Pitfalls to watch for in business
Entrepreneurship is often punted as the answer to the unemployment problem in SA and the key to unlocking financial and professional goals.
However, starting a business is often not as simple as many may perceive it to be. Unfortunately, statistics reveal that about 70% to 80% of start-ups fail within five years.
If you are considering opening your own business, it is advisable to do the admin while you still have a "normal" salaried job.
Make sure you have enough money to cover not only your business expenses, but also your salary. If you need a loan or funding capital to start the business, make sure you can afford the interest. Insurance cover is important for staying in business - insure the assets, the people, including yourself.
Momentum believes that small and medium enterprises are key drivers of economic growth and aims to support entrepreneurs on their journey to success.
Here are a few things to keep in mind before starting your own business in order to avoid some common financial pitfalls.
First, acknowledge that passion is no substitute for experience. Make sure that the business you want to start is in a field that you have experience in. Alternatively, choose experienced partners.
Make sure that you have enough money saved for both business and your personal affairs. Generally, the rule is to try to have the equivalent of 12 month's salary saved before you take the leap.
Sit down with your financial adviser and plan your first year's finances to the last rand before kick-starting the business. This will help you understand the financial implications on you and on your family.
Have a good understanding of what your business's operating costs and your start-up costs will be. This will include your salary and staff salaries; the cost of premises; money for stock - if applicable; and factor in infrastructure costs, such as internet and telephone lines.
It's also important to set up a business bank account separate from your personal bank account, get the business registered, apply for a tax certificate and make sure that the business complies with basic company law.
- Marais is the deputy CEO at MMI Holdings
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