long run as business market, visit the Fujitsu Siemens are shaped to the natural alignment of your downtime can seriously affect productivity. Computers website at www.fujitsu-siemens. fingers and wrists but can be awkward if you are co.za/sme/index.html. Software for small businesses Think of software as a set of tools designed to take the "slog" work out of running your business. The right tools can raise 18 your business to a whole new level. The wrong ones can cost you time, money and a great deal of stress. Choose wisely. Before you do anything else, decide which oper- the best all-round business support, flexibility ating system you want to use. There are a few to and security and is suited to most, if not all, choose from but remember that not all software business applications. will run on all operating systems. If a particular program is essential to your business, this will Operating systems usually come with a variety dictate your choice. Microsoft Windows offers of high-quality software included, such as email Protection software Specialist/tailor-made software Computer systems sometimes come bundled with utility software, Certain work may require specialist or tailor-made software. This can be which handles the housekeeping and maintenance tasks on your pricey, and cost does not always reflect quality. Do some research and computer. By far the most important of these is an anti-virus program consult with others in your industry who have used similar applications. to protect your machine from data loss and file corruption. Ask your See whether your local trade organisation has any recommendations. software vendor about it when you buy your computer, and again when If you employ a programmer to create custom-made software, use you buy your software. Don't start using your computer without one. one who is familiar with your type of business and who comes with The Microsoft Small Business security hub website offers advice and good references. Also make sure you get all the source code for any updates on security issues, as well as a security checklist for users to programming work that is done. Without it, you won't be able to get work through. technical assistance if your original programmer moves on. See www.microsoft.com/southafrica/smallbusiness/issues/sgc/default. Visit http://directory.microsoft.com/mprd for a Microsoft partner in mspx or www.microsoft.com/seminar/events/series/mitenash.mspx. your area. and Internet browser software and a selection for basic business publishing and marketing Need your own server? of fonts, among other things. However, you will materials (eg, Publisher). still need to purchase licensed copies of any • Email software with contact management Then this offer's for you specialised software programs needed to run features. This should allow you to man- In a small office environment, networking your business. age email and general communication, your computers allows you to transfer calendars, contacts, personal and team documents and share printers or an Internet connection. If you have more than Most basic admin programs are available in information, as well as business contacts, 19 five computers, however, you may need to integrated office software suites, which can be sales opportunities and personalised email perform more complex tasks like managing bought as single packages. These offer good marketing campaigns (eg, Business Contact email or connecting to your network value if you need two or more of the included Manager in Outlook). remotely. You can do this by installing your applications. There are several major office suites own server. available but they don't all contain the same While it is possible to set up accounts in a This functionality comes at a price, type of software. They are also often available spreadsheet program such as Excel, you might however, and many small business owners in different versions, catering for different needs prefer to buy a separate accounting package. are put off buying their own server and budgets. So don't just compare prices, com- For sole proprietors, a personal financial pack- because of the capital outlay involved. pare contents too. age may be sufficient (eg, Microsoft Money). For Microsoft and Fujitsu Siemens Computers more complex requirements, consult with your are offering Small Capital readers a small Typically, an office software suite (such as accountant to make sure you buy a package that business server package that combines a Microsoft Office) should include everything you is compatible with his/her software and that PRIMERGY Econel50 server with a year's next-day support and Microsoft Small need to run the financial and administrative suits your company's requirements. Business Server Standard Edition 2003. aspects of a small business, for example: • A word processing package for basic layout and formatting of documents (eg, Word). For software information and training options, visit www.microsoft.com/office, www.microsoft. R8495 incl VAT and delivery • An office spreadsheet program for basic com/money and www.microsoft.com/ Offer valid until 31 March 2005. accounting, statistical planning and southafrica/learning. For information call 0860 737 837 management (eg, Excel). (0860 SERVER). • An office presentation graphics program (eg, Powerpoint). • An easy-to-use design and layout program Connectivity: what are your options? E-business is not as much about doing business on the 20 Internet as it is about using Internet technologies and the web Three rules of to improve the productivity and awareness of your business. shifting to e-business Focus on people as much as processes: Getting your business online can be simple and which is faster and more reliable than analogue. Business revolves around the people doing quick, but choose your service provider carefully. As with analogue dial-up, you pay for the time it and not the other way around. The itch Think about where your business is heading and spent connected. It is ideally suited to people to put a technically perfect system in place look for an Internet partner that understands who use the line for short periods, or only for has to be subdued – you rather need a system that your staff will use. your needs and that will grow your connectivity downloading emails. If you are spending over with your business. R800 a month on analogue dial-up it's time Automate only as much as you need: to upgrade to ISDN. If you are spending over Start where it matters to you most, eg, STEP 1: Get connected R1 200 a month on either dial-up option, then customer and supplier-facing processes. In a service industry, client contact There are four connectivity options, depending it's time to upgrade to ADSL. management might be the priority. In on your business needs. a product/retail business it might be ADSL: This is a separate digital line, which inventory accounting and tracking. Analogue dial-up: Ideal for the home user, means you are permanently connected. It offers Change starts at the top: If, as a this offers a dial-on-demand connection that stable, secure, dramatically faster Internet access small business owner, you check your operates through a normal telephone line. It is speeds at a fixed monthly cost, regardless of email only AFTER printing it out, then the most common and generally the cheapest how much or how little you use it. It allows you your e-enablement is as good as dead. method of access. to use the phone and Internet at the same time. Change must be believed in and lived by management, owners and partners before the rest of the business can adopt it. ISDN line: This is a digital dial-up connection, Leased line: This is a dedicated, permanent Template vs custom-built websites MWEB Business offers small business owners the option of low-cost, easy to set up template-based websites. 