Neesa Moodley | 24 September 2024
A new report shows that women need more support when establishing a business. Francinah Phalatsi recommends that women entrepreneurs should start with a simple business plan to use as a roadmap early on. Whether their aim is to attract funding or just to measure progress.
The Global Entrepreneurship Monitor (GEM) South Africa Report 2023/2024 released by Stellenbosch Business School last month showed that women are more likely to need support in the initial phase of starting a business, that critical phase before they reach three and a half years.
It also showed that only 4.9% of women entrepreneurs get to the point where they employ 20 or more people. Natanya Meyer, lead-author of the report, is associate professor in the Department of Business Management and chair for Entrepreneurship Education at the University of Johannesburg. She says the lack of business support tailored to women’s specific challenges and needs, puts South Africa’s women entrepreneurs on the back foot in realising their potential to make greater contributions to economic growth and job creation.
“The data highlights gender disparities in business scaling, with men owning larger businesses at a disproportionately higher rate than women. This could reflect various obstacles women might encounter in business expansion, including limited access to funding, networks, mentorship support and resources,” Prof Meyer said.
As personal assistant to the CEO of FNB’s business division, Francinah Phalatsi has helped thousands of business women in their entrepreneurship journeys. Daily Maverick tapped into her expert input at a recent Money Cents EmpowerHER webinar.
Tips of the trade
Phalatsi says she sees more women taking up opportunities as entrepreneurs, and going into industries previously viewed as male-dominant. “The starting point is a solid business plan. The old adage is that failing to plan is planning to fail. Just as you would map a road trip or plan a project, a business plan is a roadmap for your business that helps you to stay focused and to attract potential investors,” she says.
Key components of a good business plan include: the executive summary, which provides an overall view of the business; a market analysis, which gives you the opportunity to identify the gap in the market; a description of your company; and an outline of your organisation and management structure. Phalatsi says the market analysis also helps you figure out what your customers need, what solutions you want to provide, and who your competitors are.
“Your business plan should also detail your actual product or the service you are offering, and what is your key differentiator? What is your angle or hook that would make a customer choose you as a supplier over another company offering a similar product or service? Then you want to include any potential funding requests, as well as financial projections and planning for the future,” she says. While this may sound intimidating for anyone just starting out in a business venture, Phalatsi advises starting with a one-pager business plan, and then expanding each section as you go along.
Importance of a network
The GEM researchers recommended that women-orientated business networks should be developed and promoted by local governments, business incubators and private sector initiatives.
“Establishing small, women entrepreneurial groups led by successful women business owners can promote confidence and increase business growth,” the report says. Phalatsi agrees, pointing out that building a network is not just about identifying mentors who may be in the same industry or own their own businesses, can hold your hand and lead you, but includes other entrepreneurs who are likely facing very similar challenges to yours.
Common entrepreneurship mistakes
Some of the more common mistakes by potential entrepreneurs Phalatsi sees include:
Failing to separate business and personal finances: Phalatsi says while many young businesses might not have audited financial statements, they can use their business bank statements as a record of their trading activity. “This means you need a separate business account, and this helps with credit applications as well,” she says.
Maintaining a good credit record: Here you want to manage your business cash flow to ensure that there are sufficient funds to cover your debit orders and operating costs. “Cash flow is a magic term. With an entrepreneurship or any other business, ensure that your business income mentioned is in a separate business account. Take the time to understand the different solutions around debt management, so you don’t find yourself in a pickle,” Phalatsi says. This means understanding the difference between debt counselling, debt review, and how it impacts your credit score. If you are a sole proprietor then the bank will look at your personal credit record to assess how you manage your finances.
Apply for the appropriate type of funding: Phalatsi recommends some homework or research to understand the different types of funding available so you can identify what is most suitable for your business at its particular growth stage. For example, funding could include a simple business credit card, an overdraft facility, asset-based funding, commercial property finance or even franchise financing.
Lack of governance or basic admin: An example of this would be poor contracts or record-keeping. “Having poorly structured agreements in place could lead to some significant issues down the line, from flimsy or light contracts with your suppliers to not having proper contracts from an HR perspective. It’s very important to clearly outline terms and conditions to avoid any future disputes,” she says.
Clear understanding of your business finances: Phalatsi says these mistakes range from inaccurate assumptions about your operating costs to over-investing in resources or equipment. “Good budgeting will make underestimating your operating costs less likely and also reduces the chances of you needing to tap into your cash flow,” she advises.
‘Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER’.