STARTING YOUR OWN

							ECONOMY

ECONOMY

STARTING YOUR OWN

Y

BY UMSOBOMVU YOUTH FUND

business
Being your own boss takes courage, imagination, finance and the right support. Here are a few pointers on how to go about it

Young entrepreneur Malefu Maupa started her business, Tamia Transport Services, with a four-ton truck in 2003. She now owns 12 vehicles and has secured transportation contracts with several blue-chip companies. Many young people like Maupa are starting their own businesses in South Africa. The success stories all have common threads throughout – the need for passion, perseverance and hard work, the importance of having a business plan and a clear vision and the great effort required to find financial backing and people who share the vision. Every new business starts with an idea. The idea may evolve from identifying a need or opportunity in a particular community or it may simply be something that someone else has never thought about. If viable, the idea can lead to the starting of a business. A young person who hopes to grow the business into a competitive and feasible operation needs to consider several factors before starting out. These include identifying opportunities, drawing up a business plan, accessing finance and starting up. So what type of person succeeds as an entrepreneur? Like Maupa, potential entrepreneurs are constantly on the lookout for new ventures. Maupa saw an opportunity to start a trucking business. She was not overwhelmed by the fact that it is a predominantly male-dominated industry. In fact, she regarded it as a challenge. In addition, entrepreneurs are good at finding the resources to take their idea and turn it into a winning business. Studies show that successful entrepreneurs generally have a positive attitude, are motivated by a sense of achievement, have the ability to make things happen, take calculated risks and enjoy exploring and discovering things about themselves and others. People turn simple ideas into business opportunities every day. They do this by thinking creatively or ‘out of the box’ and assessing their ideas from every angle. Once an idea becomes a definite business possibility, it’s time to draw up a business plan. While some people do start a business without drawing up a business plan, there is more chance of starting and running the business more efficiently with one. In addition, potential partners or funding organisations are not likely to take the business seriously if they are not presented with a business plan.

BUSINESS PLANS
Writing a business plan forces potential entrepreneurs to think beyond just starting their businesses. It also helps give them an overview of where the business will be a few months or years down the road and helps keep them motivated through difficult times.

64

65

ECONOMY

ECONOMY

The process of writing a business plan enables the entrepreneur to think long term, to assess the viability of the business, to make better decisions, to work out the best ways to sell the business idea and to help raise business finance. Simply put, a business plan should incorporate the following information: • Details about the person or people who intend owning the business • Description of the business (where the business is to be located, is it a company, close corporation (cc), partnership or sole proprietorship) • What the business is going to sell • The viability of the business • The target market • How the business will be managed • The financial requirements of the business. Guidelines and assistance with regard to writing business plans can be easily accessed from organisations such as the Umsobomvu Youth Fund at www.youthportal.org.za or the Small Enterprise Development Agency (seda) at www.seda.org.za. In addition to visiting its website, Umsobomvu Youth Fund has Youth Advisory Centres (YAC) situated throughout the country that young people can visit for additional help. To find out where their nearest YAC is, young people can check out the website or phone 08600 YOUTH (96884). Umsobomvu Youth Fund also has a business consultancy services voucher programme whereby young people can apply for vouchers to access services such as business plan development, business registration, market research and so on.

Importantly, one of the conditions for accessing finance, especially through a bank or financial institution, is business registration. Most transactions, such as applying for a business telephone or opening a business account, require business registration. It is a legal requirement to pay tax on any income received – both as an individual taxpayer and as a business, and a registered business has some advantages over a non-registered one. For information on how to register your business log on to www.cipro.co.za. There are four types of business that can be registered, namely a sole proprietorship, a partnership, a cc or a company. Entrepreneurs need to consider which route suits their needs best. Close corporations have been created specifically to cater for small businesses and registration of a cc is simpler and less expensive than registering a company. For more information on the different types of business, visit Umsobomvu’s website at www.youthportal.org.za.

ACCESSING FINANCE
Once a business plan has been drawn up and the business is registered, many young entrepreneurs need finance to buy equipment, secure premises or employ staff. According to many starting out, this part of the process is often the most difficult and arduous, especially if the young person has no previous financial track record and no way to prove his or her creditworthiness. When Maupa bought her first truck, she approached a traditional financial institution for the funding. She had to put up all her assets as collateral to secure the finance, a time consuming and difficult process. It wasn’t long before she decided she needed a 12-ton horse and trailer. That’s when she approached Umsobomvu for a loan. She chose Umsobomvu because it focuses specifically on funding youth-owned and managed enterprises and she had heard its terms were more flexible than those of the banks. Maupa received funding from Umsobomvu’s General Fund, a private equity fund

BUSINESS REGISTRATION
Most clients want to do business with a legal entity that has a name, registration number and, where applicable, a VAT registration number. If the business is hoping to win tenders, it will need to be registered.