21 These sites are ideal if all you need to do is display your products, services and contact details. They have a very short turnaround time – your website can be live in a matter of days. connection that offers real-time email and your domain name for you. The MWEB Business You usually pay a few hundred Intenet access for a fixed monthly cost. website has a search facility through which you Rand per month, which includes the creation of the site, the hosting fee, Numerous people can use it simultaneously, and can check whether the domain name you want domain name registration, email and it is ideal for business users who spend eight is available or not. See www.mwebbusiness. Internet access. You can make changes hours or more a day on the Internet. co.za/domains.asp. yourself, quickly and easily. For ISDN, ADSL and leased line options you have These sites can be e-commerce enabled at a flick of a switch. to apply to Telkom for the line to be installed STEP 3: Get a website A customised site, on the other hand, before your service provider can connect you to Creating and maintaining a website is the easi- is developed specifically for you. It the Internet. est and most cost-effective way to market your usually involves the help of a web products and services to a global audience. Most developer who can give it a specific look that matches your brand and STEP 2: Your domain name service providers offer website design and host- business identity. Registering your own domain name gives your ing services specifically for small businesses, for They can cost many thousands of business a unique address on the Internet. a minimal once-off fee and a fixed monthly cost. Rands and take a while to develop, You can use it for your email addresses (eg, Your service provider can also give you detailed depending on how complex you need your website to be. firstname.lastname@example.com) and for your com- statistics to show how many people have Hosting a customised site is not pany website (eg, www.companyname.co.za). accessed your site each day, week or month. The normally included in the price of The name remains yours as long as you renew website can also be upgraded at a later stage to developing and can be very expensive it each year. Your service provider can register include e-commerce capabilities. depending on its size and speed. Financial foundations Should you lease or buy? Do you want to merely use the asset in the short term or own it in the long term? 22 Before you sign on the dotted line, consider the pros and cons of buying vs leasing. Owning assets increases the value of your busi- fixed monthly fee and ownership of the equip- ness and provides security with which to obtain ment reverts to the owner (lessor) at the end of finance. But few entrepreneurs have cash to buy the lease term. The lease cannot be cancelled everything up front, and high loan repayments and you (the lessee) are responsible for main- URSELF ASK YO t every can kill a company before it has submitted its taining the equipment. uipmen , ehic le or eq jor repair risks first tax return. So which is better – to lease or g a new v with no ma t ? Is havin ree years, erm cos to buy? In an operating lease or "maintenance lease", h n long-t two or t important tha than more portant maintenance of the asset is the responsibility of s more im ? t saving payments Leases and loans are simply two different meth- the lessor. Computer equipment is often leased erm cos Ar e long-t lower monthly an low ods of financing. One finances the use of an this way. An operating lease can usually be can- rtant th o re impo o down rship m dn asset, the other finances the purchase of it. One celled under conditions spelled out in the lease Is owne ront costs an p-f ? u p ayment isn't always better than the other and the deci- agreement. sion depends on your particular financial situa- tion and business priorities. Sale and leaseback is similar to the financial lease. The owner of an asset sells it to another Financial leases are the most common by far party and simultaneously leases it back to use and are usually written for a term not exceeding the economic life of the equipment. You pay a Continued on page 24 BUYING: advantages LEASING: advantages You own the asset. It can't be There is no large initial cash outlay or down repossessed, unless it has been used as payment. security for a loan. Being able to spread payments over a longer You are treated as the owner for tax period eases cash flow. Crunch the numbers purposes and can claim your own If equipment becomes obsolete you can upgrade The Standard Bank website (www. capital allowances. it at the end of the lease. standardbank.co.za) offers detailed descriptions of the pros and cons of its 23 You don't tie your business into Lease payments are deductible as operating vehicle leasing and purchasing options. inflexible medium or long-term expenses if the arrangement is a true lease On the home page, click on the "business" agreements that might be difficult to according to the South African Revenue Services. menu and then the "asset finance" button terminate. The leasing firm can provide expert technical near the bottom of the screen. If interest rates fall, you may end up advice. paying less than if you were in a fixed- In the event of bankruptcy, the lessor has less There are also numerous calculators on the Internet and on many bank websites term lease agreement. claim on the assets of a firm than a general for calculating the repayment costs of creditor does. an asset. To compare the costs of leasing vs buying, see www.nebs.com/NASApp/ BUYING: disadvantages LEASING: disadvantages nebsEcat/business tools/lease.jsp. You have to pay the full cost of the Leasing usually costs more over the long-term. asset up front out of cash or borrowed You also lose certain tax advantages that go 3 staff + 2 clients - 1 holiday = 1 car funds. with asset ownership. Loans and overdrafts cost money. They You lose the economic value of the asset at the 3 staff + 10 clients = 1 car + 1 holiday can also be withdrawn at short notice end of the lease term, because you don't own 1 low interest loan from Standard Bank + 3 staff + 10 clients = 1 posh and early repayment demanded. it. Don't underestimate the salvage value of an car + skiing holiday in Switzerland You can't easily spread the cost to asset at the end of the lease – it might be worth coincide with money coming into the buying. business. A lease is a long-term legal obligation that you You are entirely responsible for can't usually cancel. For example, if you were to maintenance. end an operation that used leased equipment, You can't deduct the cost of rental from you might still have to pay as much as if you had your taxable income. used the equipment for the full term of the lease. You take all the risk. Continued from page 22 for a specified term. This arrangement lets you continue using the asset while freeing up the money paid for it, to use elsewhere. Buildings are often leased this way. 24 Net or gross leases describe the conditions of a lease in terms of maintenance, taxes and insurance. In a net lease you pay these expenses while, under a gross lease, the lessor is responsi- ble. Financial leases are usually net leases. A full payout lease is when the lessor makes back the full purchase price of the asset during the period for which it is leased. Make Business call lines: Some banks have dedicated call lines for business customers to www.mwebbusiness.co.za. that allow you to resolve queries after office Computer software: Programs like Microsoft technology hours and at weekends and public holidays, instead of waiting for the next day or Monday. Office Excel can help you to keep track of all your business statistics as well as do loan work for you Internet banking: It's simpler, cheaper, calculations and comparisons, and monitor investment values. Doing a training course to faster, and you can do it anywhere, at any learn how to use your software properly could time of night or day. Convenience comes pay off faster than you think. For tutorials, with added benefits like being able to move visit http://office.microsoft.com/en-gb/training/ early payments into high-interest bearing default.aspx. Also see www.microsoft.com/ accounts without having to go to a branch or southafrica/learning. pay higher transfer fees. For information on Standard Bank's Business Online service, go to Telephone and cellphone banking: These www.standardbank.co.za. For information on 24-hour facilities allow you to manage your connectivity options for small businesses, go banking using your phone and nothing else. Delegating financial management André Botha, partner: GSEC Many businesses fail for two reasons: either they do not (a growth, strategy and 25 have a proper business plan or they do not follow it. Keeping engagement corporation) a business sustainable means comparing your records to SUCCESS TIP: Leverage your network your planned sales costs and cash flow, and taking action if "We make the most of our partners' contacts and alliances, which allows us to work with anything goes wrong. – and rely on – people who we know and trust. We outsource 'grind' work so that we can focus As the owner of a small business it is easy to (which shows what the business owns vs on strategic issues. We also make become caught up in the actual work and lose what it owes). use of other small businesses, sight of the fact that you are also needed "at • A set of management accounts that reflect which are often more flexible the top". This is where a financial practitioner or issues such as budget variances, seasonal and cost-effective than larger suppliers." accountant can help. Between this professional fluctuations in business and your working and the business owner, the financial manage- capital situation. You must update your LESSONS LEARNT ment of even a small company should include: business plan continually to reflect the "Put the right paperwork in • An annual budget of income and expenses. changes discussed. place from the start. If someone reneges on a contract your • Monthly collation of all invoices, expense business is depending on, it could vouchers and bank statements for the A Rand in the hand cost you everything. Make sure preparation of financial statements. These is worth two in the post you have a legal agreement to include the income statement (which shows Understand the time value of money and use it fall back on." the profit and loss in terms of sales through to guide your business investment decisions. For to retained earnings) and the balance sheet example, if you invest R1 000 that generates a The figures don't lie monthly profit of R20, then over five years you of an expense the same, you have decreased make a paper profit of R200. But over five years, that expense as a percentage of sales. When you Proper records will provide the figures you what looks like a 20% return is effectively only decrease your cost percentage, you increase your need to prepare: 7,4% per annum. You'd make more money, with percentage of profit. • A profit and loss statement (preferably monthly for most retail businesses). less risk, by putting the cash in a fixed deposit or • A budget. money market account. On the other hand, if your sales volume remains • Break-even calculations. 