17 July 2009
	ENTREPRENEUR Be your own boss By Yusuf Mahomedy (CA(SA), AdvTax), is the founder of Worksucks Make Work, Work (www.worksucks.co.za)

Starting your own business may sound like a great idea, but do you really have what it takes to succeed in today's market? Do you have a killer idea that is going to shake up the industry and bring hordes of customers to your door? Or are you just tired of job-hunting, endless rejection letters and being worried about your livelihood? Starting a business, whether it is to grab an opportunity, or to earn your daily bread, could be your fastest route into the working world. But before you run off to register your company, consider the current economic climate. From 2003 to 2007, the global economy went on a dizzy ride - share prices, commodity prices, property values, credit lines and consumer spending posted double - or even triple - digit growth. Our economy kept a close following distance for similar results. Then, in the last quarter of 2008, global financial markets plunged, and the recession reached our shores in 2009. According to Statistics SA, from January to March 2009, the local economy nose dived by 6,4%, the biggest fall since 1984. ENTREPRENEURIAL RESOURCES There is a wealth of information available online for would-be entrepreneurs Visit www.wikihow.com/Start-Your-Own-Business for advice and information from entrepreneurs. Local banks provide information on becoming an entrepreneur. Find Absa's downloadable PDF collection in the "How do I" section of the website. FNB also has a dedicated page: www.fnb.co.za/commercial/findsolutions/startup/considerBus.html and a handy "Are you ready?" checklist: www.fnb.co.za/commercial/findsolutions/startup/areYouReadyNew.html Small Enterprise Development Agency (Seda) is an initiative of the department of trade and industry, and their website (www.seda.org.za) is an invaluable resource for entrepreneurs. It includes detailed information on topics such as funding, BEE, tenders, franchising and trade. Get insight from the world's most famous entrepreneur; read about the ins and outs of Richard Branson's business life on his blog, www.entrepreneur.virgin.com. Entrepreneur.com publishes excellent articles on entrepreneurship and general business topics. Starting a business in the midst of a recession has several benefits: less (or struggling) competition, lower entry barriers and start-up costs, and a clientele receptive to better deals. Having a higher level of education is a valuable asset for the budding entrepreneur, but, given the 80%-plus failure rate of start-ups in SA, it is not enough. Still think you have what it takes? Consider the following before you start: It takes passion and drive If you still want to be around in 12 months, you must be passionate about the business, product or service, and the value it offers. Remember that your passion can make a significant difference in how you run the business, and is a big plus for attracting clients. Unlike during the boom period, where almost any business had a reasonable chance of succeeding, in a recession your business must serve the specific needs of a cash-strapped market. For example, hot areas to investigate are the secondhand market (consumers buying down, mobile and telecommunications (need to communicate and falling prices), skills development (government priority, online businesses (largely untapped and a growing market) and products geared towards adopting a "green" lifestyle (good for the environment and pocket. It isn't all about quick money If your primary motivation for starting a business is to make lots of "moolah" for little work, you should rather look for a regular job. In a recession, depending on the industry you operate in, you may face lower prices, a slowdown in spending and volatile input costs. Organisations are in cost-cutting mode and this means longer procurement cycles, with many potential customers responding with "I don't have the budget" for your offering. Though many of the wealthiest people in the world are entrepreneurs, starting and growing a business is a long-term investment (roughly five to 10 years). Funding is only the first step There may be many financial institutions offering financial assistance, but don't bank on the availability of funding. Firstly, the economic meltdown has adversely affected access to funding - lenders have a duty to protect their stakeholders and this means stringent checks and balances. Secondly, be prepared for mountain of red tape that can delay your business by six to 12 months. If your application is approved, you must be comfortable with the funder's terms and conditions. If sharing equity (and control) with an external party or having your parents stand surety is a problem, you may want to raise the funds from family, or bootstrap your way. Savings and budgets are paramount In a recession, cash is king and in short supply! Conservatively, you should have enough cash for running costs for at least six months. Before starting your business, prepare a detailed budget, with a worst-case revenue scenario and realistic operating costs. Pay attention to the cash flow, from the time you propose for client work until you settle the bill from the supplier. Add a percentage to cushion you for shocks such as the 31% rise in electricity this month. The bottom-line You must be passionate about your idea and believe you can serve the needs of a cash-strapped market. F urthermore, if you're able to negotiate funding, keep the cash pumping and are willing to stay the course, then starting a business in the recession could be your smartest move.