INVESTIGATION: WIN A HOW CHIC & DELL VEG HAVE BEEN WINGING IT STUDIO XPS 13 PAGES 2 & 3 SEE INSIDE IT’S MY May 17 2009 www.itsmybusiness.co.za FRUITS OF HIS LABOUR FROM FARMER TO ENTREPRENEUR PAGES 4 & 5 2 MAY 17 2009: IT’S MY BUSINESS / Sunday Times MAY 17 2009: IT’S MY BUSINESS / Sunday Times 3 UNCOVERED: AMANDA MEMELA WAS NOT THE ONLY PROSPECTIVE FRANCHISEE TO BE TAKEN IN BY CHIC & VEG FRANCHISES THAT NEVER HATCHED It’s My Business goes undercover to catch this franchisor in the act, writes Barrie Terblanche I N THE same week as A1 Chic & Veg CC owner Sarel Grobler misrepresent- ed his franchise to It’s My Business editor Jane Steinacker, who posed as a buyer (See story in Business Times), for- mer president Kgalema Motlanthe signed the Consumer Protection Act (CPA) into law. The Act aims to protect franchisees from unscrupulous franchisors. But for the dozens of people who allege that they have lost what amounts to millions of rands to Sarel, the law came way too late. For one thing, the CPA will not work retrospectively, says Bowman Gilfillan’s Eugene Honey, legal adviser to the Fran- chising Association of South Africa. The law is expected to take 18 months from promulgation before coming into ef- fect. This means the Act will not protect anyone who tries to buy a franchise before October 2010. The story of Chic & Veg stands as a stark reminder about why South Africa needs the new law, and how careful prospective franchisees have to be if they buy a fran- chise before October next year. ACCUSED: Sarel Grobler, left, owner of A1 Chic & Veg CC, and marketing manager John Gooderham. The franchisors have been accused by franchisees of either ripping them of or failing to Complaints about Chic & Veg surfaced at provide support the end of last year when It’s My Business reported that a social worker from Mpumalanga, Amanda Memela, paid R105 000 to Sarel for a Chic & Veg franchise container, which to date has not arrived. MEMELA IS NOT THE ONLY VICTIM In response to the article, many came forward claiming to have had similar ex- periences with Chic & Veg. Through their CRYING FOWL: After Amanda Memela’s story was covered in a previous edition, more victims came forward Picture: JACKIE CLAUSEN Consumer Protection Act to the rescue stories, and through It’s My Business’s own interaction with Sarel, a clear modus operandi can be described on how Chic & grants on his behalf. Chic & Veg denies that responded by saying that they have opened keep his freezers and other equipment, the Veg has been operating. Almost all of Chic Viaan ever lost R50 000. a file on this matter and that “these aver- suppliers of which also had not been paid. & Veg’s victims first heard of the franchise ments can categorically be denied”. When he confronted Sarel, he was told: through its advertisements in business- PROMISE OF A GOVERNMENT Steve Thornes, who paid R485 000 to “Oh, don’t worry about (the equipment opportunity magazines or websites. O GRANT open a Chic & Veg in Underberg, says Sarel supplier). I can drag him through the courts NE of the main ways in which the aspect of the bill is a shift in onus from Applicants with unencumbered money urged him to sign a lease based on a for another two or three years.” Consumer Protection Act will protect consumer to business. A franchisee will no or those who can take out a second bond on The promise of “guaranteed” govern- ment aid if you put down R50 000 is what “feasibility study” which he has never seen. Steve terminated the franchise agree- franchisees in future is through the longer have to prove that his complaint is valid. their house receive approval to open a Chic “It took nine months for him to provide ment, and ran the shop independently. Chic Consumer Protection Commission, It is the franchisor who will have to prove that & Veg franchise. In the case of Jane’s first attracted Danny Europa and Johan Jamneck to the idea of starting a Chic & everything. I signed a lease, started paying & Veg denies any knowledge of delay in which will be established in terms of the new the deal is reasonable. experience, Sarel did no vetting of the rent with no form of income. I had to fight supplies and add that they experienced law. According to lawyer Eugene Honey, the But even though the CPA will make it easier ability of the applicant to run a shop. He Veg in Bredasdorp, Western Cape, but negotiations with Sarel eventually turned him for nine months before he actually problems with Steve “from the first day … commission will probably work similarly to for franchisees to investigate a franchise be- steers clear of those who wish to apply for opened the shop. It was a pregnancy.” when royalties became payable”. the Competition Commission, which has the fore they buy, and to act against a franchisor finance at the banks’ franchise units. around how much cash they had available immediately. With the help of Johan’s mu- But that was just the start of his prob- power and the resources to investigate mal- afterwards, the basic guidelines of buying a Viaan Visser, who lost R50 000 to Chic & lems. Orders for stock placed at the fran- CIVIL ACTION HAS BEEN TAKEN practices on behalf of complainants. Cases can franchise remain valid. These are: Veg when he wanted to open a store in nicipal pension package, they managed to scrape together R300 000 and paid it over to chise head office — paid upfront — were Some of Sarel’s victims have taken civil be referred to the Consumer Tribunal, which ý Don’t pay any money before speaking to Mpumalanga in 2006, says Sarel was keen, not fulfilled. “We ran out of stock. We were court actions against him. But even those will hear it without cost to the complainant. every single franchisee and ex-franchisee in even urgent, to get their shop up and Sarel in January last year. Says Danny: “The guys phoned us every a speciality chicken shop without chicken. who succeed in court still experience de- But more importantly, the new law won’t the group. If you can’t get hold of them, don’t running. But when Standard Bank’s fran- Again, (Sarel) wouldn’t speak to us. His lays. Jerome Fakoe got a high court judg- allow operators to hide behind vague promises buy the franchise. chise desk, which Viaan approached for day — two, three times a day. But after the money (was paid over) the phone