26 the same, you can increase the percentage of • Evaluations of your operating ratios Learn to do more – with less profit by reducing a specific item of expense. compared with those of similar types of business. Cost reduction is not about arbitrarily cutting Your goal, of course, is to do both: to decrease any and all expenses. You need to understand specific expenses and increase their productive the nature of your business costs and how these worth at the same time. inter-relate with sales, inventories, cost of goods sold, gross profits and net profits. Before you can determine whether cutting expenses will increase profits, you need In analysing your expenses, use percentages information about your business – and that rather than actual Rand amounts. For example, means having a good record-keeping system. if you increase sales and keep the Rand amount The value of ratio analysis Use your income statements and balance sheets to check the A ratio of "2" is generally believed to be a good liquidity profitability and liquidity of your business. Here are some benchmark, but you should also compare your ratio to similar formulas that show, at a glance, how healthy your business is: businesses in the industry, and take into account trends within a Return on (profit before interest and tax) x 100 company itself. = capital employed Capital employed This ratio excludes inventories from current assets, as they can be difficult to convert into cash. Here, a ratio of "1" is generally Liquidity (how easily an enterprise is able to pay its debts): believed to be a good guideline. Current = (current assets) Quick = (current assets - inventory) ratio current liabilities ratio current liabilities Features include in-depth guidelines for starting and running a small business, how to get the most out of your Microsoft Office Software and one of essential weblinks and references. 100 To win one of 100 copies and learn everything you need to know about running a good business, 27 send the following information via email to: mssatalk@microsoft. Microsoft Small Business Kits com, or on a postcard to Small Capital Competition, Microsoft SA, PO Box 5917, Rivonia 2128. or one of 20 copies of the Microsoft Money 2003 • Your full name • Company name • Telephone number software program • Email address • Company address • Do you currently subscribe to the Microsoft small business newsletter? If not, would you like to receive it? • Visit www.microsoft.com/ southafrica/smallbusiness and tell us what you think of the information available through this portal. The winner will be selected from a national draw, and the judges' decision is final. Entries must be received by 30 April 2005. No Microsoft SA employee or members of Written by Joanna L Krotz, John Pierce their immediate family may enter. and Ben Ryan. ISBN 0-7356-2054-7. L Calculator and pencils not included Record-keeping: Use it, don't lose it Simply put, keeping records means documenting how much money your business receives and how much goes out. This helps control cash, evaluate the success of the business, plan for the 28 future and demonstrate to others how the business is doing. Good record-keeping helps you to make Are your records up to date? informed decisions and comply with legal Does your accountant spend more time on business and tax requirements. One type of your financial statements and tax returns, record-keeping does not suit all businesses, and rather than on basic bookkeeping? your choice of system depends on: Does your daily cash sheet usually balance • The size of the business. without major discrepancies? • The type of business. Can you easily access information on money • Ownership structure. you owe and money owed to you? • The record-keeping skills of the owner. Do you reconcile your bank account at least once a month? Check the quality of your business's record- Do you file copies of all your sales invoices? keeping by ticking off the following list, devised Do you keep a file of all invoices and bills by US-based Alberta First, an industry partner- that are paid? ship that supports new businesses: Does your payroll system work well? Are your personal and business financial Are you remitting payroll deductions to the affairs clearly separate? tax authorities on time? Does your bookkeeping system meet the Do you keep business safety records and needs of your accountant? customer service records? Can you easily track your business's money Do you have a clear idea of how much and its financial performance? inventory you have on hand? Electronic filing What to keep – and for how long If your business handles large volumes of documents, then electronic INDEFINITELY: Annual financial statements, tax returns/ filing can save you space, time and human resources. There are numerous assessments, payments made on behalf of personnel, software programs that offer comprehensive electronic filing and archive stop orders, Companies Act returns, memoranda and capabilities, and which allow you to compare and update information, articles of association, special resolutions, minute cross-reference documents and automate certain tasks. books, register of company directors/officers, register of directors' interests, register of members, documentation on members' interests, dividend schedules, property 29 For a small business this could avoid postal delays in transferring informa- ownership titles, prospecting agreements, participation tion, a lower stationery bill (electronic signatures and billing reduce the and joint venture agreements, insurance agreements, need to print hard copies) and greater reliability (unlike paper documents, mining authorisations, trust deeds, personnel benefits. which can be lost or misplaced). 7 YEARS: Bank statements, vouchers, cashbooks, cheques and cheque requisitions, creditors' invoices/ But hard disks can crash, and computers can be stolen. When your busi- statements, deposit slips, fixed assets register, journal ness relies on electronically stored information, you must have a back-up reports, general financial files, petty cash vouchers, sales invoices, confidentiality agreements, leases, plan, and you must use it. guarantees/surety, appointment agreements (eg, auditors, professional advisors), financial services/ Back-up and storage banking agreements, cession/assignment agreements, The golden rule of back-up is to make it as simple, reliable and as auto- supply agreements, loan agreements, permits and authorisations. matic as possible. In devising a back-up strategy, consider the following: • What data is stored on your system and how would it affect your busi- 5 YEARS: General ledger reports, employment contracts, ness if you were without it for a few hours, days or weeks? general personnel files and personnel loan records. • What back-up media is most convenient for you? Tape drives are the 4 YEARS: Payrolls/salary and wage registers. most popular option for large enterprises because they are inexpensive, robust and simple to operate. CDs are transportable and convenient for 3 YEARS: Creditors' ledger, debtors' ledger, vouchers smaller amounts of info, while a designated hard drive could back up journal, petty cash book, other internal financial large amounts of data or entire systems. Alternatively, fully-automated documentation, offers of employment, leave forms, increment schedules (personnel), attendance registers, online server space can be rented from an external company. general records and correspondence. Back-up is an issue of discipline, rather than money, and operating systems 1 YEAR: Cheque stubs (after annual audit). like Windows have built-in back-up programs website and/or email systems are ECT-compliant. that work with any of the above media. Either way, the potential cost of lost data far out- eFiling tax returns weighs any money or time you spend backing eFiling is a company belonging to the South up your information. African Revenue Services that allows you to sub- mit various tax forms and tax payments online. 