The Top Three Reasons South African Start-ups Fail


Eskom Development Foundation Project Manager Chris Bornman unpacks the top three factors causing local small businesses to fail

Bornman is project  manager for the foundation’s Business Investment Competition and the Business Entrepreneurship and Franchise Expo. He says that working with thousands of would-be entrepreneurs and small businesses over many years has taught him that some of the biggest challenges facing local small businesses are issues that can 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 three main reasons for this can be summarised as a lack of information, red tape and a lack of financial management skills.”

While he says that funding, resources and training initiatives remain available to entrepreneurs, many are not aware of them, and so he believes more needs to be done to spread the message.

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“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, he says.

Financial mismanagement is another common pitfall.

“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 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.

source: destinyconnect

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