Starting or managing your own small business is exciting, but it can also seem like an impossible task if you have no backup.

There are new concepts to work with and hard decisions to act on. Being a business owner means you are responsible for the livelihood of other families as well as your own.

Fortunately, there are many tools, and support services offered by the Provincial Government of the Western Cape and its many partners to help you achieve your business goals.

So relax and step inside the RED Door Initiative.

If at any time you need support, you can make contact with RED Door.

1. WHAT IS A SMALL BUSINESS?
2. WHAT ARE SOME BENEFITS OF A SMALL BUSINESS?
3. HAVE YOU GOT WHAT IT TAKES TO BE IN BUSINESS?

A small business is a professional operation doing business below a certain amount of sales (or turnover) which employs staff below a specific number of people. These standards differ from industry to industry.

For example, a small business in the agriculture sector is defined differently to a small business in the catering industry. Often small business is further defined in terms of small and medium business. All these are defined in terms of the same criteria: total sales and number of employees.

Small businesses have many benefits over large organisations. For example:

• A small business can change faster than a large businesses can in simple but important ways. For example, if it was necessary to change a method of working to improve production - this can be easier spread throughout a small organisation. Or if a new staff member needs to be employed, a small business can do this quickly.


• They can make use of tactical opportunities in the marketplace. For example when an event takes place, they can draw up an advertisement alluding to that event, even if there is no direct connection. This can often be very powerful advertising!


• Many small businesses have unique characteristics. Each owner's style can filter through the organisation. It is often this that makes clients and customers return for more service from a specific place of business.

A grand idea and some guts - isn't that all it takes?

Many people make the mistake that these are the only two ingredients to get a successful business going.

RED Door is there to help 100%, but you need to know as much as possible about your proposed business to help RED Door do their part properly for you. Write down important points from your research into a document format and streamline them into the most important facts about your business. The more research you do, with the resources you have, the clearer the picture will be, and the better they can help. Here is a set of tough questions for you to answer to make sure you have what it takes to be in business.

1. WHAT KIND OF BUSINESS DO YOU WANT TO RUN?
2. DO YOU HAVE THE SKILLS FOR IT?
3. HOW GOOD IS YOUR BUSINESS IDEA?
4. WHY DID YOU CHOOSE THIS BUSINESS?

EXERCISE 1: Find out if you have the right personality to be an entrepreneur.

1. What kind of business do you want to run?

There are loads of business opportunities out there and the challenge is to find the right match for you.

Think about what you know about your personality and characteristics. Maybe a few business ideas in this list connect with you.

Again, you can turn to a RED Door advisor or someone you trust to bounce ideas around where your strengths are and what you would be satisfied doing as your business from day to day.

There is a large quantity of 'gut feel' when making this decision, so again, it is important that you speak honestly with yourself or those around you.

2. Do you have the skills the business needs?

One of the main reasons why most small businesses fail is the lack of good management. Good management is using innovation and guts to make good decisions, calculate moderate risks and continually make the business develop positively.

The lack of skills or expertise is usually in the critical areas of marketing, financing, purchasing and production or even general knowledge of the business you are in. These are all areas VITAL to the success of your business.

If you do not have the correct skills for the business, where can you get them?

Discuss the possibilities with a RED Door Manager if you do not have all the answers here. They will help to assess your skills level with you.

Currently the following training can be offered through RED Door Centres:

• Computer literacy training
• Basic financial accounting training
• Business skills
• Finance management in business
• Project management skills

NOTE: Nominal fees will be required to get this training as it will be outsourced to a Service Provider.

You can check the fee structure with your RED Door Manager and plan your costs.

3. Just how good is your business idea?

Going into business solo means risk

You can lose all your assets (even your house) if your business fails. So your choice of business is a serious matter. It has to be a good idea. Not just something you need or want to do. It has to work out well enough for you financially too.

Doing a feasibility study (a study to check what the potential of the business is) does not guarantee that you will succeed if it shows good potential. A feasibility study helps you understand your proposed business environment better so you know what areas to look out for.

To help you answer this question, here are some tips:

• Do not fall madly and blindly in love with your business idea. Be tough and realistic.
• Do research to make sure there is a big enough demand and need for your product or service.
• Get expert advice before you start your business, for example from RED Door staff, a lawyer or someone experienced in the field.
• Don't underestimate your financial needs when starting a new business. There are always extra costs you may not anticipate in the beginning.
• Consider the competition before you start your business.
• Make sure your product can compete with your competitors: is there something special or different about it?
• Know the laws affecting your type of business.

Draw up a basic checklist to ensure that you have thought through your ideas.

1. What is your business? Define it.
2. How big is the market? Is the market growing, static or declining?
3. List all the factors you can that will make your business a success (e.g. good location, low price, high quality, quality staff etc.)
4. What is the situation on paper, if you list your strengths and weaknesses in comparison with your competitors, and what are the pportunities available to your business and what can threaten your business. This is called a SWOT Analysis.
5. List the advantages you have over your competitors.
6. List advantages that your competitors have over you.
7. List ways of using your advantages to your benefit.
8. List how you will deal with the disadvantages you face.
9. Roughly estimate your returns (profit) and compare this against estimated costs.
10. List the needs you will have over time:

• What marketing will you need over time?
• What manufacturing will you need over time?
• What financing will you need over time?
• What support administration you will need over time?

If the business still looks like it is financially and physically possible, move on to a more detailed study.

4. Why did you choose this business?

Take time to think through what you really want from your own business. For instance:

• Is it personal wealth?
• Is it an idea that you have thought about for a long time?
• Is it to be well liked or to earn status?
• Is it a future for your family?
• Is it the freedom to be your own boss and make your own decisions?
• Is it that you simply have a good idea and know you could make it work?

The key is to make a list of all the reasons, many of which are not on this list here. Put the main reason on the top of your list. Check back to these reasons whenever you are making a decision - to make sure that each one will contribute to giving you what you want. This will guide your decisions.

It is also essential that you know these reasons, as it may be the most important factor in convincing the bank or a finance company to support you and put money into your idea! If you know this, you can motivate easily why you and your business idea are viable.

You also need to check if there is a need for your product or service the market - does your target market exist? And is this a great idea that can turn into a growing and profitable business? Often marketers talk of an idea or business as "having legs" which means does this business have the capacity to grow and develop so you maximise as many different aspects of the business?

Answer these basic questions first. After these you can start the steps of creating a business plan and an income statement. The income statement checks what you need to spend to achieve the set up of the business and tallies it up against what your possible income will be. This can also be called a projection of profit and how much you need to spend to make that profit.