30 Legal implications: the ECT Act No special software is required – just a web The Electronic Communications and Transactions connection and a standard Windows operating Act of 2002 (ECT) affects the way an organisa- system. tion stores its information and the way it con- ducts business on and through the Internet. The It operates through a secure line and offers Act covers issues such as: convenience (24 hours a day), ease of payments and calculations (which are set up automati- Record-keeping: Do you record and store all cally), access to a full history of submissions electronic communications and documents as and payments, a quicker rebate cycle, increased records that could be used as evidence against security and no capital outlay. There is also a potential legal claims? facility to apply for tax directives, which can be obtained within 24 hours. Back-up basics Electronic communications: Email messages, Make back-up a regular habit. attachments and all the contents thereof are Some banks have incorporated eFiling into their Test your system periodically by now legally binding, and must be controlled and existing online business banking facilities to help restoring backed-up data. stored with the same diligence as any other offi- integrate and simplify your financial manage- At least once a week, make sure cial business communication. ment. Speak to your bank for more information, backed-up data leaves your place of or contact SARS on 0860 709 709 or email work. Knowing the conditions of the ECT Act is a must firstname.lastname@example.com. Periodically leave a copy with your for every business owner. Download a copy from accountant or attorney. www.gov.za/gazette/acts/2002/a25-02.pdf. For more options see www.microsoft.com/ Rotate your back-up media – alternate between two mediums, in case one Alternatively, ask your Internet Service Provider businesssolutions/solutions.overview.aspx. fails unexpectedly. for information and advice on ensuring that your Features include Intel® Pentium® 4 Processor 540 with HyperThreading technology; 800MHz Front Side Bus; 1 GB DDR SDRAM; DVD+R/+RW; 8 X USB slots; On-board LAN; 80 GB HDD; Microsoft® Windows® XP Professional; Fujitsu Siemens a Computers LCD 17-inch flat panel monitor. 31 Fujitsu Siemens To enter the competition, send the following information via email Computers SCENIC N320 to firstname.lastname@example.com or on a postcard to the Fujitsu Siemens Computers Small Business For space-saving efficiency, operating Competition, Private Bag X75, Halfway House 1685. ergonomics, security, reliability and full- • Your full name power computing, the SCENIC N320 from • Company name • Telephone number Fujitsu Siemens Computers is the ideal • Email address business tool. Whilst being expandable to • Company address meet your growing business requirements, The winner will be selected from a the SCENIC N320 comes packed with national draw, and the judges decision is final. Entries must be received by processing power in the form of the latest 30 April 2005. No Fujitsu Siemens Intel® 915 G chipset, and a choice of Computer employee or their immediate family members may enter. configurations to ensure that you get the best solution for your business. Legal requirements Cindy Norcott, Start your business on solid legal foundations by making owner: KZN Business Training sure that you know about – and comply with – the legal Centre and Pro 32 Appointments recruitment requirements that affect your line of work. agency SUCCESS TIP: Every new business has to register with the South • Am I exempt from these two charges? Know your weaknesses African Revenue Services (SARS) for provisional (If the total amount you pay to all staff "Numbers have never been my tax, Value Added Tax (VAT), employee tax and per year is below the tax threshold of strength. Employing an accountant who I trusted meant that I could the skills development levy. Remember that SARS R250 000, you might not have to register focus on the areas where I am regards CCs, companies and trusts as taxpayers for either of the above.) strong, such as marketing and in their own right, separate from the individual. • Am I paying UIF? (1% of remuneration to sales. It's also worth having a be deducted from each employee's salary, mentor – someone whose only interest is your business success. Different tax rules apply depending on the and another 1% to be paid by the employer. This taught me to work ON size of your turnover. For example, you are not This applies even if your staff receive the my business rather than IN my obliged to register for VAT if your predicted minimum legal wage.) business." annual earnings are less than R300 000. You • Am I registered with, and paying an annual LESSONS LEARNT can, and might wish to do so anyway, if the VAT fee to, the compensation fund (as stipulated "If you are worried or upset, benefit is to your advantage. in the Compensation for Occupational it is often not appropriate to Injuries and Disease Act)? This applies share your concerns with your If you employ staff, ask yourself the following: mainly to manufacturing enterprises. staff as it may unsettle them. It can be difficult to keep yourself • Am I paying employee tax – both Standard • Do I have a copy of the Basic Conditions of motivated when everything seems Income Tax on Employees (SITE) for salaries Employment Act on my premises? (This can to be going wrong." under R60 000 and Pay-As-You-Earn (PAYE) be obtained from the Department of Labour.) for those over? • What is the minimum wage I can pay my • Am I paying the skills development levy? employees? (This is outlined in the Wage Determination Act, and can be obtained expenses and entertainment costs. However, from the Chamber of Commerce.) the business must generate a small income and have prospects for making a profit in the future. As a new business owner you should also ask your local council what Regional Services Channel income to your children: A child is Council (RSC) and other compulsory levies apply taxed in his/her own right, with a threshold of (such as on sales, wages, salaries and owner's R21 110 per year. If you pay a salary of less than 33 drawings); whether any additional trading this to your child for work done, you can claim it licences must be obtained or inspections con- as a business expense and your child won't be ducted; and if you need special permission to taxed. Bear in mind that salaries must be in rela- operate your business in the area. tion to the service rendered, and the child must One of the biggest advantages of be 15 years or older. having your own business is being Tax trimming tips for small business able to split the income within your Diarise due payment dates: This helps to Restructure your debt: Create an "owner's family. For example: avoid paying interest and penalties. loan" by selling assets to your business on Mr X draws a salary of R250 000 credit. Use the money the business pays you to from his CC, and pays income tax Claim maximum retirement annuity (RA) settle personal debt, while the business claims of R58 873,61, leaving an after-tax deductions: The Income Tax Act allows for an the interest it pays on the loan it took to buy the income of R191 126,31. additional deduction of R1 800 per year for RA asset. This can be tricky though, so get advice If he employs his wife and splits the contributions that are in arrears. Arrange with from a good tax consultant first. income equally between the two of your RA fund to make an extra contribution for them, the total tax bill is R29 930,70 a previous year in which you did not claim your Separate CCs: When you sell an asset (eg, a (R14 965,35 each). This leaves the maximum deduction. You can then claim this vehicle) you are taxed on the profit you make family with an after tax income of R220 069,30 – a saving of R28 942,91. payment during the current tax year. that is above the tax write-off value. If this asset is in the name of a separate CC, you can sell the * These calculations are based on A tax shelter business: If you run a business whole CC. According to the normal tax rules, the the 2005 tax tables as a sole proprietor from home, you can claim a profit made is a capital gain and Capital Gains for adults under 65 years. A lower rate range of legal deductions, eg, a portion of your Tax (CGT) applies. CGT applies only to a portion of tax applies to mortgage bond interest, telephone bill, vehicle of that profit, rather than the full amount. people over 65. reasons to Is your software legal? packaging that looks like the original. There If the price of that new software package looks are ways of telling the difference – contact keep it legal too good to be true then it probably isn't. the manufacturer if you have doubts. "Pirated" software is not only illegal, it can also • The resale of software marked NFR (Not for Pirated software costs you more: It harm your business and damage your computer. Resale) is illegal. Watch out for online dis- comes without a manufacturer's warranty, and without any technical support. tributors offering special deals on software 34 Without a valid licence for your software, But how can you be sure that you're not inad- bought from "liquidated inventories" or you have no legal recourse if something vertently breaking the law? "through bankruptcy sales". These descrip- goes wrong. • If you copy software or distribute it, either tions are sometimes used to fool consum- It's sub-standard: Pirated software often for home use or for work, without a proper ers into believing that they are getting a lacks key elements, documentation and licence for each copy, it is