Start Up 2 Guide by Portfolio: Neil Verlaque-Napper

2 p U t r a St he T . . . S E U TIN N O C ss Y E e n N i R s u U b O l J l ma THE s a g n i w ro story of g

Guide

Come see what weâ&#x20AC;&#x2122;ve been up to...

2 p U t r Sta Copyright ÂŠ 2007 JASA & seda

Abdul Rajah Junior Achievement SA PO Box 61540 Marshalltown - 2107 Tel: (011) 832-2632 Fax: (011) 832-2637 Email: abdul@jasa.co.za

Start Up 2 is published by Junior Achievement South Africa & Small Enterprise Development Agency ISBN 0-9583890-7-1 Start Up 2 was produced by STORYWORKS. Research and writing by Andre Croucamp, Neil Verlaque-Napper and Dale Morris, illustration by Vusi Malindi. Email: storyworks@icon.co.za

John Francis seda PO Box 56714 Arcadia - 0007 Tel: (012) 441-1259 Fax: (012) 441-2150 Email: jfrancis@seda.org.za

No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, or by photocopying, recording or microfilming, or stored in any retrieval system, without the written permision of the publishers.

CONTENTS Introduction. ................................................................................................ i Opportunities........................................................................................ i Resources............................................................................................. i Strategic plan...................................................................................... ii

Strategies for Growing a Business.............................................. 1 What really grows a business?............................................................ 1 Planning, planning, planning. ............................................................... 1 Strategic plans.................................................................................... 2 Strategic thinking and the Business Plan............................................. 2 Strategic analysis................................................................................ 3 SWOT analysis...................................................................................... 3

Tool - A SWOT analysis framework.................................................... 4 Vision.................................................................................................... 4 Organisational goals............................................................................. 4 Strategies for reaching each goal........................................................ 4 Action plans to implement strategy...................................................... 4 Monitoring plan.................................................................................... 5

Tool - A guide to the strategic plan framework...................................... 5 Tool - Your strategic plan - a checklist. ................................................ 6 2

The Business Plan................................................................................. 7 What is a Business Plan?...................................................................... 7 The structure of a Business Plan........................................................ 8 Your strategic focus.............................................................................. 9 The marketing plan................................................................................ 9 Sales forecast...................................................................................... 9

A client profile.................................................................................... 10 A competitor profile........................................................................... 10 A product profile................................................................................ 10 A distribution strategy....................................................................... 10 A pricing strategy............................................................................... 10 A promotional strategy....................................................................... 10 Marketing budget............................................................................... 11

Tool: Common mistakes when creating a Business Plan. ...................... 11 Developing a marketing plan.............................................................. 12

The operations plan. ............................................................................ 15 How to put together an operations plan for manufacturers............... 15 How can I ensure quality and cost control?........................................ 17 What will my workflow processes and schedules look like?................ 17 Will there be any variation in sales?................................................... 17 Who are my suppliers? ...................................................................... 18 How will I control my stock?.............................................................. 18 How is the manufacturing process administered?............................. 18 Who will take the order for products?............................................... 18

The staffing plan................................................................................... 19 Developing a staffing plan.................................................................. 19 Making the job offer........................................................................... 20 When the employee starts work......................................................... 21 Managing staff................................................................................... 21

The financial plan................................................................................. 23 Cash flow............................................................................................ 24

Six Ways to use the Business Plan as a Guide to your future................ 24 Keeping proper accounts................................................................... 25 Bookkeeping....................................................................................... 25 Petty cash.......................................................................................... 25 Annual Auditing.................................................................................. 25

Dudu’s Business Plan............................................................................ 26 Executive Summary........................................................................... 26 Strategic Focus................................................................................. 27 Marketing Plan................................................................................... 28 The Operations Plan........................................................................... 29 The Staffing Plan............................................................................... 30 The Financial Plan.............................................................................. 30

Proposals and Proposal Writing................................................... 33 Proposal writing. .................................................................................. 34 Different proposal formats................................................................ 34 Other kinds of proposals.................................................................... 37

ICT in a Growing Business.............................................................. 39 Become computer literate................................................................. 39 Open source software........................................................................ 39 Get connected to the Internet............................................................ 40 How to use the Internet...................................................................... 41 Search engines.................................................................................. 42

Your Relationship with Government............................................ 45 Compliance........................................................................................ 45 Other issues of compliance................................................................ 46

Services from Government................................................................ 47 SAQA learnerships and skills programme.......................................... 47 seda................................................................................................... 49

Tool – a Seven-Step Model for Creative Thinking................................ 50 Tool – A Checklist for Evaluating Ideas. ............................................ 51

Resources for Entrepreneurs........................................................... 52

Introduction First I want to congratulate you!

Do you know how important you are to the economy of this country? Small enterprises contribute 60% of the GDP. I know what courage and commitment it takes to get a small business going. Your business has even helped employ other people.

You need to be congratulated for that.

Ja, well. It hasn’t been easy.

What! Why?

f you have started your own business you deserve to be congratulated. It is not easy being an entrepreneur or business owner in South Africa.

Opportunities The fact that growth needs opportunities is obvious. Imagine you’re a fish in a jar. Your opportunity to swim 20km’s in any direction is zero. It doesn’t matter if you have a plan, and it makes no differences how good your resources are. In fact, you could have the best fins (resources) in the world, even super-fins, or an engine strapped to your back. Your long-distance swimming is limited by the simple lack of opportunity. If you travel six inches in any direction you bump into ‘jar’ and that’s that.

Contrary to popular opinion, South Africans are not competitive when it comes to entrepreneurial activity. The GEM (Global Entrepreneurship Monitor) ranks South Africa 36th out of a sample of 40 countries. The findings also indicate that a significantly lower proportion of South Africans actually believe they have the ability to start a new business. If you have started your own business you must be congratulated for your courage and determination. If you have picked up this resource, you obviously feel that it is time to look for opportunities for growing your business further.

Growth follows opportunity. Opportunity, however, has to be properly investigated and identified. It’s more accurate to say that growth In order to grow requires the investigation, identification and assessment a business needs of business opportunities. OPPORTUNITIES Growth also needs resources.

RESOURCES

Business growth can be Resources and a described as the process of So the fish investigates the STRATEGIC PLAN increasing the sustainable jar looking for opportunity. activities of the business. Let’s imagine that the jar, once ‘Sustainable activities’ means those activities the fish did a proper investigation, turned that generate enough cash to cover their out to be a fish-tank, and let’s say the tank own costs and make a profit. Growth is connected to the sea by a pipe. So now (in happens when you increase these sustainable theory) the fish has an opportunity to get activities and decrease those activities that to the sea. But imagine that the pipe has a are unsustainable. Unsustainable activities plug in it, like the kind of plug that you use are those that cost more to carry out than in your kitchen sink. Since the fish has fins, they produce. and fins don’t have fingers, there’s no way for the fish to open the pipe, and no way to t i

get to the sea. The fish has the wrong kind of resources for the job. As your resources change, so will your opportunities.

Most small business owners only work on a business plan when financing is required for some new idea. Very few develop and use business plans as part of their everyday functioning. A business plan should act as a map for your thinking and planning. This resource will focus on developing a business plan.

Strategic plan The last of the three things needed for growth is a strategic plan. The key to growing any business is planning. If you are good at running your business (as you probably are), you will have noticed that it runs better when it’s properly planned. For example, if you sell food and you remember that Fridays are when your customers get paid, then you might plan ahead and have more stock available in Fridays than on other days.

Once you have a business plan that clearly maps out your business strategy you can use it to help you write proposals for funding. This resource will look at proposal writing and at ways to respond to tenders. Many businesses fail because their owners cannot PLANNING write good proposals.

Generally, planning is understood to be can be understood a response to future Actionwise, a business as a process of needs. Needs in the and management IMAGINING YOUR FUTURE present often don’t services company in have to be planned – for Johannesburg, says that so that you can example, when you get 80 percent of reasons PUT EVERYTHING IN PLACE hungry, you eat food. for business failure in No planning is required. South Africa are within to Planning comes into it, the control of business SUPPORT YOUR NEEDS when you realise that owners and managers. you might be hungry In a world in which IN THAT FUTURE again tomorrow, and there are many things you try to make sure that you will have food we cannot control we might as well take to eat. control of all the things we can control. In this resource we will speak a lot about strategic planning. A strategy is a medium or long-term plan for the future of your business, taking into account the circumstances it operates in, and the kind of challenges it might face. This resource will help you to create a strategic plan for your business. It will help you review your business, looking at each part of the business in isolation as well as look at how all the parts affect each other. Your strategic plan must eventually express itself in the form of a Business Plan which will include: ☞ a strategic focus, ☞ a marketing plan, ☞ an operations plan, ☞ a staffing plan, and ☞ a financial plan.

It has been so exciting to see your business grow from strength to strength.

I have had quite a few flops along the way. All the greatest entrepreneurs have major failures in their history. We learn from our failures. One of the things I have learnt from you is that failure shouldn’t define you. If you cannot think far into the future, failure can feel like something that defines who you are. But if you have goals far into the future, failure just feels like useful information to help you get where you are going.

Do you have any plans like these at the moment? t ii

NOTES

t iII

Strategies for Growing a Business What really grows a business?

he first thing to understand is that Good growth comes from identifying the even though growth is measured by natural strengths and skills of a business an increase in revenue (cash), growth isn’t and taking advantage of them – it doesn’t merely an increase in revenue. For example, rely on things that aren’t there. In this way, it you might start selling your equipment builds on natural strengths and makes itself tomorrow, one item per week. For a little sustainable. while, your cash (revenue) increases, but over a month or two your business comes Revenue is the income generated by your apart – it’s not growing. So the idea that business. Profit is what’s left of the revenue growth is equal to more after you’ve paid all your expenses. cash is misleading. For Good growth doesn’t cost more to Good growth is that to be true growth it generate than it brings in. sustainable over has to be a sustainable Every new expansion or time. increase. In other words it development requires that money has to be an increase that be spent – there’s no way around can continue over time. it. Really great growth is financed Good growth In the example where increases revenues by the revenues that the business you sell your equipment, itself has generated, and these are and improves there will come a day always within an acceptable range. when you no longer have Trying to force growth to happen by profits. any more to sell, so that borrowing cash and pouring it intro kind of increase cannot be a business is pretty dumb – rather Natural growth sustained. study the business and try to figure doesn’t use out why it’s standing still. For example, Dudu’s unacceptable levels growth is demonstrated Ultimately, it should be obvious of capital. by the opening of another that there are really only two ways Café – the test, for her, of to generate growth in a business Business growth whether this good growth – either you’re cutting the costs can be sustained over time. of your business (while keeping is all about In her case, she’s given her the same level of sales) or you’re Cutting Costs and business the best chances increasing the income of your she can, by planning the Increasing Income. business (while keeping the same expansion thoroughly. level of costs).

Planning, planning, planning … We’ll pay for the services of a business consultant who really helped me with this business.

What you need, my boy, is a strategic plan.

Ma, there’ll be a big problem if I don’t get money in the next two weeks... t 1

People think a loan will solve their problems! You need someone to help you make better use of the resources you already have.

of the strengths and weaknesses off your business and of the possible opportunities in the world around you then you have begun the process of strategic planning.

Strategic plans We have all been in a situation like Vuyo. We think that the immediate crisis is too important to spend time and energy on a long-term plan. The problem is, if we never create a strategic plan we may just experience one immediate crisis after the other.

As you see above, all effective strategic planning involves two kinds of thinking: ☞ critical thinking ☞ creative thinking

All strategic plans are based on strategic analysis. You could think of it as follows:

Critical thinking is the kind of thinking that is used to analyse and evaluate ideas and business strategies. It is also used to understand problems. It breaks a problem down into its parts in order to understand it. At the beginning of the comic Vuyo is overwhelmed by his challenges because he sees them as one big complex problem. He needs to break the problem down into its parts – identify the individual problems and deal with them one by one.

Strategic planning is an organised way of thinking about the medium or long-term future of your business. First it makes a critical analysis of THE STRENGTHS AND

Creative thinking is all about making new connections between things. It is the kind of thinking that is used to innovate new ideas by making new connections between existing ideas and the things you have identified through your analysis. It is also used to solve problems. This kind of thinking can sometimes be unplanned, like the way Vuyo’s crazy designs make them an unexpected sale. We also see this kind of thinking in the innovative marketing ideas that Vuyo and Dudu come up with.

WEAKNESSES OFF YOUR BUSINESS, and of THE POSSIBLE OPPORTUNITIES IN THE WORLD AROUND YOU. Then it makes CREATIVE CONNECTIONS between the two

This resource deals with both critical and creative thinking. Being able to perform each type of thinking, when it is most needed, is key to strategic planning and the success of any business.

identifying those business ideas that are worth developing further.

If you can create a picture in your head So, Vuyo, what do you The amount of power you want your business to be have as a businessman is like in 5 year’s time? all about how far into the future you are able to plan. You need to be able to imagine what your business will look like in 1, 5 and even 20 years from now. Eish, 5 years from now! Vuyo, that’s power! I’m struggling just to put together my son’s birthday party this weekend. I can’t think about 5 years from now… t 2

The most important use of strategic thinking is to predict the future. Strategic thinking and the Business Plan Your strategic thinking should eventually express itself in a Business Plan. Your Business Plan should show how your strategic thinking has helped you plan the nature of your core business,

your marketing plan, your operations plan, your staffing plan and your financial plan. In the comic story you can follow how the business consultant, Tau, helps Vuyo through this process.

has no direction. It’s like cooking without a recipe. I don’t have the time to do this. I work and I’m always busy running from one thing to the next.

We will discuss the strategic thinking behind all these aspects of your business plan. You can think of this resource as a strategic thinking tools kit.

You don’t need to do months of work. You can even create a rough strategy in a few hours. That can serve as a model that you return to over months, and update. The most important thing to know is that strategy is always about growth. Even settling your short-term problems with the loan sharks was just a way to clear the ground for your business to grow.

Strategic analysis Let’s begin by using our critical thinking to develop a Strategic Analysis. Every large company was once a small company, and that route between small and large was made possible by strategic analysis. Large corporations do strategic analysis all the time. It is considered so important that they spend vast sums of money and hire external experts to conduct strategic analysis.

Let us begin with a simple strategic analysis – the SWOT Analysis SWOT analysis A SWOT analysis is an analysis of your business’s Strengths, Weaknesses, Opportunities and Threats.

Remember, strategic thinking is the process of organising your thinking around business growth, by a critical analysis of your strengths and weaknesses and a critical analysis of your opportunities and then by making a creative connection between the two.

Each of these factors needs to be identified and carefully considered as it applies to your business in order to assess what is the best path forwards – into the future. Once you have practiced using this tool you can apply the same process to your personal life.

When Microsoft was a small company running from Bill Gate’s parent’s garage, Bill himself was thinking about his opportunities and how to take advantage of them. One of the opportunities he took advantage of was to have his software included in every PC that IBM sold. IBM thought this was a good idea, since his software made it easier to use their PC’s, and they hoped more people would buy their PC’s if they were easier to use. By doing this, Microsoft became the standard software used by everybody. This was a strategic move, arising from Bill having identified an opportunity and acted on it, and it launched an enormous company.

Strengths and Weaknesses Start by making a list of your business’s strengths and weaknesses. It is important to be as honest as possible. You can do this as a group – together with partners, employees and even customers. You’ll often be very surprised at the differences between how you see your business and how others see it. Opportunities and Threats Strengths and weakness relate to your business itself. Opportunities and threats on the other hand, are a little more complex. They relate to the world your business functions in. And because that environment changes so do opportunities and threats. Make a list of all the opportunities and threats that you can think of.

