Through our impact investing as well as our consulting to clients on enterprise and supplier development, we at Simanye work a lot with SMEs and entrepreneurs of all sizes in the impact as well as other sectors. As a result, we have learned a lot along the way which may be of use.
If you or someone you know is interested in becoming an entrepreneur, impact or otherwise, read on for our top tips.
TOP TIPS FOR NEW (IMPACT) ENTREPRENEURS
- Create a business plan – then get ready to throw it out. This may seem like a no-brainer, but surprisingly many don’t dedicate time up front to write a business plan. A plan will help you think about your business from multiple vantage points, and can help you strengthen you idea. This is vital for when you want to speak with potential investors who will want to see a clear business plan with financial analysis. At the same time, as many who have gone on this journey know – those plans often don’t go quite how we think they will. When something big goes astray it is important to be able to adapt and pivot quickly, and to learn from feedback (both from investors and markets). Plans are not meant to be rigid – they are more to help you think about your business in a structured way, and to be able to communicate your ideas to others as well.
- Choose the right legal form when registering your entity. As a for-profit, you will be able to choose from being a private company, sole proprietorship, partnership or business trust, but if you are a social/impact enterprise that does not wish to distribute profits you can also choose to be a non profit company, voluntary association or non profit trust legal structure. Different entities have different disadvantages and advantages, and your choice can either save you money or cost you money in terms of both tax as well as accessing funding opportunities. It is always best to get professional advice when choosing your business entity.
- Separate your personal funds from your business funds. It may not seem important at first, especially if you are starting out small, however for tax purposes, peace of mind, organization and less work down the road, the proper way to go is to open a business account and manage your business funds strictly within it. It is helpful to see these at totally separate so that you can properly plan and determine if the venture is viable as well.
- Get it in writing. Whether it is shareholder agreements with your partners, employment contracts for staff, or customer agreements – make sure you clarify key requirements upfront and consider all potential outcomes and consequences and then write those up. Legal agreements are critical – not just to protect yourself but to also put things in writing very clearly so that there are no misunderstandings. Without this, we have seen a lot of businesses suffer after the fact from things that could have been clarified and planned for upfront. Even if your business partner is your best friend, trust us, get it in writing.
- Budget appropriately and build up an emergency fund. Whatever you think you’ll need to start and keep a venture afloat for an amount of time, double it just to be sure. Keep a separate emergency fund and be sure to add money to it as you go. Entrepreneurship is a fun journey, but there tend to be lots of bumps on the road – so being ready for them will help alleviate some stress.
- Purchase insurance. Whether you purchase disability insurance or overhead business protection, make sure you do the research and equip yourself with a fallback plan if you become ill or unable to work.
- Seek professional financial advice and know your financials. Setting up your business properly and making sure you are aware of the tax rules is very important. An adviser can help you make sense of this when you start out and could be the difference between you saving or losing money. Keep your receipts – a lot can be written off during tax season! Additionally, while you need financial experts to advise you and help manage finances, make sure that you get familiar with the basics – you cannot truly manage your venture without at least a basic understanding of financial management principles even if you are not a numbers fundi.