pirated. genuine product. upgrade options. • If a computer manufacturer takes one copy of software and illegally installs it on more than Your business software is an asset and should You get infected: No matter how careful you are, viruses can still enter your system one computer, what you are buying might be be managed as such. By keeping it legal you through counterfeit or hard-disk-loaded illegal. Ask for proper licence documentation ensure that you always have the full value, sup- software from dishonest resellers. This when purchasing a new PC or software. port and functionality that your business needs could wipe out data or bring down your • Unauthorised copies of software are often to operate at its best. The Business Software whole system. available over the Internet. If you download Alliance can give you support in making sure It's a crime: Using pirated software is a something make sure that the publisher has that you are using legal software. copyright infringement, a form of theft. authorised this distribution. See www.microsoft.com/piracy.default.mspx. Millions of rands in fines could be payable, • Sometimes illegal software has counterfeit not to mention five years' imprisonment for a first offence and 10 years' imprison- ment for a second. Think of your business's reputation. Do your homework The Microsoft website has a step-by step Program that helps small and medium-sized guide to help users determine if their software businesses gain knowledge and control over is legal. See www.microsoft.com/resources/ software assets. For information see www. howtotell/ww/default.mspx. microsoft.com/sam or www.microsoft.com/ licensing or call 0860 225 567 (0860 CALLMS). Microsoft also runs a Licence Management Get a handle on human resources When a small business gets big enough to need more than 35 one "driver", it can be hard to adjust. But when you're ready to start hiring help, here's how to minimise the worry. Grow with your business: Analyse the level Set expectations for performance: Make of help you need, the kind of manager you are sure you are prepared to offer ongoing and and the changes you will need to make to allow constructive feedback. a new person to enter the business. Don't rush it: Get a feel for your business cycle Don't just offload chores: Hiring is a deci- – the good months and the bad. Experts suggest sion to grow your company, and is not just saving at least a year's worth of expenses and about getting someone to help you with the overheads before you hire, to see you through overload. Before hiring, tap into the knowledge any rough patches. of other small business owners who have been through the process and think carefully about Hire attitude, not skills: If a person is smart, your strategy for the next few years. eager and open-minded, training will come easily – especially in a multitasking small busi- Make a list of tasks: List the company's criti- ness. You will be spending a lot of stressful time cal responsibilities and decide what only you can together, so choose someone who has a busi- do, what you prefer to do and what you can del- ness approach and entrepreneurial spirit that egate. Choose a title and formulate a detailed complements yours. job description for the new position. Don't wait for perfection: A first-time hire Here are some proven strategies to making must be able to do several things well – not one employees feel that they matter: thing perfectly. If your first choice turns out to • Recognise individuals. Let them know be the wrong one, just chalk it up to experience that they can make a difference. and then keep recruiting. • Be responsive. Don't ask for feedback or suggestions and then simply ignore them. 36 What staff want • Tap your top performers as teachers. A happy employee is a productive employee. You Encourage your best staff to share expertise need to instill faith and make them feel valued. through training or mentoring. To keep your staff motivated, you must be able • Help them to reach their dreams and to give them straight answers to these three goals. If you want them to invest in your questions: success, you need to invest in theirs. 1. What's the plan – how will this new com- • Create an atmosphere of trust. Don't pany work? spring things on staff without explaining 2. Where are the tools, and how is this plan why you're doing it. meant to happen? • Don't be a "superowner". Ask for input 3. How are the tools best used? to solve problems or develop strategy. You'll Employee benefits: Yes or no? A prospective employee is most concerned doing your homework, because offering with the nett or take-home salary. The small employee benefits can have some financial business owner, on the other hand, must focus advantages: on total cost to company. Calculate what a Plan contributions are tax-deductible. new employee is going to cost in terms of Setting up plans for staff might net salary, tax, levies, investment (such as training, you better benefits for less money than new equipment) and benefits. paying for your own plan alone. Some companies now offer healthcare and/or Some employees might accept certain retirement packages specifically structured benefits as a substitute for higher salaries for cash-strapped small businesses. It's worth or raises. end up with happier staff – and loads of new ideas. contractors, ie, people who sell their services to the public and who do not fall under the control Know what's right Copies of the BCEA and Labour Relations of an employer. Businesses with 50 employees or Act can be dowloaded from Too small for labour law? Think again more are also subject to the Employment Equity www.labour.gov.za. Most employers and employees in South Africa, Act, which requires the company to have a formal regardless of business size, are subject to the policy or affirmative action programme in place. This site also has a series of simple "plain English" guides explaining different provisions of the Basic Conditions of Employment aspects of the law. Hard copies can be 37 Act (BCEA) and Labour Relations Act. These stip- Certain industries may, by their nature, involve obtained from regional contact centres. ulate the minimum terms on which any employee different employment conditions to those pre- must be employed in terms of leave, overtime, scribed in the Act, and the BCEA makes provi- For the number of the centre nearest to you, call the Labour Department Head working hours and payment, among others. sion for this either through special agreements Office on (012) 309-4000. They also provide strict guidelines on dismissal, with trade unions, individual agreements with retrenchment and dispute resolution procedures. employees or formal variations granted by the Minister of Labour. For example, the section of With respect to small business, the Acts cover the Act that regulates working hours does not prospective employees (job applicants) as well apply to workers in senior management or who as former employees, but NOT independent earn more than R115 572 per year. No job description. People need a clear Using contract workers to circumvent expectation of what they should be doing. legislation. This may result in problems if an Top No contracts. Legally, all employees must employee has a reasonable expectation that his/her contract will be renewed. receive written terms and conditions of HR mistakes employment. Management attitude. You are all on the same team, working for the good of the Lack of policies and procedures. Employees No performance feedback. Motivated business. need to feel they are being treated fairly and employees need to know the goals of consistently. the business, your expectations for their Lack of communication. Share ideas, inform performance, and if they are meeting them. your employees and build trust. Misunderstanding probationary periods. If an employee is going to Avoiding conflict. A small problem could High expectations. People don't learn by fail it should not be a surprise. become a major issue later. doing things perfectly the first time. Based on an article by Rachel Manzie of HR Dynamics Use Get the most out of teleworkers Many small businesses use staff or contract Understand who works for whom: If you use an agency to find contract workers, make technology workers who work away from the office. Studies sure that everyone understands that the agency have shown that this can cut expenses by as is responsible for issues such as salary payment. to make much as 40%, reducing your fixed costs such as Discuss problems with the agency before you address the employee. you more office space, furniture and fixtures, utility bills 38 and office consumables. effective However, keep in mind that teleworkers pose Measure productivity, not activity: The lack of face-to-face contact makes it harder for If you plan to use teleworkers in your new teleworkers to prove themselves. Create clear a different set of management challenges to business, or if you are setting up a remote normal office staff. Here's how to get the most performance benchmarks. office, think about what your teleworkers need from you, what you need from them, out of them: and then invest in technology that will When is a contractor NOT a contractor? make it easier. The Labour Court may not accept the title Explain the mission and job: Create a written agreement to explain your expectations, of "independent contractor" at face value. For example, Microsoft Office 2003 (www. microsoft.com/office) and Microsoft how the work will be evaluated, what defines Contractors may be legally regarded as Windows SharePoint Services allow for success, and when and how reviews will occur. employees if they: easy collaborations of off-site contractors • fall under the direction of the employer. or teleworkers. SharePoint can set up a Review policies and benefits beforehand: • work hours that are subject to the control of website for document storage and retrieval that gives every user check-in and check- Make sure these are in line with the BCEA. Hiring another person. out privileges, among other things. By a freelancer to avoid employment laws and regu- • form part of an organisation. integrating the two software systems, • are economically dependent on the employer. lations could open you up to legal action. teleworkers can collaborate, plan, schedule • are provided with tools or equipment. and interact with one another in real time. Stay in touch: Besides regular phone calls, bring • only work for one employer, and have not For more information visit www.microsoft. teleworkers into the office for periodic updates, worked for at least one other person for a com/sharepoint. minimum of 40 hours each month, over the to maintain ties with the rest of the staff. Make sure they have the same access to HR systems, last three months. benefits and policies as on-site employees. Before you take out an insurance policy 39 Before signing any insurance paperwork, ask yourself the following: What do I want loss protection for? Make sure you're covered How much are these items worth? (Be realistic, don't under- or overestimate.) Although you don't have to insure everything, you must be What kind of coverage do I need – what is it I want protection from (eg, fire, theft, everything possible)? sure that your business can take the knock if things go wrong. Who would I like to be covered (all Business insurance is all about managing risk. Property insurance: This protects the value of employees or only certain staff)? Packages can be tailored to suit your specific physical assets like buildings, vehicles and equip- What exclusions or conditions apply budget and business needs, but all are based on ment, either in terms of the replacement cost or to my current or prospective insurance three core types of cover: actual cash value. packages and do these restrict my business operation? Liability: This protects a business from finan- Business interruption: If a business closes Is my insurance policy tailored to suit cial loss as a result of injury, death or property because of an insured property loss, this cover- my specific needs or are there other damage caused by the business's operations, age will pay ongoing expenses such as rent, util- more suitable/cost-effective options? employees or products. For example, you would ities and some or all payroll expenses. It could be covered if a client is injured in a fall on com- also include "extra expense" insurance, which pany property, or if one of your products makes covers the costs that you might incur in order someone ill. to speed up the restart of operations (eg, using a courier to deliver new equipment in three a new business that is taking out a bank loan or days, rather than waiting two weeks while it is looking for investors. For example, comprehen- shipped). However, check that your policy kicks sive business mortgage insurance is essential in within a few days of the event. Several weeks for all business mortgage loans. This is usually without income could destroy your cash flow. arranged automatically by your bank when the Tembeka Nkamba-Van bond is registered. The property is then fully 40 Wyk, managing If a company suffers financial loss due to mis- insured for the duration of the bond agreement. director, management, the response is often to sue the Talking Beads directors and officers. Directors' and officers' Basic business insurance can also include bad SUCCESS TIP: liability protects both the company and indi- debts, burglary, cash-in-transit heists, hijackings, Be respectful and disciplined vidual executives. Small businesses should also employee insurance, fire, loss of profit, natural "Respect yourself and the people consider Keyman insurance. This is appropriate disasters, personal insurance, public liability and you work with. Be incredibly where one or two individuals are critical to a vehicles. disciplined about finance. Don't think of the profit as yours – it business's success. It works the same way as belongs to the company and most a life insurance policy, except that the death If you operate a home-based business, don't of it should be reinvested. Personal benefit goes to the company, rather than the be lulled into a false sense of security. Many materialism is not the point of individual's family. homeowner insurance policies limit or exclude being in business. Employ an auditor to keep you in line and business-related equipment. Check your home- surround yourself with people who Insurance essentials owners policy very carefully before you rely on it know what they're doing." Some basic insurance is usually compulsory for for the business as well. Lessons learnt: Insurance Have the following information at hand, or in an easy-to-access "Focus on what you've decided to place, in case of an emergency: do, regardless of what anyone else • Insurance agent (name, telephone number and after-hours checklist – including the banks – might say. telephone number) Have faith in yourself, your ideas • Policy numbers and your beliefs, as this is what • Location of original policies will carry you through the hard • Deductibles times. Don't give up – success could • Coverage limits be just around the corner." • Replacement cost or actual cash value • Equipment serial numbers and invoices/proof of purchase Marketing your business "It's not just what you say that stirs people. It's the way you say it!" – The Microsoft Small Business Kit 41 You can only start marketing your business effec- • Identify your customers. Who is your tively when you are able to do the following: ideal customer, including his/her age, income 1. Define your business – from a customer's level, geographic regions, education level? point of view – in 30 words or less. What do • What's on their wish list? Discover what you want to be known for, what do want to makes them tick, what they need, what prod- accomplish? 2. Describe your point of difference, or ucts they use and how they use them. • Define your competitive advantage. Follow the unique selling point. Why would customers What is your company good at doing? What come to you rather than anyone else? do you like doing? 3. Create an image. Your logo is the "face" • Relate to emotional buy-ins. What of your brand. Whether your hire a profes- sional to design it or you produce it your- words, feelings and emotions will make your product appeal to your customers? rule self, your logo must match your brand (as • Build your reputation. Do more than you Originally devised by a 19th-century described in the two points above). Keep it are expected to. Build credibility by maintain- Italian economist, this rule states that simple. You need to be able to communicate ing high standards of quality and reliability. 80% of possible business activities tend to come from only 20% of the effort put your company name and an emotion in less • Constantly ask yourself. How can you into it. Additionally, the cost of acquiring time than it takes to sneeze. provide what your customers want, better new customers is around eight to ten than anyone else? times more than the cost of keeping an Local reputation management and training con- existing one. So if you can define your "critical few" customers and target your sultant, Deon Binneman, outlines the following Low-cost marketing strategies marketing directly to their needs, you'll as being essential to any small business market- Marketing via email: Today's software makes get far more "bang" for your marketing ing strategy: it possible to easily create and send electronic buck. newsletters, include contact details and logos at Ask your customers for referrals: If they're the end of every email message, and automate happy with your service, they won't mind recom- communication so that it can be sent out while mending you to someone else. Give leads in you're away. In some cases you can also integrate return, and make sure they are reliable. your email software with other business data, allowing you to keep customer information in one Look after your resources: Maintain good 42 place and monitor your contact with customers. relationships with your own suppliers, friends and associates. They'll be willing to share advice Marketing via the web: When approached and spread good word-of-mouth. correctly, the Internet can boost your ability to deliver products or services and market yourself to Manage your information: Compile and a larger