Let us say that you want to compete with larger businesses. They may be doing a very detailed strategic analysis of their business and they will have a pretty good of idea of what to do. Can you afford to do less than them? Without a strategy your business t 3

Tool – A SWOT Analysis Framework Strengths

Opportunities

Weaknesses

Threats

highest quality work’. Be creative, and list a range of goals. These goals should support the vision, and be achieved within the strategic time-frame. So if the time-frame is 12 months, all your goals must be the kind of things that you could complete in 12 months.

Vision This SWOT analysis will help you to develop the STRATEGIC FOCUS or what some people call the VISION for your business. When thinking about your vision of the future, be specific and far-reaching at the same time. For example, in Vuyo’s metalworking business, the business purpose might be to become the largest ‘metalworking business in the area’. This is both specific about the goals (‘largest’) and openended (‘metal-working’, rather than ‘gatemaking’).

Strategies for Reaching Each Goal As we said: A strategy is a medium or longterm plan for the future of your business, taking into account the circumstances it operates in, and the kind of challenges it might face. Each goal needs one or more strategies. Vuyo might start buying better material in order to achieve the goal of doing the highest-quality metal-work around. He might invest in some marketing drive, such as printing fliers, putting up posters, or sending emailers in order to achieve the goals of letting everyone know about their quality work. Interestingly, this is the part of your plan that may change most frequently. You’re going to try different things out, and change the strategies that don’t seem to work. Don’t be afraid to change these strategies as you work through the year.

What does the future of your business look like to you? Strategic planning involves setting up a strategy that your business is going to follow over a defined time period. So, the first thing to do is identify the timeperiod that the strategy is going to be valid for. Usually, for small ventures, it’s sensible to look at a 12-month period. A short, written plan might use no more than a page for each section. Organizational Goals Goals are specific targets that you set to achieve your business purpose. For example, in Vuyo’s business, goals might include ‘do the highest quality metal-work in the area, or ‘sell more metal products than competitors’ or both. Goals can include things like ‘make everyone in the area aware that we do the

Action Plans to Implement Strategy Action plans are the specific activities that you will be using to implement the strategies you’ve selected. Be very specific about these action plans, so that you can measure them easily. For example, Vuyo might set t 4

“distribute 1 000 pamphlets” as an action plan. He would also need to specify who is responsible for distributing them, where they are going to be distributed, how they are going to be distributed, and the date by which they should all be distributed.

Monitoring Plan Now take your calendar and your diary and make a regular commitment to checking up on the plan, and seeing where you have succeeded and failed. Update the plan each time you do this.

Tool: A Guide to the Strategic Plan Framework A Strategic Plan starts with larger-scale goals (such as the vision) and breaks it down into smaller and smaller scale goals (such as action plans). This makes it possible to work towards large goals by doing small things on a daily and weekly basis. Business Purpose To be the largest metal-work business in the area

Organisational Goals

Improve the quality of metalwork done in my business.

But this only works if the goals and targets are related to each other. One way to check that they are is to organise them into a Framework, like the one below… Strategies

Seek out highquality materials

Action Plans

Indicators

List all the suppliers of materials

Week I: List of all suppliers

Schedule visits with sales reps

Week 2: Visit sales centres

Measure their costs against their quality

Check costs and collect sales brochures

Choose best Selected a supplier materials for price. Buy the materials

Here we’ve taken one of Vuyo’s possible goals and put it in a framework that helps us to identify the relationships between all the different parts of the Strategic Plan and to check whether they actually make sense. It should be obvious that each part of the plan, listed in columns above has a clear and direct relationship to the next part of the plan. Looked at over 12 months, a strategic plan in the above framework provides us with a away to do something today that eventually ends up achieving quite a large and strategic goal.

Purchase orders placed

to measure whether the activities were carried out. You can use this approach to check that: ☞ Your organizational goals support your business’s vision ☞ Your strategies support your goals ☞ Your action plans support your strategies This strategic plan framework should be used to develop each of the follwoing: ☞ strategic focus, ☞ marketing plan, ☞ operations plan, ☞ staffing plan, and ☞ financial plan.

The last column, Indicators, is where you can write down those things that you will use to check whether you are succeeding in your plan. Your indicators give you a chance to write down the things you’ll use t 5

Tool: Your Strategic Plan – a Checklist Use the checklist below to assess your strategic plan - your written strategy should include something about (or at least touch on) ALL of the following: ☞ What are your objectives? This question could also be phrased as: What is your vision? ☞ What products will you sell? How are you going to price your products? ☞ What kind of markets will you be targeting? Who are you aiming your products at? ☞ How will you link your products to your markets? Who will tell the market that you have products? Who will follow up with past clients to check whether they want more products? How will this be done? ☞ Will you be providing any other services apart from selling your products? What kind of service? How will my market know about my extra service’s? ☞ What information will need to implement your strategy? What is your plan for getting such information? ☞ What resources, technology, transport, admin services, will you need to implement your strategy? ☞ What skills do you need to implement your strategy? What are your plans to acquire the skills you need but don’t yet have? Will you hire people into the business? Train people already in the business? Learn the skills yourself? ☞ What networks do you need to access or create? How will you become part of existing business networks? ☞ Are your ideas, strategies and plans REALISTIC, in the best sense of the word – that is, can you reasonably expect to achieve them in the time-frames you allow for?

t 6

The Business Plan Business Plans are not only for getting tenders and raising money. A Business Plan is your guide to help you think about and implement your business strategy.

Business Strategy. I don’t think I’ve got one of those!

Your Business Plan is an ongoing conversation with yourself about how you are going to make your business vision a reality.

What is a Business Plan?

operating a business without a plan is like going to a grocery store without a list and business plan is a key tool in the trying to remember all the items that are hands of the small businessperson and needed. One comes out of the store having entrepreneur. Dudu used the business plan, forgotten something critical - and having that seda helped her purchased a number of work on, to secure a items that are totally A Business Plan loan from the bank. frivolous and may is a detailed plan Vuyo uses his business never be used. It is the plan to convince Frik de same for a business describing steps Beer to take him on as a operating without a towards achieving a specific BEE supplier. plan. Critical issues do business goal, not get addressed - and Most small business some tasks get done that as well as owners only work on have no relationship the funds a business plan when to the direction the financing is required business needs to go. For and for some new idea. a business, however, the the resources Very few have either consequences of these business plans available unaddressed issues can your business needs as part of their normal range from inconvenience to reach that goal functioning. to bankruptcy.”

This lack of planning and thinking makes small businesses very vulnerable to changes in their environment and it accounts, to some degree, for the spectacular rate of failure that small businesses suffer.

I encourage my clients to ask some questions to evaluate their consultant. I have a list I can email you...

If you’ve got some idea about how you’re going to approach the next 12 months, then you’re already in a better position than 90% of small business owners. Having a business plan when starting a project can be the difference between struggling to stay afloat and sailing to your next destination. Judith Kautz, a business consultant to small businesses in the United States says: “While it may seem that planning only takes time away from running your business, t 7

The Structure of a Business Plan

The staffing plan This section deals with all your human resource strategies. This includes how many people you have employed, how you have employed them and for what tasks.

written business plan seldom needs to be more than 20 pages, financial statements included. Many are shorter. Here is a typical business plan structure: Attractive and professional cover page This cover page should have the name of your business or project in bold, your contact details and your business logo. It should look both attractive and professional.

The financial plan This section deals with your financial strategy. Most importantly it provides sales forecasts and compares these to your costs. It lists all your sources of finance, whether that be a personal investment in the business, a loan from a family member or the bank, other sources of funding. It also makes it clear how your finances will be managed.

Executive summary This is a one-page summary of the whole business plan. This comes in front but is actually the section that you write last after all the other sections have been completed. It describes the core business idea and why you think it will work. It could also include some of your key short-, medium- and long-term goals. Depending on who you are sending this business plan to, it will also include a paragraph that clearly states what you are looking for from them – a loan? sponsorship? an opportunity? etc.

Appendixes This section contains all the other documents that give extra information that the reader can look at if they really want to. It might include credit reports (like bank statements from the last 12 months), existing contracts (like contracts with external service providers, partnerships or joint ventures), legal documents (like business registration documents), leases, etc. If you have any other complicated information, consider moving it into the appendixes, and referring to it. This helps people get a clear idea of your plan from the main document without getting bogged down in figures or long detailed descriptions of complicated research or processes.

Your strategic focus This is an accurate description of what your business is about. It could also include formal information about how your business has been registered and it’s registration number. The marketing plan This section includes your market research (analysis), your understanding of your target market, your understanding of how you compare to your competition and information about your marketing strategy – pricing, product features, promotion and distribution.

It is worth spending a little time looking at each section in turn. We will do this in the pages that follow.

The operations plan This section describes what you have done to ensure the smooth running of your business on an everyday basis. If describes all the role players (staff and external service providers) and how they relate to each other. It also describes your manufacturing and distribution process – and how you will ensure that it works efficiently and provides the quality you want. t 8

Your Strategic Focus

☞ A client profile - Who will buy my product? ☞ A competitor profile - Who is my direct competition and what substitutes are there in the market? ☞ A product profile - What is the core product and what are the extra features? ☞ A distribution strategy - Is location important? Will I deliver? ☞ A pricing strategy - What will people be prepared to pay? How much can I expect to sell at that price? Will this cover my direct costs plus overheads? ☞ A promotional strategy - How will I create awareness of and demand for my product?

our strategic focus is the same as the business vision or project purpose. It should consist of no more than one page, in which you outline the nature and characteristics of your project or business. Questions to ask yourself when preparing this, include: ☞ What exactly is it that my business or project will do? ☞ Will it optimise quality, speed, affordability, flexibility (the ability to custom-make as opposed to massproduce, or provide variety as opposed to a single, affordable product) or dependability? No business can optimise all five. Small businesses, for example, are seldom good at mass production. ☞ What will my business NOT do?

Sales forecast Your marketing plan is not just about planning how you are going to advertise and sell your products. An important use of the marketing plan is to help you estimate how much you are likely to sell - in the short and long term. This is a sales forecast. A sales forecast is crucial for the rest of your business plan. All the other parts of your business plan (your Operations Plan, your Staffing Plan and your Financial Plan) all depend upon it. All marketing plans need a sales forecast that outlines the expected sales and profits associated with the business.

Your strategic focus needs to be constantly revisited throughout the process. In fact you will come back to it after writing the rest of the business plan and change it according to the ideas you had while writing the rest of the plan. But you do need to get some focus before you start on the other areas in the plan. Setting a focus, or a purpose at the beginning will help you cut down on the amount of work you have to do in each of the other areas, and make you more productive.

Business owners are optimistic people, and there is a very real danger of exaggerating your sales forecast. The rule, when it comes to devising a marketing plan, is to be very conservative in your estimates. Fortunately, there is almost always someone else already doing what you plan to do, or at least doing something similar. You need to find out what quantities are being sold by competitors, and make your estimates based on some (conservative) prediction of how many of their customers would buy your product. In this way you can get an idea of the size of a market and how it is developing.

The Marketing Plan

nce you’ve focused your business idea and established what your ‘core business’ will be, your next most important task is to plan how you will get your product into the market. This marketing plan will provide answers to questions like who you think will buy your product, how many they will buy, what they will be prepared to pay, how you will make them aware of your product, and how you will get the product to them.

Set yourself some hard, rands-and-cents objectives that you expect your plan to achieve. For instance, write down how much you expect your turnover and profit to improve in the first month, in two months, in six months and in twelve months after you start your marketing campaign. You

The questions that a marketing plan should ask and answer include: ☞ A sales forecast - How much will I sell? t 9

might need to make a ‘guess-timate’ (that is, make an educated guess/estimate) the first time around. You will need to compare the success of your marketing efforts against this educated guess. It is a starting point. If the first month doesn’t meet your guess, you might need to re-evalaute the expected turnover and profits for the other months.

A product profile What is your core product and what are its features? Customers buy products or services to satisfy a need, and that is what your business should aim to do: satisfy a need. When asked what his business did, the founder of a successful cosmetic firm replied: “In the factories we make perfume and in the shop we sell dreams.” This same philosophy is true of every business. As people’s hunger and thirst needs are satisfied, other needs such as safety, self-esteem and self-realisation come into play.

One of the things you will want to know is whether the market you are entering is going to survive. Before you go looking for customers in a particular market, find out whether the market is growing or standing still. Will the market that you sell to be there in a few months or a few years? Is the market seasonal? What outside factors or trends might affect the demand for your products?

Where are your business’s customers on the needs hierarchy, and how can your product or service help them to satisfy their needs or achieve their goals? How do customers perceive the kind of product or service that you will offer? What are their likes and dislikes? What features of your product or service would be most likely to make them use the business’s product?

A client profile This is where you answer that all-important question: Who will buy my product? Describe the kind of customers that your business will be looking to attract, and where you expect to find them. A small general shop may only service the needs of residents in a few dozen streets, for instance, but a specialist restaurant may have to attract a more diverse clientele from further afield. Your business may decide to sell to different markets. For example, a retail business can service a local area through the shop and a national area by mail order. A small manufacturing business could have a market in the local town, as well as in big cities further away and even an export market in another country.

A distribution strategy Is location important in the sector that you will operate in? If you will rely on customers coming to you (rather than you going to them), then location is indeed crucial. On the other hand, what are the options for delivering your product to customers? Are you close enough to your market to be able to deliver quickly and affordably? Maybe delivery could be a value-added service you can offer. A pricing strategy What will people be prepared to pay? How much can you expect to sell at that price? Will this cover your direct costs plus overheads?

A competitor profile You need to know who your direct competitors are, and what substitutes there are in the market. What are your competitors’ main strengths and weaknesses? Find out about your competitors’ product range, specifications, prices, discount structure, delivery arrangements, minimum order quantities, terms of trade and how they advertise. Your marketing plan will then have to take into account what your competitors are doing, so that your marketing message (and your products themselves) offer customers something different, something better, or something cheaper.

A promotional strategy How will you create awareness of and demand for your product? List all the activities that you will implement to make your marketing happen. Consider the various ways of marketing a product, and work out the right ‘mix’ of these different options to suit your market/s. These options include advertising (leaflets, magazines, newspapers, radio, etc), presentations to potential customers, direct mailing, an internet presence, etc. t 10

Set clear objectives for each activity, and describe how the results will be monitored.

and an estimation of when you will need to spend this money.

Marketing budget This should contain details of the costs of the marketing activity, including your own time, consultants, printers, event managers, etc.

Some business advisors say that at least 10% of your business’s earnings should be going into marketing.