calls staff were just saying: ‘Oh, it’s the sup- ment against Chic & Veg for about R140 000. and half-truths. It requires full disclosure by ý Do not buy a franchise from a franchisor finance, started asking questions about the pliers, it’s the suppliers’.” He says Sarel paid back R100 000 and then the franchisor. Eugene says what needs to be who does not test your ability to run a busi- franchise, Sarel “went silent and you just stopped. In the end they no longer even answered our phone calls.” Even those When he eventually flouted the fran- stopped, forcing him to go back to the disclosed will be determined by regulations to ness. It’s a clear sign that they are just after didn’t get hold of him any more”. chise rules and spoke directly to the sup- courts to get a judgment against Sarel in be issued by the minister of trade and industry, your money. Viaan finally lost faith in Chic & Veg franchisees who manage to get a Chic & Veg shop up and running report the same pliers, Steve discovered that they had his personal capacity. Chic & Veg says “this but it will probably be similar to the disclosure ý Do not buy a franchise from a franchisor when Sarel came up with an improbable stopped supplying Chic & Veg because of matter was settled and finalised some time required by Fasa (Franchising Association of who urges you to pay quickly, otherwise you’ll story about having organised government fall-off of enthusiasm and support from Sarel as soon as the money is paid. Sarel overdue accounts. Steve also had to fight to ago …[and] to Mr Fakoe’s satisfaction”. SA) of its members. Perhaps the most radical lose an opportunity. PASSIVE PRESENCE: An example of the Chic & Veg franchise 4 MAY 17 2009: IT’S MY BUSINESS / Sunday Times MAY 17 2009: IT’S MY BUSINESS / Sunday Times 5 LOVE OF THE LAND: A lack of money could not stand in the way of an entrepreneur with bold ideas and a flair for taking risks GET YOUR PRODUCTS SOLID AS A ROCK: Handri mortgaged everything he owned to build up Koelfontein in Ceres to the successful farm it has become OFF THE SHELVES ‘I am very attached to the ground This Ceres farmer put everything on the and always knew I was line and triumphed using sound business going to farm and marketing advice, writes Liesl Venter one day’ — Handri Conradie H ANDRI Conradie has al- ways dreamt big. And SECRET OF HIS SUCCESS: selling his crop only to Farmer Handri Conradie the local co-op was never says he ate, slept and going to be enough for this farmer dreamt dried fruit in his and entrepreneur. early years of operation In 2002 he took over Koelfontein, Picture: AMBROSE PETERS the family farm in Ceres, with much enthusiasm and many bright ideas, but very little money. “I am very attached to the ground and always knew I was going to farm one day. Growing up on the farm I had learned the ropes from a young age, but I also had S Marketing, all these ideas of doing things very TORES should put shoppers Craig gives the following as differently to my father and grand- and their needs at the options when marketing goods in- father. I wanted more than just to forefront when considering store: be the farmer selling off his crop.” A shopper’s in-store marketing, says ý In-store demos such as tastings Handri, who has a BSc degree in Craig Lodge, trade marketing man- and samplings of products; journey is agriculture from the University of Stellenbosch and a master’s de- gree from Oxford, wanted to be in control of the entire value chain. Having worked briefly for a not just about ager for Pick n Pay. “Too often, businesses are inter- ested in the next nice gadget or, sometimes, old methods which may not work. It is important to con- over the shop ý In-store digital screens; ý Coupons on the shelf or pack; ý Shelf adverts, or banner adverts near products; ý Bulk displays in hot spots; fresh-fruit marketer, he decided to stantly ask what your shoppers brand objectives, as well as the ý You must build strong brands ý Using gondola ends for specials try his hand at processing, pack- needs, but need, at what time and in what retailer objectives.” and great people to execute them. and promotions; aging, promoting and selling his place,” he says. Craig’s tips for SMEs developing “Engaging with the shopper with ý Using billboards around the fruit himself. also about Craig says SMEs should take into their in-store marketing campaigns the right message in the right place store entrances; “In the beginning my only sup- account the creation of a fun and include: is what it is all about,” says Craig. ý Using trolley handles or sides; porter was my wife. Many thought emotional pleasant shopping experience, ý Your plan must be a coherent, “Also, a shopper’s journey is not ý Marketing on in-store radio; I should just stick to farming, but where purchasing is made easy. consistent and cohesive customer- just about needs, but also emotional and as an entrepreneur I knew it made responses He says it is to be hoped that “this focused story; responses. ý Special packaging. more sense for us to be in control of will then help you tailor the right ý You must clearly define your “For example, the shopper wants According to Craig, costings are the entire process and was de- messages and brands for people in- market, the customers, competitors to be greeted warmly, told where based on quantity and reach, and termined to make a success of it.” store. It really is all about finding and suppliers; the key items are, given discounts not the individual tool. He advises So, with hat in hand, he visited the balance between the customer ý The plan must contain credible and savings, told what’s on sale and SMEs to look at each campaign and his bank manager. “I literally bet needs — the shopper mission — and forecasts and assumptions; and where to find it.” cost it on its own merit. the farm on my idea. I mortgaged everything.” But his daring paid off. Today, At Source Handmade Foods supplies dried fruit to major retailers such as Pick n Pay, Woolworths and Melissa’s Food Shop. “We started with a few farm workers in a shed on Koelfontein. Wanted: keen innovators Within 18 months, we realised we needed to increase capacity. T We built a factory where we now RANSFORMING emerging and role models. Endeavor is not a fund entrepreneurship in South Africa. employ more than 250 people full market economies, by identi- and it is not a charity. We don’t give Entrepreneurs, who are selected by time. We have never looked back. I fying and supporting high- financial aid, but rather connect our Excelerator, will benefit from strategic am where I always knew I was impact entrepreneurs, is members to their peers as well as a introductions, training, mentorship heading.” what non-profit organisation Endeavor global network of business leaders, and consulting services. Entrepreneurs is all about. who act as mentors and advisers. Endeavor is looking for businesses MAKING IT WORK Endeavor sets about helping “We’re part talent scouts, part busi- that: It was not an easy, overnight entrepreneurs to reach their goals, as ness accelerators and part real-time ý Are innovative, with unique prod- success story. There were many there is no doubting their importance business school.” ucts, services or business processes; challenges for Handri, who had in helping to develop economies. Entrepreneurs are chosen through a ý Have been in operation for at least to convince retailers to use his Endeavor Entrepreneurs marketing rigorous multi-step selection process, six months; product without having any track and communications manager Megan aimed at identifying the best talent in ý Have less than R3-million in record. “There was some luck de Villiers says: “Research has proven the country. revenue; and involved in that the timing was that there is a direct link between Entrepreneurs give back by sharing ý Have high growth potential. right — retailers were looking for entrepreneurs, the growing of an econ- the knowledge and expertise they have Entrepreneurs must be: an alternative to the brand leaders omy and the creation of new jobs. Our gained, fostering a culture of learning ý Innovators; decision to package under the retailers’ label At Source and we never deviate from that.” would do it again in a heartbeat.” aim is to stimulate a culture of en- and development. ý Ambitious and passionate; and at the time. But I think the quality of our as we just did not have the money or ex- Today they not only produce their own In 2007, Handri became an Endeavor product also played a role.” trepreneurship in South Africa.” Endeavor South Africa has recently ý Working full-time on their perience to launch a new brand.” fruit, but also buy up neighbouring farmers’ Entrepreneur, which he believes is important Megan says the organisation sup- launched a new initiative, the Endeavor businesses. A firm believer in never giving up, Handri Handri says the quality of his products, as produce to keep up with retailer demand. for the next phase of At Source. admits to eating, sleeping and dreaming ports entrepreneurs by giving them Excelerator, to specifically target Entrepreneurs who are interested in well as being innovative and willing to take “It is sometimes lonely to be an en- “It is time we launch our own label — access to expertise as well as local and innovative, early-stage enterprises accelerating the growth of their busi- dried fruit in the early years. risks, were key to their success. “Our mar- trepreneur, because you take all the risk something we want to see a reality before the “All our efforts were in ensuring we were global business networks. and develop them into sustainable, nesses, and who meet the above keting has always been the product itself. An and the challenge can be overwhelming end of 2009. We have come so far already, but “We help create jobs, propel high-impact businesses that will be criteria, are encouraged to contact going to get on the shelves. We made the intrinsic quality ethos is very much a part of but, having been through this process, I the journey has really only just begun.” economies and cultivate rising leaders regarded as the gold standard of firstname.lastname@example.org 6 MAY 17 2009: IT’S MY BUSINESS / Sunday Times MAY 17 2009: IT’S MY BUSINESS / Sunday Times 7 TOBY’S TOP FIVE BACK-UP HARD DRIVE Dell Tech Tip ’M sorry but I don’t even know GO WIRELESS ‘I where the carburettor is in my own laptop,” I facetiously told a friend’s wife when she asked me to fix her computer a few years ago. She turned to her husband and rolled her Get to know This is not a standard item, but an external hard drive is as essential as the components inside. If your computer is lost or stolen, the hardware is just the hardware; it’s the data that is important. Use software like EMC AS a small business, if you would eyes: “I thought you said he understood Retrospect to automate your back-ups. your PC’s bits like to increase your revenue by computers; he doesn’t even know where his being more productive — wireless own carburettor is.” It’s a gaffe that is now The best thing to happen to portable computing technology may just be what you are looking for. Wireless access the stuff of friendship legend, but she’s not the only one who is mystified by the insides of Win a Dell laptop will help you communicate from a computer and what all the various hard- since notebooks is their smaller sibling, the anywhere at any time. What you should be looking for is ware components do. It’s really simple, actually. There are a few THE Dell Studio XPS 13 laptop netbook. Toby Shapshak picks his favourites a computer with embedded 3G because their antenna design main items that you need to know about — mostly for the specifications when buying, Ever wondered what the blends power with elegance, provides a better signal quality and easier Internet access. but not much else. However, it’s helpful to know what they are and their impact on specifications on your computer and is designed with uncompro- mising attention performance. N ETBOOKS are one of the fastest- growing segments in the computer field, lower power usage and thus better battery life, netbooks are ideal for the next business owners who need compact, portable and functional laptops. This is not an expensive optional extra, but rather a necessity and it PROCESSOR mean? Toby Shapshak to detail, to deliver the ultimate laptop especially because of their great price. Netbooks have dispensed with the generation of computer and Internet use: to access web-based services such as Gmail or The netbooks reviewed here mostly have a new screen technology called