audience. It is a cost-effective means of maintain a database of likely customers and building your brand and generating new business. media contacts and use it to manage your rela- tionships. Constantly update the lists and use Make it look good Become an expert: Share your ideas and understanding of your business and offer advice them to keep track of who you communicate with, and how often. Microsoft Office contains a selection of that positions you as an expert in the field. Read software programs, such as Microsoft widely. Raise your profile by giving comment to Direct mail: Send a personalised letter and Publisher, Powerpoint and Easy Website the media, conducting presentations and actively company brochure/profile to keep in touch with Builder, that small business owners can use to create their own logo, stationery, forms, joining professional associations. existing customers or to target prospective ones. catalogues, newsletters, presentations Always address it to an individual and include a and even Internet home pages. Publisher Network: People like to do business with those feedback mechanism, such as a special discount. also gives a checklist for you to follow if who they know and trust, and networking allows Follow it up with a phone call. you want to send your documents to a professional printer. to you build relationships. Form alliances: Link up with another business Don't know how to do it? Don't worry Use your customers as your salespeople: that has a similar customer base, so that you can – detailed do-it-yourself training modules The only thing customers will remember is how cross-sell your products and services. For example, available on the Microsoft website will teach you how. See www.microsoft.com/ you helped them. Don't just sell them a product, if you own a hobbies and crafts shop, join forces southafrica/learning. solve their problems. with a local artist and run workshops together. Cross-sell to existing customers: Get to marketing activity before you spend your money. For a cost-effective know your customers and their business, and website, look no further … identify other areas where you could be of serv- Donate your services to charity fund- Your first attempt at any business venture ice. Make yourself indispensable. raisers: This is a great place for you to give back is a mix of opportunity and excitement. to your community and receive recognition at the With the growing number of users going Create a good impression: The key to suc- same time. online, the Internet has become rife with cessful marketing is not how good you are but opportunities for a business to have a 43 dynamic online presence. how you are perceived. Listen, instead of talking, Don't stop! Set yourself marketing goals for and ask instead of assuming. the next six months, choose tactics to achieve MWEB Business is offering Small Capital them, and then go for it. Base your goals on readers a special offer on the Genesis 2 Get listed: Be listed in as many directories as the SMART principle: Specific, Measurable, Lite template-based website application. This provides an entry-level, fast, low-cost possible – free or paid for, printed or electronic. Achievable, Realistic, and Time. solution to your need for a professionally built website. Genesis 2 Lite features: Guerrilla marketing: Focus on activities that For marketing tips and advice, visit the Microsoft • You can make your own changes and deliver the most visibility for the least money. SmallBusiness Centre at www.microsoft.com/ updates via a user-friendly interface. • Your website can be ready in seven Understand what you're going to get out of a smallbusiness/issues/marketing/hub/mspx. days from the moment we receive all the necessary details. 5 easy steps to create a marketing plan • Price includes all training, and hosting for up to 5MB. Position your product: Is it the right product or service for your market? Does your customer • Site can be easily upgraded to an think it's a good deal? How readily can your target customers find this product or service? ecommerce site at a later stage. Brainstorm: Who are you selling to and what do they need? What distinguishes your product or service from the competition? Which marketing tactics will make your products noticeable? R342 once off set-up fee, incl VAT Listen to customers: What influences their purchasing decisions? Based on these, what are your strengths, weaknesses, business opportunities and threats? R227 monthly fee, incl VAT Draft the plan: Summarise your market position and goals, define what you want to achieve For more information by when, list target markets and strategies, allocate expenses and resources, identify which go to www.mweb marketing channels you will use to attract customers and formulate competitive strategies. business.co.za/ Track results: Create benchmarks to measure whether your marketing efforts are paying off. packages.htm or call Review your plan each year. 0860 100 127. By Joanna Krotz, co-author of the Microsoft Small Business Kit Behind the smoke and mirrors of a website Think you need a website? Treat it like a stogie and you're 44 bound to be disappointed. Think of it more as a Havana … Old age and new technology are not supposed arm, Colin felt he was losing touch with his cus- to make happy bedfellows. But in the case of tomers and not able to share his passion for, and Wesley's Tobacconists they cosily pair up into a information on, pipes and cigars with them. marriage of old-fashioned customer service via a new-generation medium. The fact that Wesley's had started a Cigar Club in conjunction with Business Day at the height of At the age of 63, Colin Wesley launched a web- public fascination with cigars and their associat- site for his family tobacconist chain for quite ed lifestyle, provided him with a good base from the wrong reasons, business-wise. Contrary to which to launch a website. "We had an existing everyone else who hoped to ride the crest of the mail order client base for customers who were Most useful dot.com wave at the time, he was not concerned about making money from his website in the not close to our city outlets, a club member base and good old bricks and mortar outlets through book on short term. "We wanted to find a way of inex- pensively keeping in touch with our customers, which to gain access to more aficionados. starting a timeously communicating to them about new developments and special offers, and offering "This, coupled with legislation in the mid-1990s prohibiting tobacco companies or retail tobac- website them an efficient mail order service," says Colin. conist outlets from advertising in any form whatsoever, made us believe that an electronic The 11 Immutable Laws of Internet Branding by Al Ries and Laura Ries, Harper Collins As his company had grown and acquired more presence was a good move, possibly even essen- Publishers ISBN 0 00 653247 0 franchise operations and developed a wholesale tial to our continued success." "In a sense, circumstances forced us into an electronic presence. We knew South Africa was website. If we had to employ outside people to do all this, it would have cost a fortune," Three key words not yet ready for it, but we had to seize the gap says Gillian, who is the prime driver behind the for a successful by being the first tobacconist to have a web website. presence." website Despite the promise of technology's ability, a A website will work for your business only WWW = work, work, work website is hard work and requires constant if you are: 45 The decision was easy; the implementation a attention. With an overseas trip looming, the • DISCIPLINED enough to ensure your little more challenging. couple have to ensure sufficient content and information is frequently updated, special offers to keep the website updated in inventory control is meticulously Firstly, it took a number of years to sort out the their three-week absence. And the constant managed and information or special intricate details required for a purchase site, gain need for new ideas, or innovative approaches to offers appear on the same day each week. access to a safe shopping portal and provide the special offers, is particularly challenging. minutest detail of every item in the 1 200-plus • CONCERNED enough about your inventory. Some of the most successful retail websites customers' needs to find out what are those that have bricks and mortar outlets they want. Secondly, it proved prohibitive to hire outside to support the Internet business, and Wesley's • COMMITTED to invest a vast amount expertise to manage the website. Fortunately, experienced this first-hand. "Many customers go of time in promptly responding to the "can-do" approach of his wife Gillian, and into an outlet because of something they saw email requests for information. her computer-erudite sister Dee, who was disil- on the website. And often they will be enticed to … and a website will work for you if it: lusioned with the teaching profession, led to the buy something else because the shop's interest- decision to manage it themselves. (This initiative ing alternatives distract them from their original • DOES NOT CONFUSE – people don't spawned another