Tool: Common Mistakes when creating a Business Plan (and how to avoid them) 1. Not spending enough time gathering information. Don’t wait to write a plan until you absolutely have to. Too many businesses make business plans only when they have no choice in the matter. Unless the bank or the investors want a plan, there is no plan. Too many people say, “I can’t plan. I’m too busy getting things done”, but if you’re honest, then you know that most of the time you’re too busy running around BECAUSE you haven’t planned. As they say, “If you are always putting out fires, you should install a sprinkler system”. 2. Idea inflation Plans don’t sell new business ideas to investors. People do. The plan, though necessary, is only a way to present information. Investors invest in people, not ideas. Even a bank, which has a vested interest in the plan, uses it to assess your own competence and understanding – that is, they’re assessing you. You don’t need a great idea to start a business – you need time, money, common sense and planning. Don’t worry about how innovative your ideas are. Very few successful businesses are based entirely on new ideas. 3. Vague goals and hype Leave out the vague and the meaningless because they are simply hype. Remember that the whole point of a plan is to achieve concrete results. To do that you need objectives, tracking systems and follow up - you need specific dates, management responsibilities, budgets, and milestones..No matter how well marketed, plans need results like fish need water. 4. One size fits all Business plans can be different things: they are often just sales documents to sell an idea for a new business. They can be detailed action plans, financial plans, marketing plans, and even personnel plans. They can be used to start a business, or just run a business better. The same plan that helps capture new finance can be used to run the business strategically, with some tinkering. Develop your business plan in different ways – don’t try to use it all the time, for every situation. Adapt, expand and extend it. 5. Too many directions and too many priorities Remember, strategy is focus. A priority list with 3-4 items is focus. A priority list with 20 items is something else, certainly not strategic, and rarely if ever effective. The more items on the list, the less the importance of each. 6. Unrealistic growth projections Have projections that are conservative so you can defend them. When in doubt, be less optimistic. The whole point of the business plan is to provide you with a map. But rather than being a map of a place (like a roadmap) it’s a map of a time, and that time is the future. And, just like a roadmap, for it to be effective, you have to use it over and over again. You really have to decide if you want to enter your future without a map. t 11

Meanwhile... Developing a Marketing Plan What did your market ♦ Buying information research find? from market research companies is very expensive. ♦ Doing your own market research is much cheaper, you will learn more, make new contacts and even promote your business. ♦ Collect demographic statistics (from municipalities, Statistics South Africa, academic research institutes). ♦ Other businesses might pass on their research findings to you, especially if your business will benefit theirs. ♦ Speak to people in similar business in a different area, who are not direct competition. ♦ Do door-to-door surveys or distribute questionnaires. ♦ Count how many people and cars go past the location you have in mind for your business if you are going to rely on passing trade. ♦ Investigate direct competitors - their produce, their turnover, and their customers. ♦ Speak to the suppliers of your competitors. ♦ Test your ideas when speaking to the people you meet. ♦ If you already have a business and want to expand or change in any way, speak to your customers, as well as to people who are not yet your customers, but whom you want to attract. How to do market research Before you start doing your market research, you should have a good idea of what the exact focus of your business will be. This does not mean that your focus will not change (in fact, it will have to change if your market research shows you that your idea will not work); it just means that you must know what you are looking for. If your focus is too broad, your research will only give you vague and general answers.

People want a proper catalogue with pictures and prices, not just loose photographs.

We should also give each of our designs a fancy name. Why you are doing market research? Your market research needs to help you: ♦ To estimate potential sales; ♦ Identify the characteristics of your potential customers; ♦ Test the demand for new product ideas; and ♦ Understand trends that will affect the sales of your product.. The research is NOT to prove your own optimism. So you need to be as detached and objective as you can: Everything that your business will do flows from the information and insights that you gather here - it is absolutely crucial to get it right. Here follow some of the kinds of questions that will help you get the information you need from your market research: With regard to customers ♦ What type of person or business will buy the product or service? ♦ What do customers want from the product or service? ♦ How many potential customers are there? ♦ How are customers currently made aware of similar products (similar to yours, that is) on the market? ♦ How much spending power is available? ♦ Will spending power rise or fall? With regard to competitors ♦ Are other businesses offering similar products or services? ♦ What do they charge?

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♦ Are there any gaps in the market? ♦ What equipment and methods do they use? ♦ Are they seen to be good at it? ♦ Is anyone else likely to try to enter this market? With regard to your planned operations ♦ What special skills will your business need? ♦ What equipment will you need? ♦ What special regulations cover this business? ♦ How much does the business need to charge? ♦ How much can be charged?

♦

♦ ♦ ♦

Types of market research There are two main types of market research ♦ Primary (field) research. This is where a business does not have any existing information and has to arrange a way of collecting and interpreting the information themselves, e.g. a questionnaire. ♦ Secondary (desk) research. This involves the use of published sources of information. ‘Desk’ is perhaps the wrong word because it may be necessary to visit libraries, etc to find the publications required. ♦ Formal research is highly organised and based on statistical methods, such as consumer surveys and analysis of demographic data. Informal research includes talking to business contacts, future competitors, trade associations, etc. ♦ Below is a list of research methods that small businesses will find useful. (Large businesses, who compete for large chunks of market share and have the resources to commission expensive market research studies, focus on other methods.)

♦

own past sales or small-scale sales experiments, such as selling prototypes through one or two outlets, having ‘test-runs’ at flea-markets, starting off with special ‘guinea-pig’ customers, or developing a small domestic clientele before signing on your first industrial client. Getting information and market research from complementary businesses who have an interest in seeing you succeed. One-on-one interviews with potential customers. Limited door-to-door surveys to test the vibe in a targeted area. Speaking to suppliers, industry experts and advisors (just be careful that they don’t have a particular service or product that they want to sell to you, especially if this will influence their responses); Reading (secondary research): but remember that the South African market is not nearly as well researched as the first world, and there is a tendency of local researchers to try to fit first-world patterns and consumer habits onto the South African market. The main aim of this research is simply to estimate, as conservatively as possible, the amount of sales you will probably make each month in the first year or so, and whether the business will be viable. There is a secondary aim too, however, which is to get tips on how to run your business and improve your product.

Here are a few tips to help you approach other business owners in the right way: ♦ You will be surprised how many business owners out there are happy to help. They have all been through the same process and understand the value of informal networks amongst business owners. You might come across a few who are unwilling to share information, more so in some industries, but just keep trying until you find those willing to talk to you. They will be worth gold. ♦ It might help if you approach people

Research methods for small businesses ♦ The most important research method is speaking to and investigating other similar businesses. ♦ The next most important is our t 13

♦

who are not or will not be your direct competitors, for example a similar business to yours, but in a different area. Throw your net wide. You will have to take the initiative here. Don’t wait for a particular business owner to become available or return your message. Move on to the next person on your list. You can always come back to the first one later. When you phone a business owner you have a 50/50 chance of getting a good response. It depends on a combination of things: the mood of the business owner, whether you have caught him or her at a bad time, the way you come across over the phone. Never take it too personally. As you phone around, you will find an approach that works well for you. In most cases a short and to-the-point approach works best. If you want to know something fairly straightforward, introduce yourself very briefly and just ask, “I run a Bed and Breakfast/am starting a Bed and Breakfast in Cape Town; do you know where I can find an industrial size toaster?” You don’t have to start with “Can I ask you a few questions?”, or “Could I have a few moments of your time?” If they think about it, they will realise that they do not have time. If you need to have a longer discussion, you can try to make an appointment. Some people will manage this better than others. If you do manage this, then stick firmly to the time you said you would need. If you cannot succeed in making an appointment, try the ambush approach - ask your question right there and then. “What do you think the best toaster is to get for my size business?” Normally, you will get a valuable response. Often, once a business owner starts talking it is quite difficult to make them stop. Start networking. If you join the industry’s business association, you will meet other business owners face to face in a relaxed environment. Here it

will be much easier to pick their brains. Many of the business associations have their own websites on which suppliers advertise. How to put together a Marketing Plan Now that you have done your Market Research you can go back to the list of headings you worked on earlier and adapt or refine your marketing strategy. This will be your Marketing Plan. Writing down a detailed plan will help you to: ♦ Clarify exactly what benefits your business and products offer; ♦ Ensure that you are going to aim your product at the right people; ♦ Alert you to potential dangers ahead, like new competition, problems of affordability and not enough customers; and ♦ Ensure that you have enough money to make your marketing effective. Conclusion After drawing up the plan, remember that, like the rest of the business plan, it is there to be used on a day-to-day basis. So: ♦ Keep it visible (on your desk, if possible!); ♦ Read it regularly to assess whether your plans are having the desired results; ♦ Discuss it, regularly and often, with your business partners, and don’t be afraid to point out where it is failing; ♦ Keep adapting it where necessary, if something doesn’t seem to be working.

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The Operations Plan

This, together with the fact that they are almost always the production manager when they start, leads to one of the greatest problems faced by small businesses: They become entangled in the production process. They cannot step back and develop proper business strategies. They find it very difficult to delegate. The result is that they struggle to grow their businesses.

he operations plan is the ‘meat and potatoes’ of the business – it describes how your business operates – how your day-to-day business processes work. The operations plan also helps to work out the cost of the whole business operation. Your operations plan must outline the process you will use to transform your inputs (such as ideas, capital, skills, materials, equipment and time) into outputs (like products, services and profits).

In order to free yourself from your production process, it is necessary to think about your production process in terms of systems. Only then will you be able to delegate it as you grow to other people without too many problems.

For manufacturers: ☞ What are the important features of the product? How is each product made? ☞ What equipment, accessories, material and labour do I need? ☞ What is total number of factory hours needed to meet sales forecasts? How many delays can I expect and what might cause them? ☞ Will there be any variation in demand and how will this affect production? ☞ Who are my suppliers? ☞ What kind of facility do I need and where should it be located? ☞ What should my factory floor layout look like? ☞ How can I ensure quality and cost control? ☞ What will my workflow processes and schedules look like? ☞ How is the manufacturing process administered, from receiving an order to sending out an invoice? For retailers: ☞ How will I keep records of my stock, in other words, how will my stock control system work?

What are the important features of your product? How is each product made? ☞ Summarise your product and what it does, emphasising those aspects that differentiate the product from others in the market (you need to have specified these aspects when focusing your business idea); ☞ Describe the process of making it, highlighting those aspects that require special attention in the manufacturing process (that is, those parts of the process that make your product different or better than your competitors). For instance, your process might make use of a particular tool, or skill, to improve the quality or safety of your product; and ☞ If you consider it useful to a nontechnical reader, summarise the workflow by outlining briefly what happens at each stage of the process (you will go into more detail in the section on workflow below). What equipment, accessories, material and labour do I need? Under each of the items in the heading above, describe what goes into the manufacture of your product: ☞ Itemise the equipment involved, as you will have to cost each item for your financial plan. Describe how long this equipment generally lasts and how much maintenance it requires; ☞ List the main accessories that your equipment or your employees need in your working environment. Pay

How to put together an operations plan for manufacturers It is easier to explain an operations plan by discussing a manufacturing business. Most people who start a manufacturing business are very familiar with the production process of the business. Often, they have either worked in the production process of other businesses before, or they are turning their hobby into a business. t 15

particular attention to issues of safety and occupational health (noise levels, dust, lighting, dangerous chemicals, hazardous tools, etc); ☞ Describe the materials and components that you will consume in the manufacturing process, and estimate what is used in each product. This could range from square metres of wooden board to litres of paint or grams of glue. This will lay the foundation for forecasting your unit cost in your financial plan; and ☞ Describe the skills that are required to make your product, and the number of employees that you will need to manufacture the required quantity within the required time. The quantity and time-frame will come from the sales forecast in your marketing plan, where you have estimated how many units you can sell each week, month and year.

disastrous for your reputation and your chances of repeat business; ☞ On the basis of the time estimates, work out how many employees are needed. Show in a table or on a chart how many more workers need to be employed if more products need to be produced, and what the implications are for costings; ☞ Indicate what sort of problems can be expected, what might cause them, and how these could be avoided or managed. What kind of facility do I need and where should it be located? Describe the sort of environment that you would need to house the manufacturing process, such as a workshop, a warehouse, a back-room, or a proper factory. ☞ What will you need in terms of powersupply (high-voltage current, number of plug-points, safety devices, etc?), lighting, ventilation, space, loading area, access, etc?; ☞ Is it important to be close to your suppliers, or to your customers? Being near a main highway makes transport quicker; ☞ When choosing a location, make sure you visit it at various times of the day, especially peak traffic times. Is there traffic congestion that will slow down your deliveries?; ☞ If your business is likely to generate a lot of noise (from angle grinders, air compressors, metal-cutting tools, hammering, etc), avoid being too close to a residential area - you don’t need residents’ complaints and municipality inspectors to distract you from business.

How many factory hours do I need to meet sales forecasts? This is where experience is important. Hopefully you will be familiar enough with this particular manufacturing process to know how long things take. ☞ If you don’t know how many hours are required, organise a pilot scheme where you simulate the manufacturing environment and test how fast you can make the products. Don’t go into business relying on guess-work about something as important as this. If the process takes twice as long as you thought, you could fail to deliver on time in your first contract - and this would be At Frik’s factory... Why are these lines on the floor?

They indicate pathways that are a safe distance from machinery. No cables must touch those lines.

Is that part of ISO?

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Ja, the International Standards Organisation has a list of internationally recognised standards for things like safety, quality, efficiency, compatibility of equipment and cost…

So, they are like guidelines?

Ja… and if your business is ISO compliant, customers and partners immediately know your business is professional.

What should my factory floor layout look like? This will obviously depend on your particular manufacturing process, but bear in mind the following: ☞ The flow of materials - plan your layout so that materials move the shortest possible distance between production phases. Items moving ‘against the flow’ of the job will raise inefficiency and the risk of accidents; ☞ Minimise traffic around dangerous equipment, and keep all cords and cables out of pathways. You can even paint green pathways between the work areas - using special non-slip paint - to keep people (especially visitors) a safe distance from the machinery; ☞ Dedicate a ‘green area’ in the factory (or attached to it), or a quiet room in your workshop, for employees to use for breaks and meetings.

they make good decisions on their own?; ☞ Continuous improvement - are you watching the process closely and implementing improvements, and do your employees understand that they can make improvements to the way they work? ☞ Ways to measure product quality, profits, and the efficiency of your process. What will my workflow processes and schedules look like? The way you arrange your processes will depend on how certain you are of selling your products within a certain time. If you produce goods to order, then you will have a deadline to meet and you can organise the production of that batch of goods like a project, giving attention to: ☞ Scheduling - draw up a timetable highlighting the times at which the various phases of the job can be started and when they must be completed; ☞ Estimating the amount of materials, the number of employees, and all the associated costs; ☞ Controlling costs as the project proceeds, ensuring that there is no significant overspending; and ☞ Controlling the purchase and utilisation of materials in line with the project estimates.

How can I ensure quality and cost control? There are probably two things you need to understand about quality: ☞ The first is that, from a customer’s point of view, quality is no longer a luxury. They will expect your products to be of good quality, even if you think you’re selling them cheaply; and ☞ Secondly, improving your quality should not just mean spending more on your process. Getting a quality product means improving the quality of your whole process, and this should bring efficiencies and cost-savings.

If you are producing on a ‘continuous’ basis directly to consumers, or to other buyers who will require the goods immediately, you need to hold a certain amount of completed stock. Here you need to balance the cost of holding goods in stock (‘just in case’) and the more economical strategy of producing goods as you need them (making the products ‘just in time’ to sell them).

Total Quality Management A valuable approach is to look at your business from a Total Quality Management (TQM) point of view; although big businesses make more use of concepts like these, there is no reason why you can’t apply them to a small business.

Will there be any variation in sales and how will this affect production? Your sales forecast needs to warn you of any seasonal variations in the demand for your products. It is expensive to manufacture products that don’t get sold immediately. You have to pay for materials, wages and all the other inputs that go into the product, and that cash sits locked up inside the product on your shelves or in your warehouse. There is seldom enough cash in a small business to

Consider ways that you can use TQM as a tool to focus on: ☞ Your customers - ask yourself what they specifically want; ☞ Your processes - are they as efficient as they could be?; ☞ Empowerment of your employees - can t 17

cope with this situation for too long.

both your materials and your products, as they both cost you money when they stand on your shelves. What is the minimum amount of materials or stock that you can hold? Can you get materials at short notice, so that you can hold less? Is there a substantial benefit to buying in bulk? ☞ Make your manufacturing process as efficient as possible, so that materials and components do not spend too much time in the ‘production pipeline’; ☞ Arrange your purchasing system, to get the best prices at short delivery times, and to keep track of orders; and ☞ Arrange your receiving system and inventory system, so you know what you’ve got and where it is.

