How to turn a struggling venture into a profitable business

Many small businesses fail to reach their full potential for numerous reasons – and the struggle is only compounded by a tough South African economic climate that only grew by 0.8% in 2018, and is expected to increase by less than 1.3% this year. The combined result is that the majority of full-time entrepreneurs in South Africa are not yet earning revenue.

This is according to Gugu Mjadu, spokesperson for the 2019 Entrepreneur of the Year® Competition sponsored by Sanlam and BUSINESS/PARTNERS , who points to a recent survey conducted by Seed Academy around the state of entrepreneurship in the country. “The study reveals that around 60% of entrepreneurs and business owners are full-time entrepreneurs who are not yet earning revenue. Added to this, only around 5% of businesses that are post-revenue, have a turnover that exceeds R5m per annum.”

Mjadu says that these facts support the harsh reality that South African entrepreneurs have to work much harder and smarter than ever before to ensure that their businesses take off and achieve real, sustainable growth over the long-term. She offers a few tried-and-trusted tips to help entrepreneurs kick-start revenue generation:

You can’t improve what you can’t measure
It is near impossible to turn a business around if you can’t measure the company’s success or failure. As an entrepreneur, Mjadu believes that you need clear financial and operational goals, and the tools in place to gauge the status of achieving these.

“This can take the form of assessing the number of customer queries you receive; the number of complaints; the percentage of first-time customers that return; changes in operating costs; and the number or products or services sold. All of these are crucial to understanding the state of your business.

“You can track the success of your company by setting up key performance indicators (KPI) and in addition to determining how you will achieve these KPIs, deciding on the ways in which you will measure them. It is imperative to define your business goals and track your KPIs to see if your efforts are successful,” says Mjadu.

Create return customers
For the vast majority of business owners and SMEs, client retention is crucial to growing the business. And while excellent customer service is vital here, Mjadu emphasises that the key to creating serial return customers is by fostering a sense of loyalty. Harvard Business Review has shown that increasing consumer loyalty by just 5% can increase profits by as much as 98%.

“The easiest way to do this is by identifying the key touch-points you have with your customers and leveraging these. These include the company’s newsletter, social media platforms, and client satisfaction surveys,” she says.

Collect money quicker, spend it slower
Mjadu encourages business owners to find ways of encouraging customers to settle outstanding invoices as quickly as possible (for example, by offering discounts on early payments). “This makes for a much healthier bank balance and greatly improves your ability to secure business loans or overdrafts in the future.

“At the same time, you should also look for opportunities to keep your company’s money in the bank for as long as possible. This can be done by speaking to your suppliers and arranging, where possible, longer payment timelines. Suppliers that are interested in building long-term relationships with you are likely to be open to agreements like these,” she says.

Payment timelines that work in your favour can make a big impact on a business’ bottom line, but in order to enforce these timelines effectively, Mjadu says that a good accounting system and strict record-keeping is required.

Get techy
Research conducted by World Wide Worx, suggests that online retail sales in South Africa will grow to nearly R20 billion between 2018 and 2020, and other business sectors seem to be following suit. As such, for any retail businesses, creating an ecommerce presence is an obvious way to tap into higher sales figures.

For businesses that don’t lend themselves to full end-to-end sales online, Mjadu says that there are still ways to use tech to create efficiencies. “Implementing a savvy online accounting system, for example, can do wonders for a business’ revenue collection and allow you to have a better view of your financial situation.”

Mjadu says that while the economic climate in South Africa is tough for the full-time entrepreneur, the landscape is not impossible to navigate, and there are still some opportunities to grow a profitable business if you make the right decisions. “Knowledge is power, which is why it is vital to learn as much as you can about the techniques that work, and the lessons that others have learned before you,” she concludes.