Tag: economy

Buying a franchise or an existing, proven business model is a good way to reduce risk in tough economic times, say experts participating in the upcoming #BuyaBusiness Expo.

“With unemployment nudging the 25% mark and food prices rocketing, thousands of South Africans are looking to starting their own businesses as a way to survive and thrive. However, securing financing and developing a sure-fire business model are not easy. Business development experts report that the single biggest reason for new businesses failing is a lack of business management expertise on the part of the entrepreneur. The new business owner may be an expert in their field – be it baking, engineering or software development, for example – but if he or she does not know how to market the business, sell the product and manage the business’s finances, their business is immediately at risk,” says Carol Weaving, MD of Thebe Reed Exhibitions.

Buying into a proven business model helps to reduce this risk, particularly if the investment comes with support and guidance, say participants in the #BuyaBusiness Expo, to be staged by Thebe Reed Exhibitions at the Ticketpro Dome in Northriding in September this year.

Before investing in a business, it is important to consider whether there will be a market for the product or service, they advise. And in tough economic times, it is crucial that the product or service is priced right. #BuyaBusiness exhibitor Zhauns Business Opportunities & Engineering has ensured a long list of success stories for its customers, who buy equipment from Zhauns to produce goods their markets want, at affordable prices.

Zhauns sells machines for making everything from toilet rolls and envelopes, to pencils, bricks and charcoal briquettes. Its customer success stories include Pabcods Trading in Limpopo, which produces over 5 600 toilet rolls a day to meet local demand; and Big Brand Marketing in Johannesburg, which now employs eight people to keep up with demand for their toilet paper.

Zhauns director Riad Ahmed says the company, with over 15 years’ experience in Africa, has identified a number of FMCG products ideal for entrepreneurs to sell into their local markets.
“A lot of it is based on common sense. There are products everyone uses and needs, and there are opportunities for entrepreneurs to challenge major manufacturers by producing these products for sale in their local communities.”

Toilet paper is a case in point. Ahmed notes that until a few years ago, there were only a handful of major manufacturers in South Africa. Now, entrepreneurs buying machines to make toilet paper are able to work out of small premises with only three or four staff members, reducing the overheads and transport costs involved in the making of toilet paper. This allows the entrepreneurs to produce toilet paper for their communities at a very competitive price.

While this increases their chances of success, it does not assure success, however. Ahmed notes: “We provide the tools, teach them to operate the equipment, and ensure they have a marketable product. We can even refer them to business management training courses. But at end of day it’s the jockey riding the horse, so the entrepreneur is responsible for the company’s success.”

Through many years of working closely with entrepreneurs, Zhauns has pinpointed funding and financial management as the biggest hurdles in the way of the new business’s success. “Securing financing is very difficult. And often we see new business owners failing to reinvest all the money they make in the first year or so. They look at cash flow and treat it all like profit, which is a mistake.”

At the #BuyaBusiness Expo, Zhauns will showcase business opportunities priced as low as R5 000, for machines for key cutting or juicing.

Debbie Martins, area development manager – sub-Saharan and Southern Africa at fast food franchise Subway, says times are tough for business owners and consumers alike.

“Fortunately, people always need to eat, so food businesses tend to survive better than companies in many other sectors when the economy is under pressure,” she says.

Subway has an international model that drives traffic to stores through ongoing special offers. “We are constantly aware of the need to offer a discounted item in store for those who are cash strapped. These offerings are normally through a ‘Sub of the day’ or ‘wow’ campaign which discounts subs drastically to increase feet and get customers through the front door. These same customers will come back and spend money on items at full price when they have extra income to spend. It’s vital to reward brand loyalty, and therefore we also offer a loyalty programme called the Sub Club card.”