When you do find yourself in this position (and it will happen), it is important to act quickly. There are essentially three options: produce less (consume fewer inputs and hence save on costs), find other customers (expand your marketing into other areas), and/or borrow money to see you through until sales pick up. If sales exceed your forecasts, however, you will need to consider producing more. Note that you don’t have to produce more: while there is always a risk of losing future business by not being able to supply an order, there is also a great risk of ‘overtrading’ when trying to meet too big an order. Small businesses, especially those that are under-capitalised, can quickly go bankrupt when forced to outlay unbudgeted amounts of cash without prompt payment from customers.

How is the manufacturing process administered, from receiving an order to sending out an invoice? When you are manufacturing ‘to order’ (that is, making the product only once its been ordered), you need to have a lot of information at your fingertips, and a system that will allow you to keep your promises to customers. Your operations plan needs to include an explanation of how you will set and manage your ‘lead time’. Most manufacturing businesses will have a certain lead time on all their products - a period that most customers will be happy to wait, whether it’s a day, a week or a month. From an operations point of view, however, your workshop or factory might be busier than normal. How will you keep track of this so that you can adjust your lead times and not ‘over-promise’ to customers.

Who are my suppliers? Your operations plan should convince the reader that there exist a number of suppliers who are willing and able to supply you with the materials and inputs that you need on a regular basis. ☞ Describe the suppliers (by name), what they do, where they are based and, if possible, their price list of inputs you will need; ☞ Describe any relationship/contact you have had with the suppliers, and whether any of them are prepared to offer credit terms or discounts; ☞ Describe some of the logistical issues that may be involved in getting your supplies, such as whether the suppliers can deliver materials, the price of doing this (relative to arranging your own transport facilities), etc; and ☞ Describe how quickly your suppliers can deliver, and give some indication of their reliability if you can.

Who will take the order for products? How will you keep track of the order through the manufacturing process, so that if the customer phones to check on progress, someone can answer his query? How and when will the customer be invoiced for the product? Will you run a cash-on-delivery system, or will you run accounts?

How will I control my stock? Keeping the right amount of stock in an organised and accessible place is both a logistical and financial issue for you. In your operations plan, describe how you will: ☞ Manage your stock level - this applies to t 18

The Staffing plan

of government - from your employees’ remuneration before you pay them. These deductions include: ☞ Income tax (also known as Pay-As-YouEarn or PAYE); ☞ Payments to the Unemployment Insurance Fund (UIF); and ☞ The Skills Development Levy (SDL).

he staffing plan addresses your employees needs. It should realistically explain how many people will be needed to do the work, what their wages cost, where that capital will come from, and why you believe that they will be needed. Questions to ask: ☞ How many people do I need? How many should be full-time, part-time or contractors? ☞ What should their skills, experience and personal qualities be? ☞ Who should report to whom? ☞ How will responsibilities and tasks be divided into job descriptions? ☞ How much will salaries amount to? ☞ What other costs are involved (e.g. pension, UIF, sick funds) ☞ Are there minimum wages or a collective bargaining council agreement that govern my industry? ☞ What kind of training will I carry out and how much will this cost? ☞ Can I outsource certain functions rather than employ staff of my own - how much will this cost? For example, should I do my own bookkeeping and accountancy?

These need to be paid over to the South African Revenue Service on a regular basis. You also need to build your skills in managing staff. If you start learning early, and get some professional support and training, you are more likely to feel in control and confident when you start to experience staff problems or expand your workforce.

Developing a Staffing Plan Look at your operations plan and work out how many people you need. Think very carefully about how much of the work you will be able to take on yourself and plan to delegate as much as possible as soon as possible. Many business owners take on too much for too long and have problems delegating.

Advertising for staff In South Africa, most small business owners recruit staff by word-of-mouth, starting with their immediate family, extended family and then neighbourhood. This is entirely valid, especially if you don’t need highly skilled or specialised workers.

What you need to do before taking on an employee You will need to prepare: ☞ A job description that includes the job title, job purpose, duties, main responsibilities and hours. Decide if you need a full time, part time or temporary worker; ☞ A person specification that outlines the qualifications, experience, skills and motivation of an ideal candidate; and ☞ A competitive salary offer and any additional incentives.

Introduction Taking on an employee is a big step for any business, as it can involve long-term commitment and cost. You need to work out exactly what kind of person you need, and how to find and recruit them. Then there is a range of legislation that safeguards employee rights, and as an employer you need to be familiar with it.

An advantage often overlooked in doing it this way is that you have a kind of sanction against dishonesty or bad performance. If you employ your neighbour’s son, for example, the chances are less that he will disappoint you than employing a complete stranger. He and you know that he will also face the wrath of his family if he disappoints. Keep in mind, however, that it is a doubleedged sword. It is more embarrassing firing a neighbour’s son than a stranger.

You also need to have an administrative system to make deductions - on behalf

But the main danger of employing people you know is that one tends to neglect the t 19

formal aspects of the job - the job description, a contract, strict performance management, and market-related salaries. You are tempted to build your business around the strengths and weaknesses of such workers, which can lead to major problem later on when you start growing your business. Be as businesslike as possible from the beginning.

popular. So, if you have a business website, post the job advertisement there too. Ask candidates for the same information, so that comparisons are fair. Ask candidates to fill in a standard application form where you can pose specific questions for them to answer. This will make their information more concise and relevant than a generalpurpose CV.

In certain industries business owners even ask one another for semi-skilled or skilled workers when the one business owner has too many workers for his amount of work and the other needs more. Just remember that other business owners are not going to refer their best workers on to you. The workers refered to you from other business owners probably need some training, or could have problematic attitudes. Bargaining councils, unions, offices of the Department of Labour and the Sectoral Education and Training Authorities are also sources of usually unskilled workers. Universities, colleges and training organisations sometimes have entire departments for placing their graduates at businesses.

Conducting interviews Hold face-to-face interviews to match the candidate to your job description, and to check the suitability of their personality and compatibility (these aspects are especially important in a small business). Arrange a test for candidates if the skills you require from them are easily measurable. Do not discriminate You must have fair selection procedures and not discriminate on the grounds of race, gender, disability or pay. Keep the documentation on applicants and interviews for about six months in case there are complaints from rejected candidates.

If you are looking for slightly scarcer skills and experienced workers, recruitment agencies should be seriously considered. They are expensive, but they have two advantages: ☞ You don’t have to sift through hundreds of inappropriate applications. With South Africa’s high unemployment rate, you may very well get literally hundreds of responses to advertisements from desperate people who are willing to lie their way through a job interview. ☞ You don’t have to pay the recruitment agency if the appointment appears to be totally inappropriate in the first month or so. They will find you a replacement before charging you. Placing a job advertisement can also be considered, but be ready to deal with a flood of applicants. Be sure to choose appropriate media. To attract the broadest range of applicants, advertise the job as widely as possible in appropriate media. Newspapers are probably still the most common place for people to look for jobs, but the Internet is also becoming

Making the job offer Usually a job offer is made verbally, then confirmation is made in writing. Both methods constitute a contract. Appoint the staff member for an initial probationary period to make sure that they are capable of doing the job. Inform unsuccessful candidates by telephone or letter, thanking them for their interest and their time. Don’t leave them waiting for a response, as the sooner they know the outcome, the sooner they can move on and make their plans. Written contract of employment The Basic Conditions of Employment Act requires you to give new employees a written contract of employment when they start work. This contract needs to include the following information: ☞ Your (employer) details, as well as the employee’s details - employer’s full name, employer’s address, the t 20

employee’s name, and the employee’s occupation (or a brief description of the work); ☞ Employment details - place of work, date that employment started, working hours and days of work; ☞ Payment details - salary or wage (or the rate and method of calculating wages), the rate for overtime, any other cash payments, any payments in kind (and their value), the frequency of payment, and any deductions from their payment; and ☞ Leave details - any leave to which the worker is entitled, the period of notice required for termination (or period of contract).

programmes are available that can develop the skills of your employees. You will need to write a Skills Development Plan for your business before you can start making use of the Skills Development Levy that you will pay each month, but the SETA can also advise you on this.

Unless your business employs less than five people, you also need to include the following information in the employment document: ☞ Any period of employment with a previous employer that counts towards the period of employment; ☞ A list of any other documents that form part of the contract and details of where the worker can get copies; and ☞ A description of any bargaining council or sectoral determination that covers your business.

Organise PAYE and UIF deductions: Contact the South African Revenue Services (SARS) to arrange PAYE and UIF for your new employee. As the employer, you are responsible for deducting income tax from your employees’ salaries, and for paying these deductions to SARS regularly. SARS will send you the information and forms you require, and also give advice if you need it.

Keeping records The law also requires you to keep a record of certain information on each of your employees: ☞ Employee’s name and occupation; ☞ Time worked; ☞ Pay received; and ☞ Date of birth (if under 18 years of age). Managing staff This is a demanding aspect of running a business, and can be best approached with some basic planning and documentation: ☞ Draw up a personnel policy document to give employees clear and easy access to information about your (and their) responsibilities in the workplace. This doesn’t need to be long or complicated, but should just set out the ‘ground rules’ so that simple misunderstandings can be avoided; ☞ Hold regular appraisals (every week for new employees, and monthly for others) to keep in touch with employees and give them feedback on their performance. Make a point of scheduling appraisals in advance so that they happen as a matter of course, rather than just in response to problems; and ☞ Get some form of management skills training; to ensure that you have a few basic pointers to build on. There are no hard and fast rules, but time

When the employee starts work Carry out an induction: It is important to make new members of staff feel welcome and to introduce them to the business and their role. Spending time on the induction of new employees will save time and problems later. When you do the induction for the first time, it might be fairly informal. But put it down on paper so that you can start developing a more formal and comprehensive induction for future employees. Assess their training needs: You should decide early on what training will be required so that the new employee can carry out their role effectively. Training can be informal (for example, in meetings), formal on-the-job training or external training paid for by the business. Contact the relevant Sectoral Education and Training Agency (SETA) for your industry, and ask them what t 21

management and making people accountable are among the important skills to develop.

promotion opportunities, transfer processes and disciplinary measures. No one should receive privileged treatment and no one should be prejudiced against. Examples of discrimination include: sexual harassment; advertising an age limit for the job; and forcing people to test for HIV.

Further reading Department of Labour: The Department of Labour has useful guides on its website that explain, in a fairly easy-to-understand way, the most important things that you as an employer need to know and do when employing people in your business. Go the department’s home page on the internet www.labour.gov.za and click on the heading called ‘Basic Guides’.

If an employee feels that they are being discriminated against they should find out what that organisation’s policies or procedures for declaring a dispute are. Ideally all employees should be given this information in their induction programme and should be reminded of it regularly. If employees are unsure about what they should do they can seek assistance from their union or the person responsible for human resources in that organisation. If this approach doesn’t work they can go to the Commission for Conciliation Mediation and Arbitration – the CCMA.

SA Revenue Services: The SA Revenue Services also have a limited number of guides that you can read or download from their website www.sars.gov.za. Useful contacts South African Revenue Services: The SA Revenue Services has a list of offices on their website (www.sars.gov.za) which you will find a link to when you click on the ‘Contact Us’ button on the SARS homepage.

The CCMA will first try to resolve the matter through conciliation. If this fails they will set a date for an arbitration hearing where they will recommend a course of action based on the principles of South Africa’s Labour Law and the Employment Equity Act. If the organisation does not cooperate with the arbitration the employee can take the matter to the Labour Court.

Commission for Conciliation Mediation and Arbitration (CCMA): The CCMA is a dispute resolution body established in terms of the Labour Relations Act. It conciliates workplace disputes and arbitrates disputes that remain unresolved after conciliation. (http://www.ccma.org.za/)

To find out more about Employment Equity go to the Department of Labour’s website at www.labour.gov.za.

Employment equity The Employment Equity Act protects people from unfair discrimination in the workplace – especially black people, women and people with disabilities.

“What will guide us in everything we do will be the challenge to build a caring society. This society must guarantee the dignity of every citizen on the basis of a good quality of life for every woman, man and child, without regard to race, colour or disability. It must be sustained by a growing economy capable of extending sustainable and equitable benefits to all our people.”

Employers may not discriminate against employees on the grounds of race, gender, sexual orientation, pregnancy, marital status, family responsibility, ethnic or social origin, colour, age, disability, religious belief, political opinion, language or HIV status. Employment policies and procedures should also be free of discrimination. So the principle of equity should be seen in recruitment processes, the advertising of jobs, selection criteria, grading and classification of employees, training opportunities, staff development,

Thabo Mbeki, 25 June 1999

t 22

The Financial Plan

thought about them and incorporated them into your research:

he Financial Plan gives potential investors and backers a chance to see whether you’re a worthwhile risk. What a possible financial backer is looking for is a way to work out whether you are likely to produce enough cash to stay viable and repay the loan. Any new venture is a risk, and no-one expects you not to be a risk, but what people want to know is whether you’re a good risk. And what makes an average risk or a bad risk into a good risk, is whether there is a strong possibility of the risk being rewarded. For someone who provides a loan, that requires you to stay in business successfully, long enough to repay the loan. And in order to estimate whether you will do that, potential investors turn to your financial planning.

☞ Sales for the first year (or for the next year if you are already in business). What do you expect to sell each week, month and year? Is it reasonable? ☞ Cost of sales. What does it cost you to sell a product? Do you need R10 for every R7 you sell? If yes, you’re losing R3 on every sale, and you’ll be out of business fairly soon. ☞ What is your total profit, without considering what your costs are? ☞ What are your overheads – that is, what are your costs for things like rental, materials, staff and salaries? ☞ When you subtract your costs from your total profit, what is left over? ☞ What is your cash flow like? Do you have enough money available at the beginning of each trading period (week, month or year) to pay your costs and to stay in business? Do you have too little? Where are you getting the cash you need from? Are you borrowing it? ☞ How much will you need to borrow? ☞ Have you taken your loan repayments into account when working out your profit? Will you make enough money each month to pay your debts AND to stay in business?

In order to distinguish good risks from bad risks, potential investors and financial institutions need to know that you have thought about your financial situation in some detail. Having a clear and logical financial plan helps them to make the right decisions about you. Specifically, the questions that are regarded as crucial are: ☞ Are you capable of describing and measuring your start-up costs – that is, the cost of starting up your venture? ☞ Are you able to show your expected income for the first six to 12 months? Are your calculations reasonable? ☞ Do you understand the concept of cashflow? Do you understand that income and expenditure affect each other and have you thought about it?

Put together: ☞ A forecasted income statement ☞ A cash flow forecast ☞ A forecasted balance sheet If you don’t know basic financial management concepts and functions, learn them. Read, study, or ask. It is the basis of business. There are books available that can help you, and most of them cover basic ideas about financial planning and management. There is also plenty of information available online (on the Internet) that will help. One the best resources for learining basic financial magement are banks – we’ll discuss that a little later.

