All the answers to your unique business lifestage questions
Starting a business and growing a business often requires a different mindset. The start-up entrepreneur takes on big risks to see big rewards, has a job description that tends to encompass everything from admin staff to CFO, and is constantly thinking up new ways to tap markets and increase brand awareness.
Growing entrepreneurs are by definition more circumspect. They now employ people whose livelihood depends on them, and with a successfully operating business, they have more to lose than they did when they were just starting out.
They’re more cautious, and they approach business with a better understanding of customers and market trends based on experience and business lessons learnt the hard way.
But unless you have a growing business, you have a stagnant business, and so some focus needs to still be on expansion, whether that’s through a growing footprint, increasing clients, or getting existing clients to buy more from you.
Raymond Ndlovu, an investment executive at venture capitalist firm Invenfin, believes there are three core areas that South African entrepreneurs should focus in order to grow their businesses.
- Understand when you need funding – and when you don’t. Many business owners operate under the mistaken belief that they need funding before they can grow. According to Ndlovu, in many cases that’s just not true. “Before you do anything else, evaluate why you think you need funding,” he says. “Will an influx of capital allow sustainable growth? Sometimes, growth will simply burn more cash than you make. Investing in new machinery, product development, office space or staff makes sense as long as the additional income covers the investment. Have you run these numbers carefully? Growth doesn’t always mean enough additional income to sustain the added expenses. My advice? Stop worrying about where you want to be and focus on where you are. Get your cash flow healthy. Build your assets and allow growth to happen when market conditions are right, not before. In many cases, you will either then be able to fund growth internally, or approach an investor with a clear investment opportunity, or a safe and sustainable loan application.”
- Understand BBBEE. According to Ndlovu, there’s a significant pool of under-utilised, investible capital sitting on corporate balance sheets. “Not only that, but we are operating in a policy environment that encourages preferential procurement and enterprise development,” he adds. “Evaluate potential clients and make sure you have a product, service or idea that suits them, and then present it in such a way that speaks to their needs. If you manage to focus the conversation on what they will get, rather than what you need, you’ll find a wealth of readily available capital. There’s a huge opportunity here, but it needs to be viewed from the perspective of the corporate: Start by understanding their burning need, and then develop a solution that solves that need.”
- Concentrate on making more sales. It’s a business fact that if you find the right customers at the right price point your profits will naturally increase. “Real growth is all based on increasing sales, whether that’s by quantity or quality, depending on your sales model,” says Ndlovu. “So, how do you go about increasing sales? Have you been studying your clients and potential client pool? Where are their potential value leakages? Instead of straight product and service pitches, have you approached clients and said ‘I’ve noticed your business has value leakage in this area, and here’s how we can help you improve your systems’? This is a very different conversation. Your company exists because it adds value to something – you need to show this through the context of their business.”