backlit-LED, is getting cheaper. Think of it as the computer’s brain. The microprocessor — the central processing demystifies the technical jargon experience. It enables users to experience mobile computing notebook’s built-in optical drive and reduced social-networking sites such as Facebook. which is brighter and greener than LCD, unit (CPU), or chip as it’s often called — does with subtle sophistication. the screen size to 10 inches (25.4cm). Using a With prices starting at about R5 000, they plus Intel’s Atom chip and one gigabyte (GB) all the calculations and data processing that Superior service is standard with Dell new Intel Atom processor designed for are almost an impulse buy for small- of RAM. makes desktop computing possible. The average hard drive has grown over the plan to use your computer for gaming or Studio XPS products. Made from silicon, it has millions of tran- years and 120GB is probably the minimum. multimedia work, as they are now incor- Dell XPS technicians pass rigorous XPS sistors and has shrunk to its present size, Windows users need to “defragment” their porated into the chipset. product-specific training, and support making small laptops like netbooks possible. hard drives regularly. An overly full drive is calls are normally answered in less than Speed is measured in Gigahertz (Ghz), but often blamed for slow performance and de- OPTICAL DRIVE two minutes. Dell Inspiron Mini 9 Toshiba NB100s Acer AspireOne you don’t need the latest and fastest chips. If fragmenting moves data into a more orderly The catch-all name for DVD or CD drives, You can also count on the latest virus R8 200 you want to boost performance, get more format. which use optical technology to store and and spyware protection, one year of Dell R4 500 3G DataSafe online backup services, and 24- www.dell.co.za http://za.computers. R8 000 RAM. read data. In broadband-rich countries, these The Dell Inspiron Mini 9 is a toshiba-europe.com/ MOTHERBOARD OR CHIPSET are less necessary, as software can be down- hour support. In short, the ownership www.acer.co.za experience is just like the machine itself — classic netbook in the sense Toshiba’s dinky NB100s The Aspire One has RAM The motherboard has been replaced by the loaded. We’re getting there in South Africa. that it has the original 8.9- also has the smaller 8.9- This is the “memory”; think of it as the heart chipset — a combination of multiple “cards” top-of-the-line. been a hard laptop To win this remarkable machine, SMS inch (22.6cm) screen and a inch screen — making it to beat. The first to muscle, doing the number crunching and or “chips”, including the graphics and sound WIRELESS AND NETWORKING smaller keyboard. It looks smaller overall — which powering all the applications when you open cards, and the wireless and network cards. In All new laptops and some desktops have a first the codeword “business40”, followed launch with a built- by your name and postal address to 32545. like a shiny lozenge of a computer is a problem with the in 3G card last year, it was them. RAM stands for random access mem- the early days, you’d have to clip these circuit wireless built in. LAN stands for local area and has the usual 1GB of RAM as well as just-too-small keyboard. ory, which means that its integrated circuits board cards into specific slots, called a “bus”. network, while WLAN (for wireless LAN) is The editor’s decision is final and no this newspaper’s number one gadget of the correspondence will be entered into re- built-in 3G. You might be aghast at the piddling However, it is solidly built and is a year. With a bright 22.6cm LCD screen, it has a can randomly access or write data. Most new Thankfully, that’s all taken care of now — often used to describe the Wi-Fi specifi- 16GB hard drive, but it is the new sold-state drive Toshiba business-orientated machine computers come with at least two gigabytes unless you’re a gamer or power user who cations. South Africa uses the technical spec- garding this competition. 120GB hard drive and a choice of five colours SMSs cost R1 each. Entries close on (SSD), which is like the flash memory used in USB that weighs only slightly more than 1kg. With its (the 3G comes in black only). Its two mouse (GB), but more means a smoother experience. wants to upgrade it yourself. ification 802.11b/g or a newer and faster sticks. Although SSD gives you more battery life, 120GB drive are good pre-installed software prod- protocol called 802.11n. Bluetooth is often Friday May 22. You may enter as many buttons, on the left and right of the trackpad, times as you wish. it is much more expensive than traditional hard ucts such as McAffee Internet Security and are a nice touch and the battery life’s decent, HARD DRIVE GRAPHICS AND SOUND CARDS included in laptops and is handy for synching drives. Google’s Picasa for picture editing and sharing. but the price is a bit hard to swallow. Often called memory, it’s actually storage. These are not strictly relevant, unless you mobile devices like cellphones. Lenovo IdeaPad S10e Samsung NC10 From R5 000 (for a 3G-less model) R5 500 www.lenovo.co.za www.samsung.co.za Lenovo’s funky little S10e topped Stuff magazine’s Until they were introduced here earlier this year, most recent round of netbook tests. It has a decent (and South Africans did not know that Samsung has been making slightly bigger) 160GB hard drive, a built-in 3G card, superb computers for years. The NC10 is a well-rounded little Lenovo’s legendary robustness and a well-sprung computer, and while it may not have a backlit LED screen, it keyboard (never underestimate the importance of compensates for this with a 160GB hard drive and a useful six this). The red laptop lid is a nice touch, especially if hours of battery life. There is a 3G model available for R7 000. you’re in the creative industries. A great machine. 