Subway’s years of international experience in what works to keep customers streaming in benefits the franchise’s new franchisees, and reduces the challenges involved in launching a new fast food business. However, Martins warns: “Just because you’re buying into an established franchise doesn’t guarantee you a successful business. Success is up to the individual at the end of the day. If you’re not well suited to the brand, the business won’t succeed. You have to have an aptitude for the kind of business you are buying, and you must be willing to put in the long hours needed to make it succeed.” Subway, which will showcase opportunities for the resale of established stores at the # BuyaBusiness expo, conducts extensive aptitude and personality tests with potential franchisees, to ensure they are a good match for the brand, and so increase the franchisee’s chances of success.

Another business opportunity at the expo will be Sherpa Kids childcare and education franchises, with start-up costs of under R200 000, which includes the franchise, training and working capital for equipment.
Genevieve Allen, MD of Sherpa Kids, says global statistics show that parents are spending money on their kids and educational and entertainment markets are growing at a consistent rate despite ongoing financial instability.

“This is certainly the case in South Africa’s booming education and childcare franchise sectors. The continued success of franchises in this industry proves that even in these difficult times, parents consider their children’s needs as a priority and will cut back on other expenses to provide for them.”

Sherpa Kids will also sponsor a grand prize of a Sherpa Kids franchise, in partnership with #BuyaBusiness.

The #BuyaBusiness Expo and Small Business Expo will be staged at the Ticketpro Dome in Northriding Johannesburg from the 8th -10th September 2016.

In just a few days’ time, South Africans will feel the real impact of the struggling economy as inflation records a seven-year high, the drought deepens and several everyday items go up in price.

Already, non-governmental organisations are seeing increases in the number of poor South Africans experiencing malnutrition.

Next month, Eskom hikes the price of electricity by 9,4%, petrol and the new fuel levy will cost 80c more a litre and DStv subscription goes up by 8%.

Moreover, the prices of many foodstuffs have over the past few months been climbing, driven by inflation and the drought. The Reserve Bank said last week that inflation had reached 7% in February.

The poor are the worst hit. Already, one in four children go to bed hungry, according to data from the Human Sciences Research Council’s National Health and Nutrition Examination Survey.

“We expect life to get much worse for the poor,” said Mervyn Abrahams, CEO of the Pietermaritzburg Agency for Community Social Action. “People struggle to get by day to day.”

He said there was a pensioner who no longer bought vegetables because they had become too expensive as a result of the drought.

Abrahams said he also knew of a boy receiving food through his school’s feeding scheme. He said the boy brought his plastic container to school so he could take his lunch home to feed his three-year-old and five-year-old siblings.

Abrahams said his organisation had calculated that a basket of food containing enough protein and vegetables would cost a family of seven R4239 a month. An average household in Pietermaritzburg survives on R3200 a month .

On the West Rand, activist Cora Bailey said she had seen an increase in the number of hungry people approaching NGOs for food. In one instance, a grandmother approached an NGO with a baby.

“The mom has abandoned the child. The grandmother is [an illegal immigrant] from Lesotho and can’t apply for the child support grant. She didn’t have money for baby formula. The child looked [unhealthy] and she didn’t look too good herself,” said Bailey. “I had to split a food parcel for two with four people on Thursday.”

“I think we’re going to have a food revolution,” she added.

“When winter comes and people are both cold and hungry, we’re going to see huge problems. Honestly, I don’t know how people are coping.”

Economist Dawie Roodt said the situation looked bleak as more interest rate hikes were likely.

Already, a middle-class family with a R1-million bond faced a R300 increase in monthly mortgage repayment following the recent interest rate hike.

Interest rate hikes, he explained, meant people paid more for their debt and there was less money in the economy.

Less spending caused factories to produce less, which led to retrenchments Roodt added.

Middle-class families face further squeezes, with the petrol price increase at 41c a litre next month. But with increased taxes on fuel, it is likely to cost about 80c more, according to the SA Institute of Race Relations. The institute’s Ian Cruickshanks said with the rising food and fuel prices, the government had to realise it had to start spending what it had.

Roodt also said the weakening rand meant imported goods were more expensive. “High unemployment and the high cost of imported goods could be an opportunity for entrepreneurs to create jobs and factories to make things.

”But the government must stop harassing business owners and taxing them to death.”