Importantly, one of the conditions for bank or financial institution, is business for a business telephone or opening a

accessing business finance, especially through a registration. Most transactions, such as applying business account, require business registration

66

67

ECONOMY

ECONOMY

which, along with two other Umsobomvu SME financing programmes (Progress Fund and Franchise Fund), finances youth-owned and managed small to medium enterprises (SMEs) in South Africa. In addition to equity funding, Umsobomvu offers microfinance to smaller operations. Because accessing finance is often difficult for young people, Seda has been mandated to support and promote co-operative enterprises, particularly those located in rural areas. Seda’s work is carried out in line with the Department of Trade and Industry’s Integrated Small Enterprise Development Strategy, which aims to: • Strengthen support for SME access to finance • Create an enabling regulatory environment • Expand market opportunities for specific categories of small enterprises • Localise small business support through a grid of seda-co-ordinated information and advice access points • Initiate a national entrepreneurship drive and expand education and training for small business • Co-fund minimum business infrastructure facilities in local authority areas across the country. In addition, the South African Women Entrepreneurs’ Network (SAWEN) is a networking forum for individuals and organisations committed to the advancement of women entrepreneurs. Find out more about SAWEN at www.dti.gov.za.

CO-OPERATIVES
While most small businesses are started by individuals for the benefit of those individuals and their families, co-operatives are started by groups of people or, in some instances, by entire communities for the benefit of everyone involved. Co-operatives work similarly to stokvels or burial societies. They are legalised and enjoy legal protection and support from the government. In most instances, co-operatives are businesses. Their purpose is to enable the members to meet their economic and social needs in a mutually beneficial manner. Co-operatives have been so successful in some parts of the world that the government is actively encouraging the establishment of co-operatives in South Africa. If they are set up in the right way, they can play a major role in helping provide jobs and fight poverty. The fundamental nature of co-operatives is that members control them in a democratic way. Every member should play an active role in establishing policies and day-to-day decision making. Accountability, responsibility and consultation are the governing principles. In South Africa there are three main types of co-operatives, namely agricultural, trading and social services. In order to benefit from financial and other support, co-operatives should be registered with the Registrar of Co-operatives. Guidelines on how to set up and register co-operatives are provided on Umsobomvu’s website at www.youthportal.org.za and seda’s website at www.seda.org.za.

68

69

SUCCESS STORY

SUCCESS STORY

IN THE LINE OF

M
70

beauty
BY UMSOBOMVU YOUTH FUND

Hard work and perseverance paid off for a young entrepreneur who opened her own day spa

‘My advice to young people who want to start their own businesses is: get involved from the outset, compile your own business plans, educate yourselves on every aspect of your business, be original and when things get difficult (because they do), stick to the plan.’ These are the words of Nthabiseng Thabethe, 30, who started her own business, Chi Day Spa, in Waterfall Mall, Rustenburg, in September 2006. Thabethe says she always dreamed of owning her own business: ‘I was working as an independent recruitment consultant in Johannesburg and when I visited my mother in Rustenburg I’d want to spoil her, but there was no beauty salon or spa in town.’ And so the idea for opening a day spa was born. Thabethe applied for a shop at the Waterfall Mall in 2004. After months of phoning, pushing and attending interviews with Waterfall management, suitable premises finally became available in 2006. Then she desperately needed funding to secure the shop and to buy the necessary equipment from China. After being turned down by the banks, Thabethe applied to Umsobomvu Youth Fund for a loan. ‘I had to submit a business plan and follow through with numerous phone calls, meetings and assessments, but eventually I was awarded a loan of R650 000. Because the opening of my business was delayed, Umsobomvu has been flexible about repayments and I only started making my payments in April this year,’ says Thabethe. The shop opened in September and Thabethe says December was a crazy month. ‘We were really busy during the festive season and then things became relatively quiet in January. It was only later in the year that we saw the December people coming back for treatments, massages and vouchers as gifts for friends,’ she says. When people visit the Chi Day Spa with a voucher they’ve received as a gift, Thabethe offers them their next treatment at a 25% discount. ‘It is part of my marketing strategy to build a loyal customer base and get them coming back time after time,’ she says. Chi Day Spa has two treatment rooms where clients get massages, facials, wraps, body scrubs and waxes. In addition, there are two nail stations in the reception area and one for private pedicures and manicures. The spa also offers mobile treatments for busy executives, tourists or clients who prefer to have their treatments done at home or in hotel suites or offices.

‘be original and when things get difficult (because they do), stick to the plan’
Thabethe says owning her own business is not easy: ‘Fortunately, I believe that you have to work hard for everything you want, so this is not a surprise. I believe the more involved you are in every aspect of the business, the more successful it will be.’ Chi Day Spa employs three permanent and four temporary staff members. Thabethe encourages her employees to get their driver’s licences, enrol for computer training and manage their own client base. ‘Of course it will help me if the ladies can drive themselves to the various clients requiring mobile spa treatments. Hopefully, when we start selling franchises, they will also be able to buy and run their own spas’ she says.

71