8 MAY 17 2009: IT’S MY BUSINESS / Sunday Times MAY 17 2009: IT’S MY BUSINESS / Sunday Times 9 EXPERT ADVICE GIVEAWAY BARRIE Terblanche is the co-author of the STARTING OUT newly revised 11th edition of Starting Your Own Business in South Africa, published by Oxford University Press. To win one of three copies of this book SMS first the codeword “business39” followed by your name and postal address to 32545. The editor’s decision is final and no correspondence will be entered into regarding this competition. It’s My Business reader Maxwell SMSs cost R1 each. Entries close on Friday May 22. You may enter as many times as you wish. Mbelekwane wants to find out as much as ‘Augment your practical he can about opening his own business. management experience by studying business — nothing Barrie Terblanche has this advice to give wrong with a good old general BCom through Unisa’ Picture: AP I AM 24 and am trying to find ment, accounting, labour law, pro- out as much as possible about ject management, basic commercial starting my own business. law, sales and marketing, basic BEWARE OF STARTING WITH A yourself, but the only other way of doing ASK THE BANK FOR A BUSINESS business without a formal business plan, What are the processes computer skills, business commu- BIG BANG market research as a small start-up is to PLAN TEMPLATE rather attend a business plan course and do it involved in registering a new busi- nication and personal efficiency. If your business idea is such that you have speak to other business owners. If you need to apply for bank finance, ask yourself. ness, opening a business bank Courses on how to write a business to start with a big bang with thousands of Don’t be shy to go straight up to them and the bank for its business plan template and Registering a business? It’s really not as account, drafting a business plan, plan are less important, but they’re rands worth of equipment and shopfitting in ask: “I want to start a business like yours. fill it in. Don’t waste your money on a important as you think. You can do that later doing marketing research and get- still better than nothing. place, such as a coffee shop in a mall, you’re Can I ask you for some advice?” You’ll be business plan consultant. when you’re ready to take a big step in your ting access to finance? If that’s not your thing either, on very thin ice. surprised at how open some entrepreneurs The real bankers who will take the decision business, such as partnering with someone read books about it. And if reading You need lots of working capital and luck. to give you the loan or not will anyway only or signing a lease — and that can easily be a can be. CONGRATULATIONS on your de- books is also not your thing, I hope Be willing to find and spend thousands of look at your sales to date and your cash-flow year or two after you’ve started. Don’t ask for their business plan — they cision to own your own business you are a fast on-the-job learner, rands to hire the best industry experts who forecast. Nobody takes nonsense like “vision The same goes for a business bank ac- one day. It is one of the most pos- because you’re going to need to be. may be able to save you from choosing the don’t have one, not on paper anyway. Most and mission” or “core value” statements of a count. Use a personal bank account — it’s itive steps you can take towards Let’s say you’ve had a few years’ wrong spot. successful business owners work with cash- small business seriously anyway. cheaper. By the time the bank realises you’re self-fulfillment and empowerment. management experience, and Or rather get into the coffee trade in some flow forecasts, not business plans. If it’s a hot-shot investor rather than a bank running a business through it, you’re prob- It is also without a doubt one of the you’ve done some business studies other way first — make your own blend at Before you start your business, make sure that you have to persuade with a business ably making enough money to afford busi- most difficult things you will ever in some form or other — what then? home and sell it to coffee shops, for example. that at the very least you know how to do plan, he’d want to be very sure that you’ve ness accounts. do in your life, so you are right to There are many ways of starting a Once you’ve made some money — and got your own cash-flow forecast, and what a written the business plan yourself, and not Registering, opening a bank account, hav- seek out as much information as business: going into partnership to know the industry — then maybe buy a typical cash-flow forecast for a start-up in some overpriced MBA that you’ve hired. So, ing a website, printing business cards, or you possibly can. with someone, buying out your coffee-shop franchise in order to tap their your industry looks like. again, don’t fall for the widespread business- renting an office — these things are in- boss, buying an existing business or expertise in choosing the right spot. The advice of other business owners in the plan consultancy rip-off. cidental to starting up. They can be helpful, START WITH YOURSELF buying a franchise are just a few, It’s not as accurate as making some sales industry is invaluable here. If you still feel uncomfortable starting a but they’re not that important. You must try as hard as you but they are very expensive. possibly can to get a few years’ management experience before you START SMALL AND SCALE UP start your own business, even if it is The method I would recommend just as a junior manager. Running a is to start small and scale up. It successful business is about man- allows you to learn from your mis- aging people (including yourself) takes (you will make many of those) and about knowing, designing, test- and to do proper market research. ing and managing business systems Start from home. Hang on to your so that your business runs smooth- day job and moonlight with your ly without destroying your life. business over weekends and in the What if you don’t evenings at first. Beg, like managing people borrow and scrape and engineering ‘Make sure your together second- business systems? hand machinery. Then don’t start a family has other Rent someone else’s business. You can workshop in their still work for yourself income when you downtime or share by selling your ser- vices as a freelance take the leap’ workspace. Don’t start off in a mall, the specialist one day, rent will kill you. but don’t start a business. What Rather start by doing door-to-door successful business owners do most sales, flea-market sales, or through of the time is to manage people and stands in other people’s shops — on business systems. consignment, if necessary. Most unsuccessful business own- Make sure your family has other ers are bad at