Manufacturing is a critical part of South Africa’s economic growth story and at the heart of this are the small enterprises driving growth in the sector. Manufacturing activities are part of a complex value chain that starts with gathering materials, developing services and leads to a sales value chain providing goods to consumers.
But as less than half of the small enterprises survive for more than five years – the contribution to job creation is lagging behind what it could be. Emerging and established small businesses encounter different problems on the road to development and require different support programmes and solutions.
Customised support interventions will ensure the specific needs of our SMEs across sectors are met and these businesses can respond to market anticipation and customer needs.
For sustainable success small businesses need a focused, tailored outcomes-based approach to their growth. Incubation is critical and very difficult at the same time because trust is a key element of the programme for entrepreneurs. When your end-goal is to ensure the business thrives without the traditional requirement from a financier of a stake in the business or repayment of a loan – small businesses are sceptical of your motive.
Crucial to the success of small enterprises in manufacturing is an approach involving nurturing, supporting SMEs and outlining targeted results in advance. An incubation process that walks with businesses from their teething phase, through the toughest two years and into a phase when they are producing results are what manufacturing entrepreneurs need. The incubators reward must be its hand in creating a sustainable small business contributing to the eradication of unemployment; a business with a healthy turnover and in great financial health.
An entrepreneur’s journey is lonely and often most business owners don’t take care of their financial health. Incubation then becomes a tool that steps in and teaches them the basics of accounting. The solution is not to just hand over that portion of your business to an accountant – but to rather be equipped with the tools which enable you to identify and understand the signs of poor or good financial health. The incubation process should equip and impart knowledge and skills through mentoring and coaching – it should help business translate their vision and concept and have the tools to see their concept come into fruition.
Every business needs a mentor. That is very critical for every small business. Even if you’re growing, you still need a mentor who can always align you to your initial vision and mission and impart principles that will ensure you are sustainable. Many manufacturing businesses will list access to finance as their biggest barrier to growth – a mentor will dispel that notion and show them that they don’t actually need funding.
Small manufacturers can literally produce, sell and reinvest – generating their own income to build their operations or acquire assets they need for their process. Funding is not a critical element of business. Your critical area of business is sales. If the business has a market, there’s no need for it to go out and look for funding. A mentor on your side can show you that.
Reinvesting in the business is crucial. Businesses often equate cash flow with success and the realisation of their end-goal. That cash flow must be utilised to generate more income for the business. That is a critical element of sustainable businesses.
Small businesses operating in the manufacturing sector also need to realise that entering the mainstream value chain is not really the end-goal. Often businesses want to bite off bigger chunks of the pie before they can chew smaller ones. The business should manufacture and test their product – before anything, they should test their market. Manufacturing is not quick money and more often than not, you will find another small business producing the same product and doing it better.
Starting small can lead to great success. When MAQ washing powder was introduced to the market it was done so freely, on the roads. People tested it and talked about it and it gained momentum – reaching the level it is now at. Our black businesses want to grow before they’ve operated and been successful as small enterprises. Before they can walk, they want to run and that approach will not bear any fruit.
Small businesses must always ask themselves if they have a market. Have you done your research? Have you identified your competitors – not the large companies, but the local, thriving competitors. It’s a step-by-step process that works in this sector and the copycat approach will not lead to success. The chemicals industry is growing and the number of businesses manufacturing chemicals is growing – but the question remains: Will we have a market for all those products?
I have continually seen how entrepreneurs that have a passion for the sector they operate in will make it work. With passion there will be perseverance – the entrepreneur will want to see the end product. They will want to see the result. Passion is critical.