In order to give the person reading your business plan a good idea of your business, you must be able to show that you have seriously thought about the costs of running a business, and about the ways to measure the possible income. It helps, too, if you can consistently and intelligently measure the effect of different scenarios on your business. Here’s a quick checklist (below) outlining some of the things you should take into account – you might not write all of them down when it comes to your business plan, but it will help you tremendously if you have

Basic concepts in financial planning and tips on how to implement them The best way to find the information you need to develop your financial plan is to t 23

run your existent business operations in a financially sensible fashion. That way, you will always naturally have the information you need at hand. If you don’t yet have a business or small venture, then organising your personal finances in a business-like fashion will help you to understand financial management. In order to do that, you need to be familiar with some of the basic ideas.

stationery. Having a positive cash flow ensures that you have the funds available each day to cover your needs that day. When it comes to cash flow we try to slow down the amount of money leaving the business and speed up the amount of money entering the business. ☞ Make sure you get deposits on big jobs. ☞ Invoice customers on the same day you complete the job. ☞ Deposit cheques immediately. ☞ Improve your collection on overdue accounts. ☞ Negotiate extended credit terms with your suppliers. ☞ Don’t keep stock sitting on the shelf for long – that is money doing nothing. ☞ Don’t order more stock than is necessary. ☞ Keep your overdraft for short-term expenses only. ☞ Sell unproductive assets.

Cash flow Cash flow is a term used to describe the financial status of a business on a day by day basis. Cash flow means the daily balance available when costs and income are balanced against each other. In business it is quite important that your cash flow is positive – that is, that you have cash available to run the business each day. If for example, your are owed a lot of money, but you will only receive it in six months, that potential profit cannot be used today, in the event of a cash need, like purchasing

Six Ways to use the Business Plan as a Guide to your future 1. Schedule periodic business check-ups Make a habit of referring to your plan and updating it regularly. Once a year, redo the whole planning exercise. Set aside a block of time near the beginning of the calendar year, fiscal year or whenever is convenient for you. 2. Review your data to assess business performance Compare your expected results against your actual results. Because you used a framework that linked actions to goals, you should be able to see what’s working and what’s not. 3. Fine-tune your plan Keep looking for ways to improve what you’ve done so far. Take appropriate action if goals outlined in your plan haven’t been met, and change strategies that aren’t working. 4. Get help from others After you change and update your business plan, share it with an advisor. Talk to your colleagues and employees about your ideas. 5. Try to operate your business according to your plan Whether you’re updating your plan for the first time or the 20th, treating it as a living document shows that you understand your business and you know what is required to make it grow and prosper. 6. Keep a record of your strategic data Keep all the worksheets, tool and models that you use or create in the planning process. Having access to older data helps you make a meaningful comparison between where you have been and where you are. This is helpful when you have to explain your business to potential partners. It also helps you understand your business at a deeper level. t 24

Keeping Proper Accounts The most important tool for financial management is keeping proper accounts. Keeping accurate business accounts is the basic element of what’s usually called Financial Management - and good financial management is something that distinguishes smart businesses. ‘Accounts’ in this sense means keeping records of your expenses and your income. Some tips for doing this are:

Petty Cash `Petty’ means small. Petty cash is for small items that you need in a hurry and do not need to write out cheques for. Such items may include stamps, tea, unexpected taxi fare, sugar, sticky tape and batteries. Petty cash is not for bulk buying, or for paying out staff claims over R50. Keep your business expenses and your personal expenses separate at all times. Every time petty cash is paid to someone a note (voucher) should be made describing the amount and what it is to be spent on and the note should be signed by the person receiving the cash.

☞ Keep every bit of paper that has information about your money. The kinds of things that are valuable are receipts, invoices, petty cash vouchers, cash slips, and cheque counterfoils, as well as bank statements ☞ Make a record of everything. ☞ If someone can sign, get them to sign. ☞ Create systems, each with its own file/record book, for every type of transaction, and stick to these systems every time. ☞ Make a budget, write it down and then stick to it

Annual Auditing For any good business an annual audit is necessary. This provides partners and investors with an external check on whether you’re successful or not. Your bank can help you prepare for an audit, as well as provide you with help in getting one done. Getting to know your bank All major banks have developed special accounts for small business people and many of these are linked to other services (such as access to business insurance) that you really might benefit from. So the first thing you have to do is begin to establish a working relationship with your bank. Generally, if you have a business account with your bank then the bank’s Small Business Portfolio Manager is the first person to speak to. However even if you only have a personal account and have never spoken to the banking staff before, you can make an appointment to meet a consultant.

Bookkeeping Bookkeeping refers to the daily operation of an accounting system, which means recording the daily and weekly business expenses in an appropriate way. The kinds of functions that fall into this category are things like collecting bills, and paying employees and suppliers correctly and on time. Working out of your back-pocket, as many businesses do, keeping your money under your bed and never knowing how much you will have or need, just makes your life harder. One of the key advantages of good basic bookkeeping is that you can relax more – it helps you get a better, more realistic idea of what money you will have (and need) in a day or a week or a month. This helps take some of the pressure off you and helps you plan better.

Remember to prepare properly for such a meeting – you should take the time to prepare a little information about your business, and you should be able to discuss it intelligently. Also, dress neatly and speak clearly and feel confident. Remember, they need your business as much as you need theirs.

In South Africa, most of the banks offer some kind of service, either in the bank itself (as a business customer) or online, via their website, that can help you manage your finances. In order to use them, you need to have a PC, though and the software to run on it. (See the section on Free Software in this manual, for ideas).

The major banks all have websites that provide more, information, contact details and services. These websites are all listed in the Section on Useful Resources, at the end of the manual. t 25

Dudu’s Business Plan n Business Pla ternet Café D.Com (2) In

The site identified for the new store is in a busy urban residential and commercial area, one that is marked for upgrading in the Metro urban renewal programme. It is also near a growing urban residential sector which creates a potential customer base. Two schools nearby provide possible afternoon custom. The planned expansion consists of the establishment of a second Internet Café, on the model of the first, and an increase in the service on offer.

D.Com

The primary services offered will include: ❏ Training in basic internet use ❏ Training of scholars for educational purposes ❏ Training in the use of software such as Word, Excel and the Office suite, ❏ Basic web-page development ❏ Web-hosting ❏ Email services ❏ Access to technical software such as Photoshop, Visio and Visual Studio

Langa Ms Duduzile et 15 Mango Stre – 9888 le vil la de an M

Executive Summary This business plan describes the structure and operation of a proposed new Internet Café. It supports the loan application of Ms Duduzile Langa. The proposal is to expand D.Com (1), a successful Internet Café operating in profit since 2004, through the establishment of a second Internet Café - D.Com (2). In addition, D.Com (2) will incorporate the point of sale and service of Alvin’s Computers and Accessories, (hereafter “Alvin’s”) a second-hand, low-end computer sales and repair operation. (Full details of the relationship between Alvin’s and D.Com are outlined in the Operations Plan.) Through this partnership D.Com will have access to subsidised maintenance of network and hardware. In addition, all buyers of computers from Alvin’s are potential customers for D.Com training courses.

Secondary services on offer will include: ❏ Business stationery composition ❏ Hi-speed and high volume printing ❏ Basic colour and photographic printing The loan cost of expanding D.Com (2) will be R90 000.00 and the business will be operational within 30 days of funds becoming available. The first and second loan repayment will be funded by operating profit from the existing business (already set aside) and a cash contingency of R 20 000.00, accumulated from savings has also been made available. Break even is expected at the fifth month of operation, with the business relying on initial capital and revenue to establish itself. t 26

Strategic Focus

of the entrepreneurial revolution in South Africa, and contribute to the eradication of joblessness and unemployment.

Mission: D.Com (2) aims to provide inner-city residents with high-speed, high-quality internet access, a range of services related to internet use, training, and access to Open Source software. Furthermore, D.Com (2) aims to become the service provider of choice for small enterprises.

Strategic opportunities and strengths ❏ Walkthrough trade arising from location close to a busy urban residential and commercial area. ❏ Lack of competition in this market - no other Internet Cafés nearby. ❏ The experience of the first and continuing small Internet business in the township. ❏ A pool of part-time staff already trained in Internet use for the purposes of managing and promoting a business. ❏ A strong relationship with seda.

Values: ❏ Top class service ❏ Customer satisfaction ❏ Empowerment of all staff and customers ❏ Sustainability for D.Com (2) and for our customers’ businesses ❏ Transparency ❏ A commitment to feedback ❏ Life-long learning for all

Partnerships: ❏ If the loan application is successful. D.Com (2) plans to approach Alvin’s Computers and Accessories and offer them space for their business in exchange for services. Alvin’s Computers and Accessories is a small venture that supplied second-hand computers and maintenance services to the existing Internet Café. Alvin will be approached to supply maintenance services and hardware. In exchange, Alvin’s business will share the space rent free and benefit from the Internet Café’s customers.

D.Com (2) is located in an area divided between low-income urban residential space and a growing commercial area. It is expected that the area will become a commercial urban hub for small blackowned businesses seeking office space and see a significant increase in retail outlets. It is also near a taxi-rank and visible to people living in the township travelling to and from town. D.Com (2) will provide private and business support services, like telephones, faxes, printers, photocopiers, high-quality internet access, a range of services related to internet use, training in the use of software, and Internet training. Internet training focuses on small enterprise owners and entrepreneurs. D.Com (2) will provide a number of tested skills training courses, including Introduction to Computers and the Internet, Designing Business Media ,and Using the Internet to Market your Business.

Risks and risk assessment The main risks and strategies to deal with them are: ❏ Not enough walk-through trade. The response to this is aggressive marketing, and the deployment of tariff plans, such as month-long memberships and membership plans at preferential tariffs. Renting the venue on a year-long lease (with option to renew), rather than buying it, also ensures that the business can seek an alternative venue in the event that trade is too low.

D.Com (2) has applied for a SAQA accreditation. Once it is accredited it will expand the training product range with a number of potential partners.

❏ Alvin’s Computers and Accessories may choose not to rent some of the space for their business. Another business will then be approached. D.Com (2) prefers

D.Com (2) aims to be a significant part t 27

to rent to a business that can provide services that are complimentary to its business services.

service facility for printing. I have already spoken to Alvin Computers and Accessories about creating a self-service process that uses registered passwords that can be purchased with units of credit and records the customerâ&#x20AC;&#x2122;s use.

Registration D.Com (2) has been registered as a close corporation.

Overview of planned marketing efforts In order to meet basic financial targets as outlined in the cash flow document (see Financial Plan) D.Com (2) must operate between 25% and 50% of capacity. To make this possible, it is critical that market awareness be clearly established within the first 90 days from opening, and that passing trade be converted to regular trade.

Registration number: 2006/178/115/23 Accounting officer: Mary Tlale â&#x20AC;&#x201C; of Peter Mlanga and Associates. Marketing Plan Initial Market Research D.Com (2) is located in an area divided between low-income urban residential space and a growing commercial area. It is expected that the area will become a commercial urban hub for small blackowned businesses seeking office space and see a significant increase in retail outlets. It is also near a taxi-rank and visible to people living in the township travelling to and from town.

In order to take advantage of the current lack of competition, marketing efforts in the weeks leading to opening and in the first 90 days will be tightly focussed on generating awareness of services and products to local residents and businesses, and converting walk-by trade into walk-in trade. Customers who make use of the printing, faxing and copying services will receive vouchers that give them (small amounts of) free time on the Internet. In this way we can introduce them to the Internet via services they are already familiar with.

A survey of small businesses in the area indicated a need for centralised printing and Internet services. Specifically, many small business owners commented on their need for a dedicated and secure email service. Business owners did not see the value of Internet training immediately, but that was because they were not aware of all the ways in which Internet can add value to their business.

A two-part leaflet campaign targeting both residents and small businesses will be completed before opening. Leaflets aimed at residential users will focus on high-speed internet access, free software, secondhand hardware sales and games. Leaflets targeting local businesses will focus on small-enterprise services, stationery design, business email accounts, software training, free business software, printing and possibly second-hand hardware sales if Alvin Computers and Accessories comes on board. The leaflets will be designed so that they can unfold into a poster that can be put up at points where there is a lot of traffic.

Discussions with local government officials revealed that plans for this area include refurbishing it as a commercial hub. Interviews were conducted with current users of the existing Internet CafĂŠ to determine what features they thought would increase the quality of service. One of the most common responses was a need to separate the people receiving Internet training from the other customers. This is why the new venue will have a separate training area. Customers who were familiar with the technology also wanted a self-

Dudu Langa will personally visit all the local business with leaflets, and offer them generous tariff plans. Businesses will be encouraged to buy a service package, at an t 28

attractive discount, that will lock them into an extended relationship with D.Com (2).

Four dedicated workstations partitioned from the main Café will serve as the training environment.

The leaflet campaign will be supported by half-page black and white advertisements placed in the local community newspaper. The paper has also agreed to feature the store opening alongside an interview with Dudu Langa, as part of their focus on local success stories. This will run in the week of the store opening.

Managing cash A small safe houses the cash on hand, and daily takings are cashed and accounted for each day. The time for banking is changed every day for security reasons. Each day’s takings are banked the following day and the receipts, amounts and cash-up documentation are annotated and entered in a ledger on the premises for that purpose. Similarly, all invoices for ad hoc expenses, all goods received and all payments made are entered into that register. Once a week that data is captured in a spreadsheet, and once a month that data is backed up to disk.

The local community radio station, that is active evenings and portions of weekends, has also agreed to feature the store opening as a news item, in exchange for in-kind provision of services. Further advertising with them will depend on the effect of these notices. Discussions are underway with two local business organisations (a hawkers’ forum and the local merchant’s association) to provide them with a range of centralised business services.

Backups and supporting documentation are stored off-site. Hours and duties Operating hours are from 07h30 to 18h30, Monday to Saturday, and the ownermanager is on duty each day, supported in the afternoons and early evenings, by at least 2 part-time staff, from a pool of 5, whose role is to assist customers on the floor. Part-time staff take over all duties in the store when the manager is providing training.

D.Com (2)’s close relationship with seda will be mined for referrals. The Operations Plan Basic flow of work In the basic business model, the main cash flow into the business comes from renting business services and Internet access on an hourly basis to customers.

Alvin’s Computers and Accessories will provide 12 workstations and maintenance. They already supply excellent service to D.Com (1). It is hoped that they will rent some of the space in exchange for maintenance services. It has already been established that they are looking for a bigger premises. D.Com (2) hasn’t approached them yet in this regard but will do so if the loan is acquired.

The Internet Café provides place for 8 workstations connected through a hub to a Telkom ADSL line. Internet access is purchased via the point-of-sale (POS) software running off the server. Each unit purchase ‘unlocks’ the workstation for a unit of time (one hour, or one half hour), at the end of which the workstation is automatically locked for use, and must be unlocked again through a subsequent purchase. Customers who do not use all their time can be issued with a credit for later use. Managing sales of ‘air-time’ is done via the main cash-register.

Just as we have done at D.Com (1), a trouble shooting register will be maintained so that both D.Com (2) and Alvin’s Computers and Accessories will be able to keep track of the kinds of problems that are being experienced. This register is reviewed at weekly meetings. t 29

Weekly staff meetings Staff meetings will be held every Saturday at 08h00. All part-time staff will be expected to attend, as well as a representative from Alvin’s Computers and Accessories.

After six months one of the volunteer staff may be promoted to the position of Assistant Manager.

Internet training courses The Internet training courses last 8 sessions and cover the following topics: ❏ Basic computer literacy ❏ Emails ❏ Searching the Internet ❏ Designing your business identity and using Internet as a marketing tool ❏ Marketing and using Internet as a marketing tool ❏ Using free Open Source software.

The Financial Plan 1. Start Up Costs 1.1. Assets and equipment: Internet Cafe

The Staffing Plan Unit Cost

Total

R1 000

R8 000

Chairs

R100

R1 000

Desktop/Dividers

n/a

R3 000

Cabling

n/a

R2 500

Routers

R500

R1 000

Item

Dudu Langa will manage the business. She already has experience in starting and running the existing Internet Café, D.Com (1) in the township. Before that she was involved in a successful retail business that now makes use of her Internet services.