By Katharine Child for www.timeslive.co.za

While South Africa has pinned its hopes on small business development to address unemployment, an increasingly gloomy economic outlook may seem set to undermine these hopes.

“There’s an economic malaise coming,” says Tshepo Phakathi, Group CEO of Phakathi Holdings. “We can expect more pressure on emerging markets, exacerbated by a spike in food prices as a result of the sub-Saharan African drought.” However, tough times ahead do not necessarily mean bad news for small businesses, he says. With the right strategies and innovation, entrepreneurs can take advantage of a changing market to build their businesses and thrive, he says.

Learn to meet next gen customer demands

Phakathi, whose KAELLO initiative promotes entrepreneurship and mentors thousands of aspiring entrepreneurs, and who serves as an advisor and ambassador for the expo, says small business owners who change their business strategies now stand to benefit in an uncertain market.

“In the five or more years that I have been involved in the expo, we have seen significant changes in the market,” he says. “In addition to slowing economic growth, a key change has been the advent of high speed internet access and social media, which has completely changed customer expectations.” Customisation and instant gratification are the keys to meeting customer demands today, he notes. However, local small businesses have been slow to change accordingly. Phakathi says: “Consumers have become more discerning. It’s a consumer market now, and people expect more of what they want, where and when they want it.”

To survive and thrive in this new environment, Phakathi says: “We need to batten down the hatches, tighten our belts, and take care not to be over consumptive as a business. Businesses also need to be more innovative and more deliberate about customer satisfaction, and they need to ‘stick to their knitting’. This is not the time to dabble and over-diversify: the more competitive a market becomes, the more niche it becomes,” he says.

Phakathi, who will speak at the #Buy-A-Business Expo & Small Business Expo on strategies for thriving in the current economic environment, believes small businesses need support in changing their strategies and understanding how to harness IT to meet new customer expectations.

Embrace structure and order

Brian Walsh, CEO of the Real Success Network and member of the Small Business Expo advisory board, says structure and order are key components of business success. “For small businesses to thrive, they need to learn to create systems that run the businesses,” says Walsh. “A new business is always chaotic at first, but the chaos is supposed to abate after a few years. With the help of the right service providers, businesses can get organized faster.”

Walsh believes having access to a network of service providers goes a long way toward supporting small business growth. “The problem is that many new and small business owners need assistance with marketing, web site development and accounting, for example, but they are often uninformed about the support and opportunities open to them, and frequently spend too much time trying to source service providers or carry out functions that are not core to their business.”

Walsh says these challenges informed the Small Business Expo’s stepped up focus on service providers. “The expos will include seminars on business management and structure, but will also showcase service providers and interventions that will help business owners take their businesses to the next level,” he says.

Exposure and networking

On the back of decades of hosting South Africa’s top expos in South Africa, Small Business Expo organisers Thebe Reed Exhibitions believes that networking and exposure are crucial for small business growth. “Opportunities for small businesses to meet a broad range of investors, partners and service providers are important, but rare,” says Carol Weaving, MD of Thebe Reed Exhibitions.

“In our years of experience in supporting small business development, our research has found that networking opportunities are invaluable for business growth. Therefore, the Small Business Expo delivers optimal opportunities for small business owners, service providers, funder and partners to engage, learn and expand business relationships.”

Among the highlights of the Small Business Expo will be:

  • Business Speed Dating sessions;
  • An all-new Investors club for high profile investors and business partners;
  • Networking Circles;
  • Development Den workshops on business trends and strategy, management, financial and digital;
  • Online Business Matchmaking;
  • Business Bootcamp workshops for early stage start-ups;
  • Techpreneur Pavilion for tech-based small business and entrepreneurs;
  • The fast-growing international Get In The Ring entrepreneurship challenge;
  • Wealth Masterclasses; and
  • The Chat Room networking lounge and internet café.

The Small Business Expo and #BuyaBusiness Expo will take place concurrently at the TicketPro dome from 8 – 10 September 2016.

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