small business, Deezine: goal." Thus the two forms of retail complement like to puzzle over how to do things. email@example.com.) one another. Your website must be simple, obvious and easy to use. "We do everything: from coming up with the "One thing is certain: you are not assured of ideas for the content, writing the articles and making money out of your website in the short taking the photographs, to taking control of the term," says Colin. "We use the site as an educa- inventory, and uploading everything onto the tional medium for pipe and cigar lovers as well Widen your In 2000, at age 63, Colin Wesley launched www.wesley.co.za. A text-book example that a successful businessperson never stops learning. marketing net as a communication tool with our customers. Compared to traditional advertising, online By carefully structuring our special offers and advertising is a much more affordable seasonal content, we use the website to 'pull' and cost-effective means of building your brand, generating traffic to your customers into the franchise outlets. Basically, 46 website and – perhaps most importantly the website is just another shop for us." ("One – generating new business. with low rent, high costs and little income at present," quips Gillian.) MWEB Business offers a range of unique online marketing services to customers like Wesley's Tobacconists, to help promote Wesley's runs a parallel purchase site, which their e-commerce offering and their is managed by MWEB Business's shopping Colin and Gillian Wesley in their shop at competitive edge on the Internet. portal, SafeShop. "When we started we had to Rosebank, Johannesburg. These include: weigh every single item for listing and postage. Online Advertising: Unlike billboards and We totally underestimated the work required," we have succeeded. As a purchase site it is not all other media, online advertisements let admits Colin. yet a financial success but we know that it will businesses keep track of the number of be in time – just like opening a shop in a new users that respond to and click through to the advertised website. MWEB Business "What we had hoped for when we started out shopping mall. And we won't stop trying to con- customers qualify for special discounts was that we could apply modern technology stantly improve the website." of more than 50% off the normal cost of to a traditional retail set-up and communicate online advertising within the MWEB family more effectively with our customers. In that goal Now put that in your pipe and smoke it. of sites. Brabys.com: The most comprehensive online business directory for Southern Africa and the Indian Ocean Islands, Best advice Useful link this is the premier guide for information Writing for the web is a specialised Seventwentyfour.com – subscribe to this on business, community, government, skill, but can be expensive. In fact, if link service which informs you what is recreation and entertainment. your business is built on your personal linked on your website and which links MWEB Shopping Listing: An electronic reputation, the words should sound as if are broken or dead. listing on one of South Africa's favourite they come straight from you. places to shop online. The golden rule: Keep it short. a 12-month To WIN this package and expose your small business to a much bigger market, send the following details via website email to firstname.lastname@example.com, or on a postcard to Small Capital Competition, package from MWEB Business Marketing, PO Box 84631, Greenside, 2034. • Your full name MWEB Business • Company name • Telephone number 47 worth over R10 000! • Postal address • What is your core business? • How long has your business been in operation? Contains everything you need to get your website up and running – in just seven days. The winner will be selected from a national draw, and the judges' decision is final. Entries must be • Internet access via analogue dial-up connection • Domain registration – received by 30 April 2005. No MWEB employee .co.za, .com, .info, .biz, .net or .org • Two business email addresses or their immediate family members may enter. Winners must be prepared to transfer existing • A website designed to your specifications • Web activity statistics Internet services to MWEB. Internet access • 12 months' free website and database hosting upgrades will be charged at full price. Installation of digital lines will not be the responsibility of MWEB. Winners will need to make themselves available for website training. Domain registration dependant on availability of choice. NEED ADVICE? FREE GIVE-AWAY What Internet package would suit your business best? What type of connectivity do you need? What other services are available? The MWEB Business Advisor will help you find the answers. For a FREE copy of the MWEB Business Adviser, email the infor- mation required (see right) to email@example.com, or send it on a postcard to Business Adviser request, MWEB Business Marketing, PO Box 84631, Greenside, 2034. Where to learn more Training courses 48 Boston Business College Damelin Management School Entrepreneurship diploma (small business Small Business Management Certificate (part- Your small management, business communications, basic time over four months); Business Management business partners bookkeeping, accounting and advertising, Excel, Development Programme (part-time over seven Word, Windows XP). months) – a qualifying course for people who www.realbusiness.co.za Contact: Braamfontein branch, want to do an MBA but don't have an under- tel (011) 339-2153, fax (011) 339-2158. graduate degree. www.fujitsu-siemens.co.za Contact: 14 colleges nationwide. Wits Business School Braamfontein tel (011) 242-3400; www.mwebbusiness.co.za Development programmes in the fields of gen- Durban tel (031) 310-2800; MWEB Business sales: 0860 100 127 eral management, HR (eg, labour law), finance Cape Town tel (021) 686-8991; (email email@example.com) (eg, finance for non-financial managers), mar- Port Eizabeth tel (041) 581-2999; MWEB Business technical support: keting and specialised topics. www.damelin.com 0860 100 154 Contact: tel (011) 717-3600, (email email@example.com) http://wbs.mgmt.wits.ac.za MWEB Business tutorials PDF format tutorials on getting a business www.microsoft.com/southafrica/ Birnam Business College online, access methods, surfing the web, shop- smallbusiness Business Management (Marketing), including ping online, Internet banking, security and 0860 225 567 management, communication, marketing, book- business mail. Available on the MWEB Quick (email email@example.com) keeping and administration. Reference Guide CD available on request from Contact: Head Office, tel (011) 887-2545 or MWEB Business – toll free on 0860 100 127 or www.standardbank.co.za email firstname.lastname@example.com email firstname.lastname@example.com Online resources http://small-business-hub.co.za www.entrepreneur.co.za www.theinnovationhub.co.za A meeting place for people in small business Information to support and help develop A hi-tech business hub in Gauteng that provides and entrepreneurs. entrepreneurs. business support to technology-rich and innovation-based businesses through their www.successfulbusinessplans.com www.bizassist.co.za start-up, survival and growth stages. For a free business plan template, and quick and A database of businesses offering services or easy general guides. products to one another. www.realbusiness.co.za Real Business, a printed supplement in Business www.jumpstart.co.za www.bizland.co.za Day on the third Monday of every month, has a Business advice and venture capital for entrepre- Applications, services and information that are huge store of online articles to help manage a neurs in the technology (financial sector), media, indispensable to the small business. business. Topics include management strategy, telecoms and tourism industries. leadership, marketing, BEE and starting out. http://africa.smetoolkit.org/ www.myownbusiness.co.za Free software, forms and tools for small business Equipment rental A site within the Moneyweb network that offers in Africa. support, news and advice to South African www.spartan.co.za entrepreneurs. www.thedti.gov.za A Microsoft-affiliated provider of rental and The official website of the Department of Trade finance solutions for certain types of technology www.seda.org.za and Industry. hardware and software assets. These include The Small Enterprise Development Agency, a rentals, support and maintenance, upgrade development and support agency operating www.frain.co.za options and insurance. Spartan can be contacted within the Department of Trade and Industry. Franchise advice and information network. on tel (011) 886-0922. www.upstarts.co.za www.brain.org.za Software vendors Founded by Mark Shuttleworth, Upstarts pro- The South African Business Referral and vides facilities and business support services to Information Network, which offers value-added www.microsoft.com/southafrica/ entrepreneurs. information to SMMEs in South Africa. solutionware BG0003 Produced by Words'worth (011) 381-7700 issue two June 2005 Expanding your business Next issue Managing growth
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