Workstations

Dudu Langa has been training small enterprise owners for nearly two years. She has been invited on more than one occasion to address community groups on the subject of entrepreneurship, in recognition of her expertise and experience.

Hubs Software

Number

R500

Various

R15 000

Total

R31 000

1.2. Assets and equipment: Training Area

Five volunteers have been identified to offer support services on a part-time basis. In exchange for their services they will get free time on the Internet as well as free Internet training. Each volunteer will also receive a modest stipend to cover any costs they may incur in getting to and from work. This system has already worked successfully in the existing Internet Café.

Item

Number

Unit Cost

Total

Workstations

R1 000

R4 000

Chairs

R100

R500

n/a

R1 500

Desktop/Dividers Total

R6 000

1.3. Other costs:

Initially, a high turnover in volunteer staff is expected, but it is expected to stabilise in 3 to 6 months. In that period, it will be possible to determine the need for further paid full-time staff or part-time staff. It is anticipated that a receptionist/cashier will need to be employed at this point.

Item

Unit Cost

Total

Shop fitting and sign writing

n/a

R10 000

Initial Marketing

n/a

R5 000

Total

Number

R15 000

2. Operating (Recurrent) Costs:

A working week consists of 6 such days. Maximum income in a working week is therefore R9 600.00.

2.1. Premises and Infrastructure Item

Number

Unit Cost

A working month consists of 4 such weeks. Maximum income in a working month is therefore R38 400.00.

Total

Rental

n/a

R4 000

ADSL line

n/a

R600

ADSL connection

n/a

R500

Printer rental

n/a

R1 500

Telephone line

n/a

R500

Loan repayment

n/a

R3 000

Total

3.2. Training A single training course consists of 5 participants, paying R250.00 each, and lasts for 5 days (a working week). Each course therefore earns R1250.00.

R10 100

A maximum of 4 courses per month is feasible. Maximum monthly income from training is therefore R5 000.00.

2.2. Personnel Item

Number

Unit Cost

Total

Owner/Manager

R4 000

Volunteers

R1 000

R5 000

Total

3.3. Small Business Support Services Email Based on prior experience, an uptake of 12 new private email accounts @ R100 per month is high. We therefore set R1 200.00 as the high-uptake figure.

R9 000

2.3. Sundries Item

Number

Unit Cost

Paper

R50

R500

Toner

R400

R1 200

Blank discs

R300

Stationary

n/a

R300

Telephone bill

n/a

R300

Consumables

n/a

R400

Total

Business Services Based on prior experience, 10 printing and/or copying and/or stationary design transactions per day is high. Assuming an average of R10.00 per transaction, the maximum income is R100.00 per day, over 24 days, or R2 400.00 per working month.

Total

Telephone Based on prior experience, 30 units a day is high. Assuming a charge of R1.00 per transaction, maximum income is R30.00 per day or R720.00 per working month.

R3 000

3. Income (Please note that these calculations outline maximum usages. For anticipated growth and use, see section 5 of this plan.)

4. Summary Tables 4.1. Start Up Costs

3.1. Internet CafĂŠ The internet cafe has 8 units available, priced at R20.00 per hour. Maximum use per hour is therefore R160.00.

Item

A working day consists of 10 such hours. Maximum use in a day therefore consists of R1 600.00.

t 31

Monthly Cost

Internet Cafe

R31 000

Training Area

R6 000

Other costs

R15 000

Total

R52 000

4.2. Operational Costs Item

Monthly Cost

Premises

R10 100

Staff

R9 000

Sundries

R3 000

Total

R22 100

4.3. Income Assuming maximum uptake of services: Item

Monthly Cost

Internet Cafe

R38 400

Training

R5 000

Business Services

R4 320

Total

R47 720

5. Growth Projections Prior experience informs the following growth projections, adjusted conservatively to reflect expected business uptake: Month 1 and 2: 10% of maximum uptake Month 3 and 4: 25% of maximum uptake Month 5: 50% of maximum uptake Month 6 onwards: 50%+ of maximum uptake Month 1 Carried over Capital input

Month 2

Month 3

R40 672 R90 000 (loan capital)

R23 344

Month 4

Month 5 +

R13 174

R3 004

R5 000 (capital injection from contingency)

R20 000 (capital funding from existing business) Once-off costs

- R52 000

-R5 000 (capital recovery from contincency)

Operating costs

- R22 100

Revenue

R4 772 (10% of maximum income)

R4 772

R 11 930 (25% of maximum income)

R 11 930

R23 860 (50% of maximum income)

Surplus/ Shortfall

R40 672

R23 344

R13 174

R3 004

R4 764

t 32

Proposals and Proposal Writing

Remember: all govt departments have to be fair and give opportunities to as many small enterprises as possible. They have to share out their jobs...

But where does one find out about such tenders?

Big companies also put out tenders, and they have to ensure that a certain percentage of their procurement goes to small enterprise.

Meaning...?

Meaning that in order to meet the government’s Broad Based BEE requirements bigger companies have to buy from smaller ones, especially from black-owned businesses.

nder the government programme of Black Economic Empowerment, many opportunities have been made available to small business that previously wouldn’t have been possible. Many of these take the form of tenders.

From government Tender Bulletins, newspapers, online... look at corporate websites... both provincially and nationally.

The Department of Trade and Industry (the dti) maintains a complete list of organisations in each of at least 30 industry sectors. You can get the details of all these organisations by visiting their web-site: http://www.thedti.gov.za/ in order to see this information.

A tender offer is when government or some other organisation invites individuals or businesses to compete for the opportunity to fill a specific service or product need. In other words, a tender is an advert by a customer, looking for a supplier. Usually, an invitation to tender is very specific about the practical tasks that need to be accomplished.

All companies have their own procedures for registering what are often called ‘preferred suppliers’. Make your services or products known to those companies that you think could benefit by making you business one of their preferred suppliers. Find out what their procedures are.

Government accounts for something like 40% of all procurement in South Africa. For tenders under R30 000 government departments usually have to get three quotes from suppliers already registered with them. For tenders above R200 000, they have to publish a formal tender invitation. Major tenders are advertised in the Government Tenders Bulletin. It’s at www.info.gov.za./ documents/tenders/index.htm.

One of the most important criteria for tenders is a business’s BEE status. Black Economic Empowerment (BEE) How does Black Economic Empowerment affect the small business owner? BEE regulations have made many opportunities available to small business owners. Big companies have to show that their procurement procedures offer some benefit not only to black owned businesses but also to small black owned businesses.

There are over 200 publications where tenders can be found. Some organisations provide a service in which they go through all these publications and summarise this information for you – for example, www. tradeworld.net, www.tenderscan.co.za, and www.dailytenders.co.za. For a small monthly fee you can access these services. TradeWorld has been appointed by seda to provide information about tenders through seda offices all over the country.

In the past small black owned businesses didn’t really see themselves as needing to be BEE compliant. Most of the effort was coming from big companies that were hiring them. Now small enterprises with a turnover of more than R300 000 a year (and less than a few million depending on your sector) have to become BBBEE t 33

verified and compliant with the new BBBEE codes. BBBEE stands for Broad-Based Black Economic Empowerment. BBBEE is about more than just Black ownership. Your BBBEE status will be affected by the BEE status of all your suppliers. Procurement will account for 20 BBBEE points out of a 100. New BBBEE verification agencies will help you make verification easier.

an online facility for businesses interested in tendering.

To understand BBBEE better and how it is going to affect you go to: www. itsmybusiness.co.za.

Remember that when you respond to a tender invitation, you are proposing a legal contract. If you win the contract based on inflated figures, misleading information or false claims, you can be held legally liable for the contract. Furthermore, if you win a tender and fail to meet the terms of the tender, you can also be held legally liable for the losses suffered by your partner. These are important considerations to bear in mind.

Many businesses treat such online tender forms as a marketing exercise. In other words, they try to use the tender as a way of marketing their services and often overstate their capacity. This is a really dangerous thing to do.

Who can tender? As a guideline, an enterprise is ready to tender if it: ☞ is a registered business; ☞ has a good banking record and credit history; ☞ is able to deliver - on time, on budget and according to specifications; ☞ is up to date with its taxes; ☞ has the required cash-flow and other resources to complete the contract; ☞ is pro-active, actively looking for business opportunities; ☞ is able to deliver goods or services of consistent quality; ☞ has qualified employees; ☞ has, or can acquire, the right equipment, clothing and accessories to complete the tender; and ☞ has registered its employees with the Department of Labour (for UIF, Skills Development Levy, Workmen’s Compensation etc.)

Proposal Writing

ot all tenders have tender forms. Sometimes you have to write a proposal. This means that people often get a tender because of their writing skills. How good are your writing skills? The purpose behind a demand for a written proposal is often to test whether you have a clear understanding of your own business, and whether you can communicate that to others. Proposals are not only written for tenders. You may write a proposal simply because you have a good business idea, service or product that you want to promote and are looking for the support of financial partners. So the skill of proposal writing is very valuable indeed.

Responding to a tender When you are thinking of responding to a tender, be realistic about your ability to accomplish those tasks. Remember, failure to deliver what is required at the stated costs and within the time agreed will probably make you liable to pay penalties in terms of the contract. At the very least, failure to deliver in terms of a formal tender will count against you for future tenders.

Different proposal formats When writing a proposal, the first thing to check is whether the group or organisation that you’re going to send the proposal wants it to be written in a specific way. Often tenders will have an associated Application Format, and you will have to use that format to write your proposal – it will have headings that you will have to use, and require you to provide specific information. Always respond in the format they prefer.

If you do not win the tender, find out why, and learn from the experience. Answering Tenders Online Often organizations inviting tenders provide t 34

The only time you are free to use a personal format of your own is when they do not provide a format for you to use.

colours. Some people think that this kind of variety is good, but it can make your proposal look fragmented and messy.

Contact the government or business department that is inviting tenders before you write your proposal, to be sure you clearly understand their guidelines.

Don’t use pictures on the title page, unless you are a gifted graphic designer, or have hired one. You can however include your business’s logo.

Even though you will be working with an organization’s specific format, it’s a good idea to understand what you can expect from most formats.

Put key contact information in a box on the Title Page. That way, if the document is lying on someone’s desk, and they want to get hold of you, your contact information is immediately available. Every little advantage might help you.

A proposal is a lot like a business plan. In fact it should be based on your business plan. If you have developed a good business plan, writing a proposal based on it will be much easier.

2. Contents page Write this page last when you know exactly what headings you have and the page numbers that these headings appear on.

Most important of all is to remember that a proposal is an advertisement for your business – so make it look like one.

3. Executive Summary Think of the Executive Summary as a project overview. This is the one piece of writing that will convince someone to read further or not Be specific and concise. Do not go into detail on aspects of your proposal that are further clarified at a later point in your proposal. The Project Overview should “paint a picture” of your proposal in the mind of the reader while providing them with the main, critical information – what will be delivered, in what volumes, at what cost and in what time.

The Key Sections of a typical proposal 1. Cover page 2. Contents page 3. Executive Summary (project overview) 4. Background Information on your business or organisation 5. Project Description (like the strategic focus) 6. Project Implementation Process (like the operations plan and staffing plan) 7. Financial management of the project (like the financial plan) 8. Evaluation Plan 9. Budget 10. Appendices and Attachments

Write the Executive Summary just before writing the contents page – second last. You understand all the aspects of your proposal before summarising it here. 4. Background Information on your business or organisation This section should give the reader a good idea of your business’s experience and its profile – its main characteristics. Think of the business as a person. What gives it its ‘personality’? What are its strengths and unusual characteristics? Why would someone want to work with this business?

The following provides some details on each of these sections. 1. Cover page Just like the cover of a book, the title page helps sell the proposal. The title page should be neat, clear and professional. If your proposal is built on collaborating with other groups/organizations it is usually a good idea to include their names on the Title/Cover Page.

Is there a special reason why you and your business or organization are uniquely suited to conduct this project? Location? Experience? Expertise? Partnerships? Preferential rates with a supplier?

Try not to use too many different fonts and t 35

5. Project Description This section must show that you have a clear understanding of the objectives and the activities of the project – even if you restate them as they are in the original invitation to tender.

gearing up other parts of your business, not related to the project. Also use this section to describe the roles of the different people associated with your project and the importance of each. Describe your management structure and refer to your periodic strategic reviews and business planning sessions.

The objectives will form the basis for the activities of your project and will also serve as the basis for the evaluation of your project.

If you will be collaborating with other organizations make sure some of their interests, strengths and skills are also clearly described. Make sure you include name, title, experience, and qualifications of the key people involved. Include other information if you feel it is important to the success of your project.

Now describe clearly exactly what you intend to do to meet these objectives. The activities of the project are the ‘solutions’ you have come up with to meet the objectives. Make sure you clearly present the innovative aspects of your ideas, as well as the ‘tried and tested’ ideas. Don’t be too innovative – organisations looking for partners will value success and consistency more than novelty.

7. Financial Management of the project This section must show that the money will be managed responsibly. What account will the money go into? Who has access to that account? What protocols, or rules, does your business have when it comes to withdrawing and spending money? When and how will you pay your suppliers and service providers? What records will you keep?

You may even have done some research of your own, on suppliers and markets, that has given you a special insight into what the nature of this project should be. Show the reader that you know what you are proposing because you are familiar with the situation – clearly identify what problems you anticipate and what opportunities you intend to take advantage of.

You might want to open a separate account for a specific fund or project so that the movement of that money can be easily monitored and recorded. You would explain all that here.

6. Project Implementation Process (The operations plan and staffing plan) This section describes the actual process that you will be following step-by-step. It is useful to have a schedule that lists what activities will be completed when.

You will also need to commit to producing a financial statement once a year and give the name and contact details of the professional accounting officer that will be responsible for drawing up that financial statement.

Your implementation process can include additional resources you need to get before you can complete the project successfully. You may need some part-time staff or temporary contractors. This way you demonstrate the flexibility to work large and small jobs without compromising your own business structure.

When you write this section look at your Financial Plan and see if there are ideas from there that are relevant here. You must show that you have given financial management a lot of thought and careful planning. 8. Evaluation Plan This section describes the mechanism that you will use to measure progress during the project period. Each activity and what it promises to deliver should have a means of verification attached to it.

Do you have to rent any facilities or acquire extra technology? Be careful not to make it seem that you are not equipped to deal with the project. Try to show how any asset acquisition is directly related to the tender. Avoid giving the impression that you plan to use the tender opportunity as a means of t 36

9. Budget More often than not, potential partners will include a detailed budget scheme of their own, that they expect you to follow. Follow it scrupulously. If no such scheme is provided, organize your budget around a set of meaningful categories that work for the project you are proposing. Categories that you may want to consider for itemizing your budget are: ☞ Personnel (salary and benefits) ☞ Equipment ☞ Supplies ☞ Communication (telephone/postage) ☞ Materials preparation ☞ Travel ☞ Rental of facilities ☞ Other expenses

funding have to be directly linked to projects and project activities. This is also why project money cannot be spent on activities and costs that are not directly related to the project. It is a good idea to have a separate account for each project. Projects are usually an attempt to solve a problem and enable communities or specific groups of people in the process of dealing with a particular challenge. Projects like this appeal to a company’s Corporate Social Investment (CSI) departments. For a sponsor to be interested in a project it needs to: ☞ offer attractive branding opportunities to the sponsor; ☞ show financial competence so that the sponsor knows the project will not abuse the funds or damage their brand/name; ☞ be visible and actively involve the community exposing as many people as possible to the brand; ☞ have a sustainable strategy to ensure the life of the project after funding runs out; ☞ have objectives that are realistic and reachable; ☞ have an evaluation strategy; ☞ promote the sponsor’s CSI image in a way that can be effectively represented in media and end of the year reports.