managing people and income when you finally take the building business systems. They try leap — your spouse will have to go to do all the work themselves, be- out to work, for example, and the come overwhelmed, and either run grandparents will have to be called their businesses into the ground or in to take care of the kids for a while. burn out after a few years. If you’re single, consider moving There is no better place to learn back in with your folks to save on about managing people and getting living expenses. to know business systems than If you don’t like the idea of such working as a manager in someone an unglamorous struggle, keep else’s business. Research shows your job, save up money for a that most business owners regard decade or so and rather buy a fran- their previous jobs as their most chise. They’re expensive, though, important source of business and even with a franchise you’re in knowledge. for a hard first few years. Regard your first years of strug- STUDY gling in this way as your market Augment your practical manage- research. It’s really the only way a ment experience by studying busi- small business start-up can do prop- ness — nothing wrong with a good er market research. If you want to old general BCom through Unisa. know if your product or service will If that’s not your thing, try to sell, try to sell some, even if it is on a UP AND RUNNING: Starting up a small enterprise like this coffee shop requires proper planning and sound business attend as many short courses as flea market, or through your net- management Picture: MARIANNE SCHWANKHART possible about financial manage- work of family and friends. 10 MAY 17 2009: IT’S MY BUSINESS / Sunday Times MAY 17 2009: IT’S MY BUSINESS / Sunday Times 11 ADVICE SOUGHT Words of wisdom TO THE SELLER IN BRIEF business, not its potential value. SCREEN TEST ý Don’t let your feelings for the business cloud your ý Use a broker. judgment. ý You can approach competitors as potential buyers. ý Once you have a potential buyer, don’t sit back — ý You will expose yourself to strangers looking into RECORD MONTH FOR SMME FINANCIAL they are buying a going concern. the private affairs of your business — get used to it. SERVICE PROVIDER ý Set up a prospectus with information about the business and its competitive advantages. FINANCIAL services provider Netcash enjoyed their highest client sign-on month in March, with a 40% ý Speak to your auditor and lawyer as often as you TO THE BUYER increase in merchant activations. need to and make use of their expertise. ý Make sure you conduct due diligence — this is your The Netcash system allows businesses to cut costs ý Advertise in niche industry titles to reach the largest money. by managing their debtors and creditors more ef- possible number of potential buyers. ý Do not overgear yourself — keep the debt and equity fectively, resulting in better value for less money and ý Do not advertise false or inflated revenues. In fact, ratio healthy. an increase in cash flow. do not advertise revenue potential at all. “We had our best sign-on month since our inception ý Do not overestimate future income potential. Hendri Pelser talks to someone wanting to ý If you really want to sell the business, set a fair and in 2001. We generally activate about 100 new accounts ý Do not pick an industry in which you have a month, but a further sign-on of 40 clients is realistic price. A buyer pays for the present value of a absolutely no knowledge or experience. exceptional,” said chief executive Charles Pittaway. With more scrutiny on traditional banks and bank- sell an established, profitable business ing fees, South African business owners will be attracted to alternative solutions and competitive prices. Netcash charges a single setup fee of R425; monthly fees are R120. WOULD YOU LIKE YOUR STORY HEARD? M OST entrepreneurs spend a IF you have an extraordinary story to tell, or if your lifetime building a business, business is being affected by an issue that other small buying and selling day in, day businesses should know about, then It’s My Business out. But more often than not, would like to hear from you. For more information, however, they are unsure how to sell the contact It’s My Business editor Jane Steinacker on business itself. email@example.com Sofia Radebe* and husband Paul have spent 13 years building a successful ball- SUPERIOR PERFORMANCE. SECOND ANNUAL JOZI YOUTH SUPERIOR CONNECTIVITY. mask manufacturing business in Limpopo province. The masks are of high quality and ENTREPRENEURS CONFERENCE a hit among the who’s who locally and in INCREDIBLE PRICE. most of sub-Saharan Africa. THE Braamfontein Recreation Centre will be home to Unfortunately, Paul died 18 months ago, the second annual Jozi youth entrepreneurs con- leaving Sofia with a difficult decision — one ference on June 15. The conference is aimed at youth that would not only influence her life, but and women entrepreneurs looking for information her 20 staff too. and guidance to run their businesses successfully. “The decision to sell the business has A group of 400 young women from disadvantaged been in the back of my head since Paul died areas of Johannesburg was sponsored to be trained in . .. I am nearing retirement age and being beauty therapy by the City of Johannesburg. Through here every day reminds me too much of the programme, these young women are learning him,” Sofia explains. how to carry out popular beauty treatments such as manicures, pedicures, French manicures, artificial SPLASH OF COLOUR nail-tips, make-up, beauty treatment, ethnic hair- Because the ball masks of Polokwane- styling and braiding. based Fancy Faces* are made from the finest The top achievers among the 400 will also be materials, they are sold at a premium. honoured at the event. Moreover, the manufacturing process is Delegates at this year’s conference can look for- quite complicated, so the company has been ward to an informative day where four workshops able to compete effectively against cheaper will be held, including: A micro MBA; Investments, imports from Asia. Through a network of markets and business law; Finance and other avail- distributors and retailers, the masks are able funding options, and Tendering. For more in- available in speciality shops, from Cape formation, e-mail