Taking the leap into entrepreneurship

A good deal of research and planning before taking the leap into entrepreneurship can help turn that dream into a reality – and minimise potential nightmares along the way.

Before taking the leap, it is important to test your concept – preferably among those that will provide honest, constructive feedback – and to establish the distinctive features that will set your business apart from competitors. It is also important to have a sound business and financial plan.

“You have to have a deep understanding of the resources that you’re going to require to be able to get your distinctive, compelling idea to market. And you need to ensure that the resources that you’re going to require are going to see you through to point where this great idea is going to start translating into cash in the bank,” said Alan Shannon, head of relationship banking sales at Nedbank.

In many instances, early stage businesses fail due to cashflow problems arising from inadequate provisioning or a lack of business acumen on the part of entrepreneurs, whose expertise centres around their field. Shannon advised entrepreneurs to make a concerted effort develop business and financial acumen by making use of resources such as Nedbank’s Essential Guide for Small-Business Owners and SimplyBiz online portal.

Before consulting professional advisors – with a proven track record – Nedbank advises potential entrepreneurs to “begin with the end in mind” and consider the following:

• Is this a full time or part time commitment?
• Are you in it for the long run or for a certain period only?
• What are the potential liabilities should your business fail?
• What are the financial and legal risks for you, your family and other personal relationships should the business fail?
• How much money do you expect to make – before and after expenses – in the first year of business? Will you employ staff? If so, how many?
• Will you work from home or rent an office or shop?
• What equipment, vehicles and furniture will you need?
• How much money of your own do you have and how much will you need to borrow from others?
• Will you have partners? Will they be involved in the day-to-day operation of the business or merely assist with funding?
• How will you exit the business? By sale to a third party, handover to another family member or merely by closing the doors?

Such considerations should be addressed in a detailed, realistic business plan. “Sometimes, business plans can be fairly one dimensional in terms of money in and money out but they’re short on the how. I think business plans need to be quite heavy on the how because that’s what gives us – banks – confidence that what you say you can generate in numbers is real or not,” Shannon said.

He also advised that due consideration be given to determining an appropriate business format. Each type of entity has different administration requirements and can affect taxation, personal liability in the case of insolvency, as well as access to finance and the sale of the business.

Informal enterprises such as sole proprietorships do not need to be registered with the Companies and Intellectual Properties Commission (CIPC). Trading trusts must be registered through the Master of the High Court that has jurisdiction in the area in which the business holds the bulk of its assets. Other formal enterprises may be registered with the CIPC through its offices, website or through a Nedbank’s SwiftReg®, which offers banker-assisted business registration services.

Whether you are starting a business, running an established business or looking to expand, you need a reliable, affordable banking partner who understands the challenges of your business and responds with flexible solutions to your needs. Nedbank has extensive experience in serving small businesses and offers a comprehensive suite of payment, investment and finance solutions, as well as industry specialisation and services that extend beyond banking. Why not contact one of Nedbank’s small business experts to help you see money differently and take your business to the next level? Call, email or visit www.nedbank.co.za/business for more information.