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EXECUTIVE SUMMARY
THE DEMOCRATIC ALLIANCE GUIDE TO SETTING UP A SMALL BUSINESS
In South Africa unemployment and poverty are demoralizing the population and the DA has sympathy with these people who struggle and cares about their problems
This DA-published pamphlet will provide you with information on how to start a new, small business (SMME).
Guidelines for planning a business
1. List your reasons for wanting to go into business
2. Determine what is right for you
- What are you good at and what do you like to do with your time?
- What technical skills have you learnt?
- Will your family support you
- Do you have ideas or hobbies that can be marketed and made into a viable business?
3. Identify the market your product or service will fill
- Is your idea practical?
- What or who is the competition?
- What is you advantage over your competition?
- Can you create a demand for your business?
- Can you deliver a quality service?
4. Your pre-business check list
- Skills and experience
- Legal structure
- Format for maintenance of records
- Insurance
- Equipment or supplies
- Payment of yourself and/or staff
- Resources
- Financing options
- Location of business
- Name of business
Get professional help with your business plan from The Business Referral And Information Network (BRAIN), Ntsika Enterprise Finance, Ntsika Local Business Service Centres and the Thuso Mentorship Centre.
What does a business plan look like?
A business plan shows what you intend doing, how, when and why it will succeed and should consist of the following:
1. A Front Page
Name of the Business; Personal contact details
2. A Contents Page
What the plan contains
3. Summary and/or Important Features
A description of the product or service, why it will succeed and short, medium and long-term objectives
4. Business Description
General description of the business; Type of ownership
Uniqueness of product or service
5. Marketing plan and Strategy
Target market; Competitors' strategy; Pricing, product, promotion and distribution strategy
6. Financial Plan and Strategy
Financial forecast; Profit and loss; Cash flow; Break-even analysis; Source of funds; Security offered
7. Operating Plan and Strategy
Staff and key personnel; Suppliers; Description of the manufacturing or distribution of product or service
8. Conclusion
Why the business will prosper
Why finance should be granted
9. Additional reports
Credit reports; Contracts; Legal documents; Leases
Financial Feasibility
A Financial Feasibility Study shows the following:
- Profit
- Money which will be needed to invest in the business
- Any money which will have to be borrowed
- Operating costs
- Cash flow
- Expected profit given the risks
Include legal costs, machinery and equipment, stock and market research in your start up costs and salaries, wages, rental of premises or equipment, insurance, advertising stationery and other expenses into running costs.
Getting the Money
Before finding someone to loan money to you, consider the following:
How much is needed? How long will it take to pay it back? What can you use as security? Can you afford to contribute from your pocket?
Here are some organisations which can help with finances and procedures
Khula Enterprise Finance - 0800 11 88 15, fax 012 807 8471.
Business Referral & Information Network (BRAIN) - Call 012 349-0100.
Ntsika Enterprise Promotion - 012 483-2000 or 0800 11 38 57 or visit www.ntsika.org.za
Moipone Molotsi on 012 483-2056 or e-mail, mmolotsi@nepa.org.za
Thuso Mentorship Programme - 011 315-0036/7 or send an e-mail to khulamid@iafrica.com
The Trade and Investment Development Programme - 012 483-2000 or send an e-mail mmoloene@nepa.org.za
NAMAC Trust - 011 883-2542 or send an e-mail to info@gaumac.co.za
The Law Regarding Businesses
There are four main types of business and the law changes for each one.
- Sole Trader - easy to set up; few legal difficulties; owner is completely responsible for debts and liabilities. Structure is easy to change and owner makes all the decisions.
- Partnership - easy to set up; laws are minimal, but responsibility is shared and partners may disagree on issues; experience and finance is combined
- Close Corporation - owners are not responsible for the debt; easy and inexpensive to register. Suppliers and customers are more trusting.
- Company (Private or Public) - takes time to establish; double taxation takes place as both the company and shareholder's dividends are taxed. Owners are not responsible for debts the business earns.
To find out about registering a company or close corporation call the Department of Trade and Industry, 0861 843 384 or visit www.thedti.gov.za.
One last aspect to consider is a trading license which is needed when selling freshly prepared meals from a building, take-aways from the roadside or opening health facilities or places of amusement to entertainment.
Marketing
This is divided into four main categories
- Market Research - The needs of the customer
- Market Strategy - Your competitive advantage
- Serving specific markets - Target marketing
- Satisfying the need of the customer - Market mix
Firstly consider the industry in which you want to trade - what is the main activity, how long has the industry been in existence, what is the competition like, what barriers are there, what are the risks and the legal considerations.
Who are your customers, how large an area you will cover, what does the customer consider important, what method is best for providing this service.
Investigate the competition by reading business magazines and the business sections of newspapers, question competitors' customers, examine the quality of customer service and product of competitors, visit trade shows and manufacturers.
Remember these points to attract and keep customers:
Product, Price, Place, Promotion Persuasion (personal selling)
A Marketing Strategy or Plan
The most important rule for a new entrepreneur is to focus on the market you serve best!
- The marketing potential - who will buy the product; local or international market; how will you deal with the competition; how will you reach your customers?
- Marketing mix - Make sure your product or service is sold at the right place, the right time, the right price, use the best promotion.
- Product strategy - Concentrate on a narrow product line or a highly specialized product with superior service.
- Promotion - start low cost advertising such as the Yellow Pages or direct mail and remember quality salesmanship speaks volumes.
- Price - Small business can offer higher prices but only if this is backed by quality personalised service.
- Distribution - Established distributors of manufacturers are better, be selective where you place your business, an inexpensive premises that cannot be seen means spending more on advertising, find a healthy medium.
- Marketing tools - Use items like brochures, company profile, newsletters, posters, web pages and so on.
Click here to download the full document:
"A Guide to Small Business Development in Gauteng", by Gavin Lewis
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