Laurence Molatlhegi Ntlokoa at Town to Kampala. firstname.lastname@example.org Sofia recalls how Paul, an avid ballroom from across the world. business — we spent our time building one.” come up with a price for prospective buyers. dancer, made his first mask “simply because “Over the past couple of months, though, Sofia adds that she does not want her “All I know is that I must look at my books. it was a challenge”. One thing led to another we have proved that the business can keep employees to know that she intends to sell As the book-keeper, I know what the sales WINNER OF BIG PROTECTION FOR and the business that started as a hobby going without Paul and that it won’t the business just yet as it might foster figures, turnover and assets are, but I’m now manufactures more than 5 000 masks a crumble. So whoever buys it, will be getting unnecessary worries. “They will get nervous unsure how to turn this into a price. I once SMALL OFFICES year, with prices starting at R1 000. a good, profitable concern,” she says. that they will lose their jobs, especially in heard that you average these figures out CONGRATULATIONS to Zama Lolwana from Belle- Nevertheless, Sofia believes it is time for a Sofia, who has never sold a business the current climate. I don’t want them to over three years. But what about goodwill?” vue East, the winner of an AVR 625 UPS from Eaton break. “I’ve been struggling with this before, explains that the decision to sell has leave. Most of them have been with us for a Sofia believes the business will attract a Power Quality valued at R1 200. The Nova AVR range decision for a long time, but I had to calm not been easy and that she often feels quite long time and are good at their jobs. I want buyer, even in the present economic climate, of UPS units provides cost-effective and rugged down and keep going.” uncertain about how to approach the task. to be fair to them, too, and don’t want them because sales volumes are still increasing protection against electrical interference and power “I wouldn’t advertise it at this stage — I to worry. Once I start spreading the word, I every month. Nevertheless, she wants a outages through sophisticated voltage correction and GOING CONCERN think I will start off by letting a few key will obviously tell them.” price that is fair for both parties involved. a wide tolerance to fluctuations in the mains power “It is a specialised technical process to people in the fashion industry know and * Certain names and details have been supply. These UPSs are the ideal protection for one to make the masks and it took Paul a long time advertise at a later stage if they don’t take THE PRICE IS RIGHT changed to protect the identity of the three PCs. to create a network of materials suppliers up the offer. I don’t know how people sell a In the meantime, though, Sofia needs to business and possible deals SPECIAL OFFER: OPPORTUNITIES CREATED FOR SMALL Lenovo ThinkPad SL500 featuring Intel® Centrino® BUSINESS WHAT ABOUT A BROKER? O Back to basics VER the past 22 years, Chris Koen has been involved in the buying and selling A broker is a professional whose job it is processor technology with Intel® Core™2 Duo processor. AS part of the Western Cape Drakenstein munic- of hundreds of small and medium to sell your business. He or she charges a ipality’s economic development programme, five enterprises. The chief operating officer at commission or fee for their time; this is small businesses will be able to benefit from the private investment firm Business Partners, usually negotiable. R600 000 Gouda small business hive. Chris has some advice for first-time sellers Look at the broker’s credentials to The programme provides basic business infras- and buyers: ensure that he or she has what it takes. tructure and services and is set to play a critical role Generally, a fair PE ratio is five, but this FINANCIAL STATEMENTS to enhance the growth and development of the SMEs depends on the state of the business, A buyer has the right to look at your There are several reputable brokerage to steer them towards greater profitability. WHAT’S IN A PRICE? market conditions and the risk involved. financial statements and conduct due firms or franchises that will give you peace The project that has been identified is the con- Determining the fair market value of a The higher the risk, the lower the PE ratio. diligence. of mind. struction of a small business hive in Malva Street. business is often the most difficult issue to If NPAT is R1-million, then the value of a You can wait until you are sure that he or Essentially, brokers are facilitators who Gouda consists of five units that will accommodate resolve and you should seek a professional going concern will be R5-million. she is a legitimate buyer before showing have a network of potential buyers. They entrepreneurs who have small businesses, but do not opinion. ý Earnings before interest, tax, these. Have your statements of the previous can help you appraise the business (but have the infrastructure from which to operate their There are a number of different methods depreciation and amortisation (Ebitda) is three years handy and make sure they are check this with your auditor) and will businesses. that can be used, but one must remember mostly used when fixed property forms a accurate. Make sure your books are as up to investigate the legitimacy of potential The entrepreneurs run an Internet café, a butch- that these formulas should be amended big part of the business, such as a date as possible for the current financial buyers. ery, a tyre repair shop and a funeral service and will according to market conditions, the state of guesthouse, for example. Once again, year. sell fruit and vegetables. the business and pure common sense. Some determine a fair ratio and multiply this You can also ask the buyer to prove that TELLING EMPLOYEES “It’s opportunities like these that people should of the most common methods are: with the Ebitda. they have the funds available to buy the A business’s employees are central to its take to get financially independent and let their ý An earnings multiple is used when the ý A capitalisation rate is used where business. Look at their personal financial success, and a buyer wants them to stay on business grow in order to create