Make your budget realistic. Carefully think through exactly what you will need to carry out the project and establish your budget around this amount. Have your business advisor, bookkeeper or accountant help you to prepare a cash-flow statement. 10. Appendices and Attachments Complex and overly detailed information should be attached as Appendices. Similarly, letters of intent from your own suppliers, testimonials from previous customers and proof of local and community partnerships can be attached as Appendices.

When writing a proposal that appeals to a company’s CSI objectives you can use the same format discussed above.

Other kinds of proposals Not all proposals are linked to tenders. Some proposals are about fundraising or attracting a sponsor to support your project. These kinds of proposals are usually for business ventures or organisations that are providing some essential public service like education, health, food gardening, assistance to victims of crime and violence, etc.

One addition is your own Project Title. A good title should paint a quick picture for the reader of the key idea(s) of your project. Try to say it like it is. Another addition is the addition of a description of the challenge you are trying to find a solution for. This is sometimes called a Problem Statement.

There are proposals that try to convince sponsors that you have a special opportunity to get their branding “out there” – to put their logo on your shop, your products, your events, the T-shirts of your employees or volunteers, etc.

When writing the “Problem Statement” start by identifying the central problem that you are trying to solve. Get as much information on it as possible – including statistics, newspaper articles, reports, interviews with experts and with people who have been affected by the problem, photographs, etc.

It is important to understand that donors, or sponsors, do not fund small businesses. They fund projects. For this reason, requests for t 37

Now think about all the possible contributing factors that have created this problem. These should include economic, social and political factors. You could even map these out in a diagramme or a â&#x20AC;&#x153;problem treeâ&#x20AC;? that shows how they are linked to each other.

The Project Description that comes next in your proposal is a response to the problem you have described. If you can describe the problem well and show that you have insight into what is causing it you will be able to write a better Project Description in response to it.

NOTES

t 38

ICT in a Growing Business Is that yours, Ma?

But did she do that all herself… on that computer?

You sound surprised, Vuyo. Why?

Ma’Bonolo has also produced a business card, promotional flyers, an email template… even a T-shirt design.

Yebo ‘fana. I designed the letterhead myself to show what my business is all about – delicious homemade food.

Our computer training courses are very practical.

Get the information you need & get your information out there

CT stands for Information and Communication Technologies – which is usually understood to mean computers and the Internet. The authors of the comic book decided to make Dudu’s business an Internet Café because they wanted to stress the importance of computers and the Internet in a small enterprise. Small enterprise owners that have a knowledge of computers and use the Internet are more likely to be successful that those who don’t.

software freely. Hundreds of thousands of people around the world use it, and it’s become so professional, that many countries, including the South African government have converted to using Open Source Software. Really? It’s that good? Explain this Open Source business to me, then…

Open Source Software The Open Source Initiative is basically a marketing program for free software based on the idea that good things (things that work) can also be free. The Open Source Initiative helps develop and publish standards for software development and it organises groups of designers all over the world. Tens of thousand of people around the world donate their time and expertise, free, to develop and maintain excellent, highquality free software.

Become computer literate If you’re not using a personal computer (PC) to help keep track of your business, then you really should think about doing so. You might even want to hire someone to help you get organised. As you’ve seen from working through the exercises in the book so far, it helps a lot to be able to track and update your thinking, as it changes from month to month. It also helps a lot if you have a reasonable financial management system. The easiest way to do this is to get a PC.

For an entrepreneur or start-up business, Open Source is like being given a free house. There are software programmes that do everything that expensive commercial software programmes like Excel, Microsoft Word and PowerPoint do. Anyone can download Open Source software from the Internet. The kind of software available ranges from basic business software like Word Processors to complex data analysis programme and free email programmes.

Free software? I’ve seen some of that. It was pretty lousy and my cousin said he got a VIRUS from it, though I have no idea what he’s talking about. There’s lots of different type of free software. Some is junk. But the software we’re interested in is Open Source Software, and it’s part of a long-running project aimed at producing top-quality

t 39

The First Thing to Do: Get Open Office Open Office is the free alternative to Microsoft Office. Does that make it inferior? Actually no, it’s a superior product. While it does all the things that commercial packages do (some of them better) it is also more stable, works with a greater range of operating systems and is fully compatible with all the Microsoft Products.

BASE enables you to manipulate database data seamlessly within OpenOffice. Create and modify tables, forms, queries, and reports. Freedom Toasters Getting freeware is easier than you think even if you haven’t got access to the Internet for long enough to download it. . A wonderful drive is underway to make the free software easily available in South Africa.

This means that you don’t have to worry that someone using Microsoft or another commercial programme won’t be able to read your documents.

This is being done by The Freedom Toaster Project. In the main centres across South Africa free software is being hosted in machines called Freedom Toasters. All you need to do is pay for a CD, usually around R5 to R10 and you can copy the software you need from their Toaster to the CD and install it on your own PC.

Open Office has been translated in to more than 30 languages and is now in use by tens of millions of users worldwide. You may download OpenOffice.org Version 2 completely free of any licence fees, use it for any purpose– private, educational, government and public administration, commercial – and pass on copies free to family, friends, students, employees, etc. You can do with it as you like.

There are no other charges. Check out http://www.freedomtoaster.co.za/ to find a toaster near you. Get connected to the Internet As Dudu says, the internet helps you make more connections.

What’s in OpenOffice? The OpenOffice package consists of 5 main parts:

You can: ☞ send emails as a form of cheap advertising; ☞ send proposals to donors using their online formats; ☞ find out about government and private sector tenders for service providers; ☞ increase your skills through online training courses; ☞ learn about up and coming trade fairs.

WRITER is OpenOffice’s word processor. Use it for anything from writing a quick letter to producing an entire book with embedded illustrations, cross-references, tables of contents, indexes. CALC is the spreadsheet programme (equivalent to Microsoft Excel) This powerful spreadsheet has all the tools you need to calculate, analyse, summarise, and present your data in either reports or graphics.

On average, small enterprises with Internet connections do better than those that do not have access to the Internet.

IMPRESS is the fastest, most powerful way to create effective multimedia presentations and is an exceptional marketing tool. Special effects, animation and high-impact drawing tools make it possible to develop and print marketing material easily.

The Internet is actually an invisible world that is created when millions of computers all over the world connect with each other so that information can be sent and received 24 hours a day. This web of connections is also known as the World Wide Web and is a network in which many new possibilities for faster and more effective communication are opening up. Where else can you do your banking, visit a dating site, send an invoice

DRAW will produce everything from simple diagrams to dynamic 3D illustrations and special effects. t 40

Meanwhile...

Many of your clients are already online. More and more, email and Internet are the accepted ways of communication…

You know that business is all about making the right connections and having the right networks… Internet helps you make more connections.

You can market your business through a website, through linking your website to other websites, and through sending emails.

to a client, order catering for a meeting, send an inexpensive advert to everyone on your database, download software to help you design business cards, get information about a up and coming trade fair or the latest Wesley Snipes movie, get up to date information on Kaiser Chiefs, complete an online course in Swahili and chat to a friend in Hong Kong – all without leaving your chair?

that lets you connect to the Internet) and an Internet Service Provider (an organisation that provides you with Internet services for a small fee). Some computers will experience a slower flow of information than others depending on their modem and Internet Service Provider. If you are not connected you are behind in the game and everyone who is connected is ahead of you. Get connected!

All computers can connect to the Internet as long as they have a modem (a small device

How to use the Internet

☞ A handheld device that accesses the Internet through wireless signals.

Learn the Net (http://www.learnthenet. co.za) is a free South African online training course. This is a user-friendly introduction to the Internet and the World Wide Web. In this short course, the Internet, the Web, search engines, e-mail, using your browser, Internet terminology and a host of other useful topics are introduced and discussed.

You then need to start up your Web browser. Two popular Web browsers are Netscape Navigator and Microsoft Internet Explorer. Small handheld devices may have their own versions of these Web browsers or have a special Web browser that operates on them.

The best way to learn how to use the Internet is to experiment and play with it.

Find out what Web browser the computer has and click on it to start it up.

In order to use the Internet, you need a computer that has access to the Internet. This computer might be: ☞ Your personal computer at home, connected to the Internet through an Internet Service Provider (ISP). ☞ A computer or workstation at your school or place of employment that is connected to the Internet. ☞ A computer at a library or Internet Cafe which is available for public use.

If you know a site’s address (or URL) you can simply type it into the Address bar on your screen. The Internet is not linear like a book You can move back and forth through different links. You can also move up and down through different layers. Look for the blue underlined words or phrases. These are links to other pages or other sites. The t 41

Teoma: www.teoma.com Ask Jeeves: www.askjeeves.com AllTheWeb.com: www.alltheweb.com AltaVista: www.altavista.com GigaBlast: www.gigablast.com LookSmart: www.looksmart.com Lycos: www.lycos.com MSN: http://search.msn.com Netscape Search: http://search.netscape. com Mamma: www.mamma.com

Internet is so non-linear and inter-connected that people speak about it as a web – the World Wide Web (www). Your computer will keep a memory of your search while you are online. You can also use the Back and Forward buttons to move through the “memory” of your search. For specific definitions on Web terms check A Beginner’s Web Glossary (http://www. webteacher.org/windows.html), an online dictionary for computers and the Internet.

Try these sites if you want to learn more about searching on the world wide web: Searching The World Wide Web: http://www.tilburguniversity.nl/services/ library/instruction/www/onlinecourse/ Comprehensive guide to searching the web. The Spider’s Apprentice: http://www.monash.com/spidap.html Up-to-date information and tips on how to search the web effectively.

Search Engines Search engines help you find links to the information you are looking for. You could think of them as Internet librarians. Some are better than others. You cannot always rely on them to list the “hits” in order of importance. If you are searching for a phrase like “arts and crafts” put it in quotation marks as it is in this sentence. If you do not indicate that it is a phrase the search engine will search for each word individually.

Some ideas for making your search more effective The following information on how to search was found at: http://searchenginewatch. com/facts/article.php/2156021

Which search engine should I use? Google: www.google.com Google has a well-deserved reputation as the top choice for those searching the web. It’s highly recommended as a first stop in your hunt for whatever you are looking for. Google is also available in Afrikaans, Sesotho, Zulu and Xhosa.

Be Specific The more specific your search is, the more likely you will find what you want. Don’t be afraid to tell a search engine exactly what you are looking for. For example, if you want information about Windows 98 bugs, search for “Windows 98 bugs,” not “Windows.” Or even better, search for exactly what the problem is: “I can’t install a USB device in Windows 98,” for example. You’ll be surprised at how often this works.

If you want to see academic articles free of advertising and banners, try www. scholargoogle.com. Here follow some of the other search engines for your interest: HotBot: www.hotbot.com HotBot provides easy access to the web’s three major crawler-based search engines: Yahoo, Google and Teoma. It’s a fast, easy way to get different web search “opinions” in one place. Ananzi: www.ananzi.co.za Ananzi is a South African search engine. Yahoo: www.yahoo.com

Using the + symbol to add Sometimes, you want to make sure that a search engine finds pages that have all the words you enter, not just some of them. The + symbol lets you do this. For example, imagine you want to find pages that have references to both President Mbeki and Nelson Mandela on the same t 42

page. You could search this way: +mbeki +mandela Only pages that contain both words would appear in your results.

reservations in the Grand Canyon. All the words you added together would appear on this page, but it still might not be what you are looking for. Doing a phrase search avoids this problem. This is where you tell a search engine to give you pages where the terms appear in exactly the order you specify. You do this by putting quotation marks around the phrase, like this: “yosemite camping reservations” Now, only pages that have all the words and in the exact order shown above will be listed.

The + symbol is especially helpful when you do a search and then find yourself overwhelmed with information. Imagine that you wanted to reserve a camping space in California’s Yosemite National Park. Try searching for all the words you know must appear on the type of page you’re looking for: +yosemite +camping +reservations

Combining symbols You can combine symbols to easily create targeted searches.

Using the - symbol to subtract Sometimes, you want a search engine to find pages that have one word on them but not another word. The - symbol lets you do this.

For example, a person who wanted pages only about Star Trek’s original series? We searched this way: star trek -voyager -deep -space -nine -next -generation

For example, imagine you want information about President Clinton but don’t want to be overwhelmed by pages relating to the Monica Lewinsky scandal. You could search this way: clinton -lewinsky That tells the search engine to find pages that mention “clinton” and then to remove any of them that also mention “lewinsky.”

A better search might use subtraction and multiplication: “star trek” -voyager -”deep space nine” -”next generation” The above tips are probably enough for 90 percent of search engine users out there. If you want to go beyond the basics visit the SearchEngineWatch site http:// searchenginewatch.com/facts/article. php/2156031 to learn more about power searching.

In general, the - symbol is helpful for focusing results when you get too many that are unrelated to your topic. Simply begin subtracting terms you know are not of interest, and you should get better results. Using quotation marks “…” for a phrase search Use quotation marks when you are searching for a whole phrase. For example, remember above when we wanted pages about reserving a campsite in Yosemite? We entered all the terms like this: +yosemite +camping +reservations That brings back pages that have all those words on them, but there’s no guarantee that the words may necessarily be near each other. You could get a page that mentions Yosemite in the opening paragraph but then later talks about getting camping t 43

NOTES

t 44

Your relationship with Government Close Corporation A close corporation (CC) is ideal for a small enterprise that does not want to have a complicated legal structure.

Compliance Compliance means bringing your business practice into line with the laws and regulations that help to govern business in South Africa.

You do have to register a CC. It is not difficult to register, but it does have more business laws and regulations that it must follow than the first two options.

Compliance is more than just a lot of red tape. It helps to build professional integrity and better relationships between business owners and employees.

The first step towards registering a CC involves reserving a name. You cannot do anything else until you have reserved a name (on a CK7 form) that no one else is trading under. Within two weeks of reserving the name you will have to hand in a founding statement and the official registration forms (called CK1 forms) to the Registrar. A CC requires 1 – 10 members who are the owners of the CC.

Registration The first step towards compliance is registering your business. You need to decide what the most useful structure for your business will be – a sole trader, a partnership, a close corporation or a company. You need to register this structure as a legal entity with the Department of Labour. Below are brief descriptions of each.

A main advantage of a CC is that it is a legal entity separate from its owners. This means that the owners are not personally responsible for the debts of the business. A CC does not have to be audited but it does have to produce financial statements once a year. These have to be reviewed by a professional accounting officer.

Sole trader This is the easiest structure to set up and requires the least amount of compliance to business laws and regulations. You don’t have to register anything apart from registering as a tax payer. As a sole trader you will conduct business under your own name and you will be the only one making business decisions. The one drawback of this structure is that you will be personally responsible for all the debts of the business.

There are more growth options for a CC. For example, a CC can continue to exist even if the owners change over time. This is called ‘perpetual succession’. Company It is not easy to register a private or public company. It has to comply with the Companies Act. It is unlikely that a small enterprise will take this form, so we will not go into a lot of detail here.

Partnership Partnerships are also relatively easy to set up and do not have to be registered. It is useful to draw up a formal partnership agreement between partners so that no misunderstandings occur.

Companies require at least 7 members and at least two directors. As with a CC, a company is a legal entity separate from its owners and the owners are not held responsible for the debts of the business.

Each partner should make some form of contribution in money, property, labour or skills. In a partnership business decisions are shared. This is a potential source of conflict, but it is also an opportunity to combine experience, finances and expertise.

