The rising unemployment rate in South Africa has left a large percentage of the youth desperate for a way out of their financial crises. A lot of the youth and unemployed graduates are all seeking a way to deal with the financial burdens that accompany black tax, student loans, the pressures of having to play the role of a third parent to siblings, and ordinary day to day survival.
For many, the viable solution to all these money problems is starting a small business venture. Whilst this may be a solution to help alleviate the financial burdens currently faced by many young people, one of the biggest mistakes that a lot of potential business owners make is the assumption that the road to business ownership is a smooth ride. Contrary to popular belief, the simple act of providing a product or service, and getting paid to do so, is not the secret recipe it used to be for a successful business venture; there is now more to a successful venture than meets the eye. If the business is not properly managed it can cause the business owner to find themselves facing heavier financial burdens than before they started the business.
Apart from the age old problem of lack of financing – financing may be needed for starting the venture since the individual who starts the business in this case is unemployed and does not have much money to speak of – other reasons that contribute to small business failure include: risky business practices, such as the lack of regular bookkeeping; reckless expenditure of the money generated by the business; and not assessing your business performance over time, which can lead to the decline in the growth of your business.
Another problem that threatens new business ventures is the fact that small business owners often fail to implement the age-old advice: “separate business from pleasure.” This flaw often manifests itself in situations where the business owner has a stable business that is running, and they suddenly face a personal financial difficulty, or they find themselves making more money in the business than they had imagined. In both of these cases, the business owner is oftentimes tempted to spend money from the business account; money that could have been used to buy stock for the business or money that could have paid for costs that must be settled to run the business. Although every business does allow for the owner to take money out of the business, a process called ‘drawings’ in accounting terms, such practices can run the business down and cause all previous business development to wash down the drain and be in vain.
The above are not meant to scare anyone who want to start their own business. It is meant to engage your mind about the potential problems and pitfalls you can face when starting your own business.
Although I cannot give you a step-by-step guide on how to start your own business and grow it sustainably, let me cater for the potential business owner who has the following burning question on their mind: “Eish, so where will I get the money for all these ideas I have?”
Well, in the past, prospective business owners had to face the challenge of high interest rates charged by banks when getting a business loan. Now, however, getting financial aid for your business as a young person has become a lot easier with aid of institutions such as:
- Women Entrepreneurial Fund (WEF)
- Black Business Supplier Development Programme (BBSDP)
- Incubation Support Programme (ISP)
- The National Empowerment Fund (NEF)
- National Youth Development Agency (NYDA)
- The Isivande Women’s Fund (IWF)
Beyond the funding question you should always remember that even as a small business owner, the main objective of a business is financial gain. You should always strive to grow your business and not let it be stagnant. Should you reach the point of stagnation, the goal of growth and profit is a difficult one to reach.
As a young entrepreneur you should also not overlook the positive impact that the following simple practices can have on your business:
- Saving or investing a portion of your profits,
- Forecasting of fixed and variable expenses,
- Cutting down on operational costs by making majority of the products yourself or even looking at recycling and reusing material as alternatives, and
- Using social media platforms to market the business as opposed to traditional advertising methods
With thorough financial and strategic management and careful use of the business resources, there’s a decrease in risk of the business failing and greater opportunity for your financial growth as an upcoming young business owner.
This article was written by Karabo Rantho.
You can contact Karabo Rantho by clicking on the social media buttons below, or by emailing her on: firstname.lastname@example.org.
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