more jobs in their value of the business lies in its income and fixed property generates a rental income. history and position. Also make sure you board. Initially, you may want to approach communities for their own people,” said Draken- cash-flow streams. Use historical financial Look at the earnings before tax and look at the proportion of cash to borrowed senior management as potential buyers. stein’s executive mayor Charmaine Manuel. data to determine the price . interest, and determine a fair cap rate. For capital being offered. If not, wait until you have a potential A selection process was followed to ensure that the ý Price/earnings ratio (PE ratio) is example, if the earnings are R1-million, buyer lined up and the deal looks solid beneficiaries who will occupy these units are the ones generally the most used method. divide this amount by the cap rate — 11%, in WHAT IS GOODWILL? before you tell your staff. who really need it. For more information, e-mail May Look at the net profit after tax (NPAT) for this case. Then multiply this answer with This is a premium charged for the Always be sensitive and assure staff that Carolissen at May.Carolissen@drakenstein.gov.za the most recent year and average it out 100 to get the price of property: (R1- intellectual property in the business, and their jobs are safe. Thereafter, manage staff with previous years to ensure a fair figure. million/11) x 100 = R9.09-million. includes elements such as a brand name. morale and productivity. 12 MAY 17 2009: IT’S MY BUSINESS / Sunday Times CLEAN UP YOUR ACT THE DIRT: BUSINESS IN SOUTH AFRICA IS A GRIMY GAME The time has come to offset your business’s carbon footprint, writes Hendri Pelser S OME say business is a dirty game — and in South Africa this seems to be the grimy truth. South Africa is one of the world’s largest emitters of greenhouse gas- es for its economy and population size. But this sad state of affairs could soon change. According to a new report from the South African In- stitute of Chartered Accountants, local businesses could be forced to get more responsible about pol- lution when new climate change laws are implemented — possibly as early as 2012. At the same time, the organ- isation says that multinational companies will start insisting that ‘If we can set an local businesses clean up their act example among our if they whish to secure contracts. Some small businesses are al- friends, neighbours ready taking up the challenge to reduce their waste and carbon and business footprints. Cape Town-based Wired Com- colleagues, then as munications is one example; the PR people we are owner, Kerry Evett, has implement- ed a number of initiatives to make spreading a good the business cleaner. Kerry says Wired decided to fol- message while doing low suit after its affiliate, Zoom Advertising, implemented a carbon something about it’ offset programme. — Kerry Evett “We are often involved in dis- tributing green messages for our clients, and I felt it was hypocritical not to do anything if our clients and ference. I think that generally, associates are doing something,” more people are becoming aware of the PR veteran explains. their impact on the environment,” “We are quite conscious that we, Kerry says. as one small company, can make a difference. If we can set an example NEED HELP? among our friends, neighbours and Visit Food and Trees for Africa’s business colleagues, then as PR website at www.trees.co.za to use people we are spreading a good the online calculator. message while doing something For manufacturers and other about it.” producers, the calculation might be Kerry used Food and Trees for more difficult, so log on to the Africa’s online carbon calculator to Global Carbon Exchange website at find out what her business’s carbon www.globalcarbonexchange.com footprint was, and swung into for help. action. This meant looking at the To find someone to help amount of paper, petrol, electricity your business, visit the Food and and air travel the company used, Trees for Africa directory at and finding out what the ecological www.trees.org.za. impact was. REDUCE YOUR CARBON MEASURE YOUR CARBON FOOTPRINT FOOTPRINT ý Travel less – Skype instead of The carbon footprint is mea- meeting face to face; sured in weight and is translated ý Fit energy-saving bulbs and into the number of trees a business switch lights off when not needed; needs to plant to offset this. ý Open windows and switch off “It is an easy way to measure the air con; your carbon footprint, and planting ý Install sensors that switch of fruit trees is a way to give some- lights and air cons when there is no thing back to the community.” movement in a room; Wired Communications’ foot- ý Print on both sides of a sheet of print came to 60 trees, but Kerry paper. Ask yourself if you really decided that 70 sounded like a TONS OF TREES: Environmental activist Jeunesse Park, who, when she is not hugging trees, champions a system whereby need to print a document; much better number. businesses plant them to offset their carbon footprint Picture: ROBERT TSHABALALA ý Recycle used paper and other “At about R83 a tree, it is not a office waste; prohibitive cost. I’m going to do this ý Switch off appliances that are annually. Every year you make an Jeunesse Park, says businesses are print is energy usage. Energy tar- its analysis, translates one ton of not in use at the plug point; impact on the environment, so I increasingly taking proactive mea- iffs will increase so it makes sense carbon emissions into 2.67 trees. ý Request your bills electroni- think that each year you must make sures to offset their footprint. to look at your energy usage and This calculation is based on a 15- cally and pay online and ask your a contribution to help alleviate this Jeunesse believes it is in their how to save on these costs,” she year cycle and 60% survival rate for customers to do the same; impact.” best interest because it affects the says. the trees. ý Switch to solar power; and Food and Trees for Africa is a bottom line directly. Jeunesse explains that their cal- “If many more small businesses ý Drive more slowly to emit less nonprofit organisation. Its founder, “A big part of their carbon foot- culator, while quite conservative in do this, it would make a huge dif- pollution.