With South Africa’s unemployment rate currently at an eight-year high – up from 24.5% in the previous quarter to 26.7% – encouraging a culture of entrepreneurship in order to promote job creation is more pivotal now than ever before.
For Andrew Maren, CEO: Ecsponent Development Fund, it is critical that budding entrepreneurs understand that the spirit of entrepreneurship is based on relentless hard work, dealing with inevitable red tape, testing your ideas over and over again and never giving up on your dreams.
“While a growing number of business incubators continue to play an invaluable role in growing small businesses through upskilling and providing funding for entrepreneurs, the reality is that most entrepreneurs would need to knock on many doors, and accept many rejections, before achieving tangible success,” he says. “Many entrepreneurs acknowledge and crave the success others achieve, but fail to realise that this kind of success sometimes demands years and years of hard work and perseverance.”
There also seems to be a general misconception among entrepreneurs that having a good idea is sufficient enough to bring overnight success. However, starting and growing a business not only requires inspiration, but also goes hand in hand with thorough research, input, adaptability and peer-to-peer reviews…..and sometimes a bit of luck!
“A particular challenge for entrepreneurs is realistically demonstrating to a potential investor or financial institution how their product or idea will make money,” comments Maren. Before you approach anyone for funding, it’s extremely important to bounce your idea off others. However, this isn’t always done for the fear of rejection or someone else stealing your idea. Without a sounding board providing alternative ideas, viewpoints and somebody playing “devil’s advocate”, it is quite likely that an investor will pick up on these and decline the opportunity as they believe that you have failed to identify these risks in your proposal and showed ways how these could be addressed and mitigated,” he emphasises.
Maren says other areas that entrepreneurs find challenging is the red tape around company registration, tax compliance and financial management. He states that streamlining these processes and making compliance easier will certainly encourage far more entrepreneurs to action their ideas successfully and be compliant. In the past, access to funding was also one of the biggest challenges for entrepreneurs, but this does not always have to be the case
“There are currently a number of alternative funding solutions available to entrepreneurs that do not apply the stringent lending criteria used by traditional financial institutions. Instead, they consider transactional risk where collateral and credit history are less important in determining the credit risk. These types of transactions mean that in future, entrepreneurial success will hinge more on the entrepreneur having the drive and passion for making their dream a reality rather than on external factors such as funding.”
Finances and other administrative matters aside, Maren wants to encourage all budding entrepreneurs to seek out as much advice, and even criticism, as possible and then put a detailed business plan together.
“It is critical to understand your market and ideally test your product or idea before approaching an investor or funder. Your business plan also needs to cover a variety of possible scenarios in a typical business environment such as changing interest rates, market demand and access to suppliers to show that it is robust.
Once you are convinced that you have covered all areas, and have prepared adequately to answer the often tough questions posed by potential funders, the real work begins. It is then that tenacity and passion come in to play if you want to make your business dream a reality,” he concludes.