N4 Entrepreneurship & Business Management


contacts will also have advice on better and potentially cheaper suppliers. Maybe you have a friend or a family member who can help you with bookkeeping in the beginning? It is time to find out. The keyword is networking. Get to know people and tell them what you are doing or planning to do. If they know what you are doing then they can refer business to you. This is particularly important when starting up, as it takes time to build up a customer base of your own. Knowing where your first sale will come from is very re-assuring. And then, word of mouth is still one of the best ways of marketing!


• Finance (own money and assets) Starting a new business always requires money. Money you don’t have. Banks and other money-lending institutions may be able to help you, but will charge you interest. This makes the costs of starting a business even higher. The ideal is to save up before you start or to start small and to borrow only a small amount. If you need to borrow money, know that everyone will ask you how you plan to spend the money. They will want to see your business plan.


A successful entrepreneur has to understand the following important aspects of good finance: • Costing and pricing of products and services • Break-even point – when you make neither a profit or a loss • Cost of inventory and debtors


Step 2


Identify your critical success factors Critical success factors are the one or two factors that are critical in order for a business to succeed. In other words, know which “things” need to be in place or what skills you absolutely need to ensure success. For example, if you would like to start a taxi business, the critical success factors are: • Vehicle • Public transport permit • Driver’s licence


PAUSE FOR THOUGHT


A business idea is an opportunity only if the idea matches the personal resources of an entrepreneur and he/she can overcome all critical success factors.


The question you need to ask is, “what are the critical success factors of my business idea” and secondly, “can I overcome them (if I don’t have them)?” The critical success factor of a potential business idea should be the deciding factor when trying to answer this question. If you cannot overcome a critical success factor, then your business idea is NOT a business opportunity!


4.3 Will I make a profit?


It is always difficult to know whether you will make a profit since nothing is certain when starting a business. However, a few simple calculations at an early stage may provide some clarity. If a business does fail let it be for a good reason and not for something very obvious. Profit is the difference between the selling price (what you will ask) and the cost price (what you paid for it). This difference (R) is multiplied by the number of products that you expect to sell. From this amount you must still deduct all your expenses or costs. What is left is called profit. The formula to calculate profits is the following:.


Profit = (selling price – cost price) × volume – fixed costs This will be discussed in more detail later on.


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