A company also enjoys perpetual succession. In other words, it can continue to exist even if the shareholders change over time. t 45

It can sell shares to the public and may have a listing on the stock exchange.

procedures in terms of retrenchment and dismissals are followed.

A company has to be audited every year. The tax burden becomes heavier as the company is taxed on profits and dividends taxed in the hands of the shareholders.

Depending on the kind and size of your business you might need to comply with health and safety regulations. The Occupational Health and Safety Act of 1994 governs the safety of employees while they are at work. According to the act, an employer must take steps to reduce the risk of injury at the workplace. You may need to prepare a health and safety policy for your business. All accidents at the workplace must be reported.

NGO, NPO or Section 21 Company Some people choose to start a not for profit organisation like an NGO (nongovernmental organisation), NPO (nonprofit organisation) or Section 21 Company. This kind of structure is usually focussed on development projects like establishing food gardens in communities, or supporting local artists by providing them with business skills, or providing a service to victims of crime and violence.

You need to be aware of employment equity. Discrimination on the base of gender, religion, or race in the workplace is strictly prohibited. As a small enterprise you do not need to have an affirmative action plan, but you do need to be aware of how employing people from previously disadvantaged communities and employing women gives you an advantage when tendering or seeking funding.

In such a business structure profits can be generated but they have to be poured back into the projects of the business. Profits cannot be divided amongst any of the members. The real advantage of registering this type of structure is that it connects to sources of donor funding that other kinds of businesses cannot access. This kind of structure is also freed from most tax obligations.

You need to contact your regional office of the Department of Labour for more details. Receiver of Revenue The office of the Receiver of Revenue is very efficient, so it is not advisable to avoid registering for the kind of tax you and your business are responsible for. You need to find out whether you need to register for VAT, employees tax and income tax.

Where do you register? The Companies and Intellectual Property Registration Office (CIPRO) is the office that controls business regictration. You can contact them on 0861843384 or www.cipro. gov.za.

Trading Licence If you have the following types of business you will need to get a trading licence: ☞ a business that serves food, provides take-aways or delivers meals (whether from business premises or from the roadside); ☞ a health facility, like a gym or a massage parlour; ☞ an entertainment facility, like a cinema, nightclub, games arcade or a casino; ☞ any business with 3 or more vending or slot machines ☞ all hawkers. For more information on the process of applying for a licence contact your local municipality.

Other issues of compliance Department of Labour If you are employing others, it is very important for you to become aware of what their rights are and what your rights are. The Labor Relations Act and the Basic Conditions of Employment Act protect South African workers. They specify working conditions, work hours, basic salaries, vacation time, sick leave, and the worker’s rights. If you are employing people, it is a good idea to consult with a labour law officer to make sure that your employment contracts include the minimum requirements and that the correct t 46

Services from Government

here are many in government who believe that the future economic growth of this country lies in the hands of small and micro enterprises. It is therefore important for you to become informed about the programmes and opportunities that government is making available to young entrepreneurs.

☞ The government is also developing a system to give more small suppliers a share of large government contracts. SAQA Learnerships and Skills Programmes National Skills Fund Economic freedom is directly related to the kinds of skills that a person can use to create an income for themselves and their family. For this reason skills development has become a priority in our new democracy. South Africa’s National Skills Development Strategy encourages life-long learning and develops skills programmes and learnerships that can lead to the achievement of relevant and employment-creating outcomes.

The government is spending billions to create an infrastructure to improve economic opportunities for you. Here are some examples: ☞ The Micro-finance Apex Fund provides affordable financial services to microbusiness owners and to help financial structures like burial societies.

Every employee has the right to upgrade their skills and every employer has the responsibility to provide opportunities for relevant training and self-development. Employees are allowed at least three chances to complete relevant training. For this reason the National Skills Fund makes funds available for the ongoing training of employees in all sectors.

☞ The government is also providing investment grants to small enterprises who have qualifying assets. ☞ They are developing skills support programmes in all sectors as well as grants to access these programmes. ☞ They are working together with the Council for Scientific and Industrial Research to make technologies available to entrepreneurs – especially women.

The National Skills Fund was established by the Skills Development Act of 1998. If you want to find out more about the NSF you can get a copy of the National Skills Fund Strategic Projects booklet from: The Department. Of Labour, ESDS Marketing, Private Bag x117, Pretoria, 0001.

☞ The National Empowerment Fund makes investments and support available to increase Black ownership and management of businesses.

Who is SAQA? The South African Qualifications Association (SAQA) is a body that was appointed by the Ministers of Education and Labour. Its functions include overseeing the development of the National Qualifications Framework (NQF), which integrates all training courses in the country (whether offered by NGOs, religious organisations, universities, technikons, companies, community art centres, or whoever) into one system of standards, and qualifications.

☞ They are also opening up export opportunities for small enterprises. ☞ They are trying to make the public procurement process simpler, fair and more transparent. You will be able to access information on public procurement opportunities on-line through a National Procurement System. ☞ Through partnerships with organisations like seda, the government is making sure that there are business development services to help you take advantage of these opportunities.

SAQA has two important primary responsibilities: t 47

1. Bringing people with relevant expertise together to decide what the outcomes should be for education and training in different sectors at different levels (standards setting function).

NQF LEVEL 6 – is equivalent to a 2nd Certificate, 2nd Diploma or 2nd Degree (i.e. Honours level training). NQF LEVEL 7 – is equivalent to a 3rd Certificate, 3rd Diploma or 3rd Degree (i.e. Masters level training). NQF LEVEL 8 – is equivalent to a PhD.

2. Making sure that training delivered against these outcomes is of a high standard (quality assurance function). SAQA does this by accrediting various organisations and associations as Education and Training Quality Assurance bodies (ETQA). The ETQAs will take responsibility for accrediting training providers for the delivery of training against specific standards and qualifications.

If you are interested in learning more about SAQA and the NQF you can read the booklet National Qualifications Framework, An Overview, which you can get from Create SA. Contact details for SAQA: SAQA switchboard: (012) 482 0800 Resource Centre:(012) 482 0836 Standards setting and NSB or SGB’s: (012) 482 0807/ Fax: (012) 3465812 ETQA’s: (012) 482 0805/Fax: (012) 482 0905 National Learners Records Database: (012) 482 0805 Postal Address: Postnet Suite 248, Private Bag X06, Waterkloof, Pretoria

The SAQA Act of 1995 requires that all training leads to the acquisition of learning credits and qualifications. These learning credits and qualifications should reflect the achievement of clearly defined competencies or outcomes on the part of individuals, whether they are seen as learners or workers. Qualifications are then made up of meaningful packages of these outcomes, which are known as “unit standards”. Each unit standard has a credit value attached to it. Each qualification has to clearly define what skills a learner acquires through achieving that qualification and how those skills will add value to that learner’s personal development and employability.

What are the SETAs? SAQA has ensured that each sector has its own Sector Education and Training Authority (SETA). The SETAs are the main drivers of skills development. Each SETA is also an ETQA and supports a properly planned and managed approach to skills development. They also serve to bring business and labour together in each sector of the economy. There are currently 25 SETA’s. Each SETA focuses on a particular sector, for example, the CHIETA SETA focuses on the chemical industries and the FOODBEV SETA focuses on the food and beverage manufacturing sector.

Each learning field, identified in the NQF, has a National Standards Body (NSB) appointed by SAQA. The NSB oversees the development of standards and qualifications for that field. The NSB creates teams, or Standards Generating Bodies (SGBs), made up from representatives of the best that field has to offer. The SGBs develop the outcomes, the unit standards and the qualifications for each field of learning.

The SETAs are funded by the Department of Labour, and in some cases, like that of Create SA, directly through the National Skills Fund (NSF). All SETAs are also supported by the businesses and organisations that belong to the training sector that SETA oversees.

NQF LEVEL 2 – refers to ABET level training, which is the equivalent of a Grade 9 qualification. NQF LEVEL 4 – is equivalent to a Grade 12 qualification. NQF LEVEL 5 – is equivalent to a 1st Certificate, 1st Diploma or 1st Degree (i.e. Undergraduate level training).

The Skills Development Levies Act of 1999 ensures that SETAs get funding through levies paid by businesses and organisations in the appropriate sector. This fund is only used for projects identified in the National Skills Development Strategy as priorities. t 48

Learnerships and Skills Programmes Learnerships are essentially work-based training programmes that are identified and developed by the SETA on the basis of careful analysis of the training needs within a sector and registered with the Department of Labour. They are comprised of a theoretical and a practical, work-based component. The Department of Labour requires that every learnership leads to the achievement of a qualification registered on the NQF. Learnerships are based on legally binding agreements between an employer (where applicable) a training provider and a learner.

a whole qualification. A number of skills programmes combined may address all of the unit standards required for the award of a qualification. What are the benefits of learnerships? They are national qualifications that are registered on the NQF that give people the opportunity to have their existing skills, knowledge and experience recognised formally, without having to undergo any unnecessary additional training. They allow more flexible delivery of training and assessment and therefore provide a means of training and assessing new and existing workers, at times and in locations that suit their needs. Most importantly they offer pathways to further training and career development.

Skills programmes are shorter training interventions that lead to the achievement of one or more unit standards rather than

seda

The National Smallest Manufacturing Programme makes professional manufacturing expertise available to small businesses – even those who manufacture from their own homes.

The Small Enterprise Development Agency (seda) provides non-financial business support services to business owners throughout South Africa. Their vision is ‘To be a centre of excellence for small enterprise development in South Africa’. To fulfil this vision, every district in South Africa has a seda branch. Each seda branch is a walk-in centres where business owners can receive: ☞ Information, advice and referrals; ☞ Tender information and advice; ☞ Import and export training; ☞ Trade information; ☞ Business assessments; ☞ Technical support; ☞ Business mentoring; ☞ Market access; ☞ Business linkages.

The National Procurement Programme makes information about tenders available to small business owners. seda also assists small businesses with access to bridging finance through the National Empowerment Fund, Khula and the Industrial Development Corporation. Business owners can call seda’s National Information Centre for more information – 0860 103 703. You can also contact the seda Head Office at 012 441-1000 or visit their website at www.seda.org.za. The website is a mine of information about starting and running a business, and provides links to business advice agencies, finance providers and other relevant government and private sector organisations that entrepreneurs need to know about.

seda also supports enterprise information centres (EICs) where business owners can be referred for good business support services. The National Smallest Exporter Programme helps small businesses by identifying international markets and then connecting suppliers to those markets. Together with the Department of Trade and Industry they will help small enterprise owners exhibit their goods and services overseas.

Once a year, seda will host a National Small Enterprise Summit to review the progress made in small business development, and to share best practice in this field.

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Tool – a Seven-Step Model for Creative Thinking 1. Orientation: pointing out and describing the problem. Start here - remember, there’s always a subject or problem that you want to think about. It’s important in the beginning to clearly specify problem or the task. Be general when doing this – don’t describe what you think the solutions might be. Just describe the problem. 2. Preparation: gathering pertinent data Step Two is to try to gather as much information about the problem as you can. If you’re following these steps in a meeting or with partners and employees, this can take the form of asking people what they know about the problem. 3. Analysis: breaking down the relevant material Step Three requires you to look at both the problem and the information about eh problem and test kit. In this step you ask questions about the assumptions – questions that might start with ‘Is that really a problem?” and “How do we know it’s a problem?” 4. Ideation: piling up alternatives by way of ideas. Step Four is the fun part – At this point you should let yourself run wild – feel free to have the craziest ideas you can think of, and then write them all down. Don’t try to judge the ideas, or give them a priority. Just set a time limit and see what you come up with. One technique for generating new ideas is to choose three related words, such as Elephant, Lion and Springbok, or such as House, Office and Tent, and start off by thinking about these three words, instead of your business. Think about the relationships between them, for example. In the first case, they’re all animals – some bigger, some more aggressive and some faster than others. They have different qualities, and they need different things. Use these ideas to think about your business – is your business more like an elephant than a lion? What would your business look like of you changed it to0 be more like a Springbok? Have fun. 5. Incubation: letting up, to invite illumination. Step Five is to collect all the ideas generated, and to either talk about them with the others, or think about them (if you’re on your own). See which ideas interest you. Think about the implications of the ideas. If you have the time, stop here ands think about them for a day ot two. Don’t wait longer than two days, though before moving on to Step Six. 6. Synthesis: putting the pieces together Step Six is to combine the ideas that you like into groups. Put them into categories, like to simple plans. Take ideas that are incomplete and see if you can join them to others. 7. Evaluation: Step Seven is to evaluate your bunch of new ideas.

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Tool – A Checklist for Evaluating Ideas ☞ Have you considered all the advantages or benefits of the idea? Is there a real need for it this idea? ☞ Have you pinpointed the exact problems or difficulties your idea is expected to solve? Are you sure that this particular idea solves the problem you set out to solve? ☞ Is your idea an original, new concept, or is it a new combination or adaptation? What does that mean for you in practice? (New ideas are often more difficult to implement than combinations of existent ideas) ☞ What immediate or short-range gains or results can be anticipated? Are the projected returns adequate? ☞ Are the risk factors acceptable? What kind of risk does the new idea run? ☞ What long-range benefits can be anticipated? ☞ Have you checked the idea for faults or limitations? ☞ Are there any problems the idea might create? What are the changes involved? ☞ How simple or complex will the idea’s execution or implementation be? ☞ Could you work out several variations of the idea? Could you offer alternative ideas? ☞ Does your idea have a natural sales appeal? Is the market ready for it? Can customers afford it? Will they buy it? Is there a timing factor? ☞ What, if anything, is your competition doing in this area? Can your company be competitive? ☞ Have you considered the difficulties convincing people that the idea is good? Are you sure yourself that the idea is good? ☞ Does your idea fill a real need? Or will the need have to be created through promotional and advertising efforts? ☞ How soon could the idea be put into operation?

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Resources for Entrepreneurs Small Enterprise Development Agency: www.seda.org.za

Mail & Guardian: www.mg.co.za

Department of Trade and Industry: www.thedti.gov.za

News24: www.news24.com

SA Entrepreneur: www.sa-entrepreneur.co.za

Independent Online: www.iol.co.za

Sizanani: www.SizananiAdvisory.org.za

Business Day: www.businessday.co.za

Khula: www.khula.org.za

Useful Links and Services Adobe Acrobat Reader - free download: www.adobe.com/products/acrobat/ readstep2.html

Free Management Library: www.managementhelp.org

AVG free antivirus software â&#x20AC;&#x201C; download: http://free.grisoft.com/freeweb.php/ doc/2/

South African Banks and Financial Resources ABSA: www.absa.co.za

South African Government Online: www.gov.za/

First National Bank: www.fnb.co.za

South African Qualifications Authority: www.saqa.org.za

Standard Bank: www.standardbank.co.za

Proudly South African: www.proudlysa.co.za/

Nedbank: www.nedbank.co.za

South African Revenue Service (SARS): www.sars.gov.za

SA Banking Council: www.banking.org.za

Companies and Intellectual Property Registration Office: www.cipro.co.za

Business and Personal Software www.openoffice.org

Personal Finance: www.persfin.co.za

www.tucows.mweb.co.za News

Blue IQ: www.blueiq.co.za

Information Clearing House: www.informationclearinghouse.info

Provincial & Local Government: www.local.gov.za

Business Report: www.busrep.co.za

Public Enterprises: www.dpe.gov.za

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Funders and Donors National Development Agency: www.nda.org.za The Department of Trade and Industry: www.thedti.gov.za The Equal Opportunity Foundation: www.eof.org.za Industrial Development Corporation: www.idc.co.za Kagiso Trust www.kagiso.com

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NOTES