According to Christo Botes, an executive director at Business Partners and a spokesman for the Sanlam / Business Partners Entrepreneur of the Year competition, the world of entrepreneurship is increasingly getting more awareness, and while the allure of owning a business might be exciting, there are various challenges that entrepreneurs should consider when starting a new venture.

DESTINY MAN (South Africa) had a chat with Botes regarding the realities of entrepreneurship and how to best plan for them.

What are the various challenges that most entrepreneurs face when starting a business?
• Being under-capitalised. That is, not having enough capital to acquire the necessary equipment, stock and also not having enough cash to carry the business throughout the start-up phase, where sales are not yet sufficient to cover all the costs.
• Not distinguishing between the business expenses and the owner’s private expenses.
• Having too much debt in their personal capacity that needs to be serviced while the business cannot generate enough revenue to service its own debts.
• Not keeping proper records, which can be compared to trying to drive a car without a speedometer, fuel gauge, brakes and lights. You need to have basic records to inform and guide you on the journey of running your business.

Most businesses don’t survive beyond five years. What factors hinder growth and how can they best work around them?
Often entrepreneurs find themselves tied up in the day-to-day running of their businesses and fighting the challenges of that day without considering their long-term growth path. You need to have a plan which could be like a roadmap for your business. To be constantly in survival mode will not stand the test of time.
The best you can do is:
• Have a clear vision of where you want to be in 10 years.
• Decide on what short-, medium- and long-term objectives are necessary for you to realise your vision.
• Keep track by ways of simple graphs you put up that are visible all the time. Track sales, gross margins, net profit, cash flow before debt servicing.
• Make use of an adviser who quarterly reviews your plans. Thay can then ask the difficult questions and even answer them for you. You also need to sometimes just make time to step away from the business and obtain an objective (bigger picture) view of things.
• You need to carve out your niche in the market place. You need to be able to differentiate your business and its product offering from the rest and need to constantly ensure that you remain relevant in the market place.

How should an entrepreneur tackle the internal (industry knowledge, management skills, cash flow) and external (competitors, securing loans) challenges? Should they start with the internal and deal with the external later?
An entrepreneur needs to keep many balls in the air at the same time. You cannot separate internal and external issues, as they both influence each other.

For example, a loan can address the cash-flow needs of the business. Knowing your competitors will help you to determine your internal plan of action. You should have the basics right in your business and should not try to enter an industry you don’t know, as your competitors will outplay you.

Use your industry knowledge and skills to find your niche in the marketplace. Approach your potential customer base with your unique product and service offering, which will convert them from a prospective customer to a real long-term customer.

What are the common mistakes entrepreneurs make?
They don’t always manage their cash flow on a daily basis or interact with their customers on a regular basis. They don’t maintain good employer / employee relationships.
They don’t always have short-, medium- and long-term plans for the business – they just slog on from day-to-day.
They don’t do a proper product or service costing, which could lead to losing market share because of too high prices or making losses on certain orders because of too low prices and too high costs.
And they don’t properly determine their capital requirements over time.

If the business is already experiencing some difficulties, how can it be saved and recover from making a loss?
The main action plan that any business owner should first address when difficulties start to show up is:

• To delight your clients / customers even more.
• To drive more sales at a better price.
• To lower overhead costs and being more efficient.