Maybe you are fed up with the 9-5 grind, or maybe you were never considering it. Either way, you have made the decision to start your own business. You may be asking “What now? Where do I start?” Well, we have talked to a host of homegrown entrepreneurs and have devised the ultimate guide to starting a company in South Africa.
Step 1: Select a Viable Idea & Market
Make sure your idea ticks these boxes:
- You are passionate about the core product/service and what it stands for
- The target market you are addressing is focused, unsaturated and not too small to make business sense
- Your market needs your product/service and will pay for it
- You have a unique selling point (USP) that entices your market to switch to your offering from your competitors
Ticking those boxes may seem elementary, but take them seriously. Think like a consumer, ask potential customers and do not rush.
Here’s a tip from ClockWork CEO, Jamie Rood; “One of the biggest mistakes I see when chatting to early founders is that they are addressing an extremely big market. I often hear ‘My product can be used by anyone and everyone’. As a startup, the key is to find a niche initially, perfect your product and then scale”
Step 2: Determine Ownership
If you have a cofounder or cofounders make sure you all know what the ownership agreement is before you start. Too many founders leave this too late, and once the money starts flowing, this leads to disputes and stunts the company growth. Or worse still, it could even lead to the company failing completely. Make sure you get it in writing, sign off and make sure you file it in a safe place.
Here’s a template: http://www.startupcommons.org/founders-shareholder-agreement.html
Step 3: Name your business
This does not have to be final, but start brainstorming ideas with your cofounders, friends and family. Have a few variations, as it will need to be available when you register it in Step 7. When choosing a name for your company you should consider the following:
- Domain Name – These days every business should have its own business. Make sure the domain is available and see what other businesses display when you search your potential name. The more unique your name is, the easier it will be to become visible on search engines.
- Misspelling & mispronunciation – If it is not easy to spell or say you are doing it wrong. These two problems make search & word of mouth, two of the most important marketing tools, very difficult. Not to mention, it will start to become very frustrating when you have to keep spelling out your name when you’re on sales calls.
- Identity & Meaning – Most importantly, does your name portray what your company does and what it stands for? Your name should give your potential customers a hint into what your product/service is all about.
Step 4: Financial Forecasting & Budgeting
Most entrepreneurs are by definition creative dreamers and therefore often scared by thought of number crunching. This means that financial forecasting and budgeting is neglected and founders pay the price for this in the long run.
Forecasting sounds very complicated, which it can be for professionals, but for us it can be simplified into an educated guess. Create a spreadsheet with the months along the top, and estimate your sales for each of them. Remember to state your assumptions for each month and continue to update them as new information reveals itself. Once you have your sales forecast you can do the exact same for your monthly expenses.
Don’t forget to estimate your startup costs and assets needed before you start. This essentially gives you an estimate of the capital you will need to obtain before you start. Make sure to account for the cash-negative period, which is the time after you launch and have expenses but have not yet turned over any revenue.
A really key point is to track your transactions from day one. It is extremely important to have these numbers if you ever want to gain funding or sell your business. Even if you don’t, your financials are your company’s heartbeat. You will thank yourself a few years down the line!
Free Forecasting Template: http://quickbooks.intuit.com/r/business-planning/how-to-create-financial-projections-for-your-startup/
Free Basic Cloud-Based Accounting Software: https://zipbooks.com/
Step 5: Marketing Strategy
In step 1, you identified your target market and know what your ideal customer looks like, their age, their gender, their likes, their dislikes and their favourite things to do. Basically, you know them inside out. Now you are thinking about how you will implement a strategy to gain those ideal customers.
What type of message do you want to send your customers and what channels will you use to reach them. Make sure you outline your strategy carefully. Use a template like the one below.
Marketing Strategy Template for any industry: http://www.mplans.com/sample-marketing-plans.php#.WP7o8tKGPIU
Step 6: Try to sell
Get on the phone and try to make a sale. Even if you don’t have the product yet, there is no harm in seeing if a potential customer is interested in what you have to offer. The moment you hear someone say “I need that” is the day your company is born.
Remember to track your leads, make sure you note what the outcome of the call/meeting was and when to follow up. Zoho CRM is a great CRM tool for this.
Free CRM system: https://www.zoho.com/crm/
Step 7: Register your business
Intuitively, it seems like the first thing you should do but this should only be done once you are further down the line. It could potentially be a waste of time & money otherwise. To do this, you need to register your business name and type of company on the CIPC website (http://www.cipc.co.za/za/).
There are five types of businesses you can register, most founders register a private company as it is a ‘separate legal entity’ which means as a founder your personal assets cannot be taken in lieu of your business debt. This is not to say you have to register this type of company, do your research to find out exactly what type of company your business is suited to.
You may apply for between 1 and 4 names during each application process. Each name reservation application costs R50. A company registration may vary between R125 and R475 (R125 for a private company, R475 for a non-profit company registered without members).
How to register your company: http://www.cipc.co.za/index.php/register-your-business/companies/register-private-company/
Once all these steps are completed you will be well on your way to starting a successful business. Remember, this is only the start and there is lots of work still to do! There will be tricky situations to overcome, you will make mistakes and you will have sleepless nights, but it is certainly a journey which you will never regret. Good luck!