The top three reasons SA start-ups fail

Lack of information; red tape and financial mismanagement are the three biggest reasons for small start-up businesses failing in South Africa, says the Eskom Development Foundation.

Chris Bornman, Project  Manager for the Foundation’s Business Investment Competition and the Business Entrepreneurship and Franchise Expo, says the Foundation’s experience through working with thousands of would-be entrepreneurs and small businesses over many years indicates that some of the biggest challenges facing small businesses in South Africa are issues that could be overcome relatively easily.

“A large percentage of new businesses in South Africa fail. This could be in the order of anywhere between 30 and 50%. Another large percentage of small businesses don’t achieve their full potential. And the big three reasons for this can be summarised as a lack of information, red tape and a lack of financial management skills.”

Bornman explains that large enterprises such as Eskom, as well as a number of other public and private sector organisations, are going to great lengths to support small business development in South Africa. “Funding, resources and training are available. But many entrepreneurs don’t know about these opportunities.” He believes more needs to be done to take this information to the hundreds of thousands of potential entrepreneurs across the country. “The information would-be entrepreneurs lack also extends to crucial insights into successfully managing and growing the business,” he says. “We see small businesses just breaking even because they do not know how to find tender opportunities and participate in the tender processes. We see many falling short in terms of regulatory requirements because they simply don’t know about them. Others lack the necessary information on marketing, management and sales skills they need to become more successful.”

Red tape, says Bornman, is a major stumbling block in the way of small business success. The requirements for registering a business and complying with legislation are often onerous and confusing to the new business, he says.

Financial mismanagement is another common mistake new businesses make. “Too often, new business owners treat the company’s finances as their own personal finances. Instead of investing revenue back into the business to increase production or expand the business, they buy personal consumer goods like a new car. This leaves them high and dry when the revenue dries up, and results in an inability to grow as they should,” he says.

To help would-be entrepreneurs and small businesses overcome these challenges, the Eskom Development Foundation partners annually with Thebe Reed Exhibitions to present the Business Entrepreneurship & Franchise Expo (BEFE), to be staged from 10 – 13 September 2015 at the TicketProDome (formerly the Coca Cola Dome) at Northgate.

At BEFE, start-ups, prospective and existing entrepreneurs are able to discover hundreds of business opportunities, network with potential business partners, and learn the crucial skills they need to make their businesses successful, and to secure their future. With a series of business boot camp talks and dedicated information areas, entrepreneurs will be able to learn about business trends, potential pitfalls and sound business management strategies.

Eskom’s pavilions at the event will showcase the Foundation’s Business Investment Competition winners and finalists, in which small businesses in the manufacturing, agriculture, trade or services sectors stand to win R1.7 million in business development prizes. The Foundation has as its theme for BIC and BEFE: “If we eat it, wear it, use it… why don’t we make it?”The Foundation’s Simama Ranta school entrepreneurship programme will also be highlighted, and small businesses will be able to engage with prospective partners in a BEE development initiative. This year, an art installation by Art it is, with the theme Wall-street-economy, will see fine arts entrepreneurs showcasing their work, and a fashion installation will give young designers an opportunity to showcase their work.

“By bringing together large enterprises and potential buyers with start-ups and small businesses, and creating an environment for learning and business development, Eskom and the Business Entrepreneurship and Franchise Expo are working to put in place the foundations start-ups need to succeed. They are gaining the information, exposure and professional assistance necessary to help them overcome the biggest small business challenges,” says Bornman. “As one component of our far-reaching business development programmes, we have partnered with Thebe Reed Exhibitions on the expo for the past 13 years, and in that time, a number of success stories have come out of the Eskom Foundation programmes and the BEFE event.” He cites, for example, a sewing group that participated in the event and secured a contract to supply uniforms to the Botswana Health Department as a result. Tshepo Phakathi, Group CEO of fast-growing Phakathi Holdings, is an adjudicator for the BIC and he pays it forward by being an ambassador for Eskom’s BIC programme.

“There is a great deal of innovative new business potential in South Africa. But without the right information and support, those big business ideas often amount to nothing. Through its extensive development programmes, including the partnership with Business Entrepreneurship and Franchise Expo, the Eskom Development Foundation seeks to support these innovators in building sustainable businesses that provide employment and grow the national economy,” says Bornman.

Entrance to visit BEFE is free of charge for visitors who pre-register online at .

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