Navigating entrepreneurship: Overcoming the risks

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AKHONA MATSHOBA: Thank you for joining us for yet another edition of the Small Business Conversations podcast, Moneyweb’s weekly SME show highlighting critical issues affecting South Africa’s small business environment. This conversation is brought to you by Momentum.

Small businesses are the bedrock of South Africa’s economy, reportedly contributing over 40% to total GDP in 2022, and accounting for a significant portion of the jobs in our economy.

However, as you may know, the entrepreneurship journey is not an easy one. In fact, we have covered the journey on our podcast, and we’ve previously reported on how most small businesses fail to make it to their fifth birthday.

Understanding the tough environment that entrepreneurs in South Africa are faced with, Momentum is coming to the party to make the journey easier by offering entrepreneurs the tools and financing they need to thrive.

Through the Big Success for Entrepreneurs Campaign and the Advice for Success initiative, Momentum looks to better equip entrepreneurs for their growth journey. Joining me on the pod to tell us more about what Momentum is doing is Charlotte Nsubuga-Mukasa, the head of marketing at Momentum Brand. Thank you for joining us on the podcast, Charlotte.

CHARLOTTE NSUBUGA-MUKASA: Thank you so much for having me. It’s my first time, so I’m looking forward to this conversation.

AKHONA MATSHOBA: I am too. I’m looking forward to the chat about what Momentum is doing. Can you tell us more about Momentum’s Big Success for Entrepreneurs campaign, as well as the Advice for Success initiative that comes along with it? How did this project come about, and how long has it been going on?

CHARLOTTE NSUBUGA-MUKASA: It started off probably about three, four, five years ago, and was then called the Small Business, Big Success campaign. But this year, we’ve changed things.

Instead of focusing on small businesses only, our shift in the campaign was on the entrepreneur, so the solopreneur, the startup, the business that is obviously under two years [old], but even those that are peaking past two years which, as you said, are pursuing their fifth birthday, we decided as a business that yes, we look after large corporates, yes, we look after large businesses, but can we in 2023 keep the small business factor in our minds but focus on the person, because it’s the person that needs the advice.

It’s the person that’s going to decide what risks the business takes. And if we start to invest in the IP [intellectual property] in mitigating the risks so that they can make [it to] their fifth birthday, we believe that their small business will naturally flourish.

So, it’s been going on for about five years but it’s no longer called the Small Business, Big Success campaign. It’s now called the Big Success for Entrepreneurs campaign, with a pitching element that is new and fresh for South Africa.

AKHONA MATSHOBA: And in those five years or so of existence that you mentioned, what is coming up as the recurring issue that entrepreneurs in that maybe under two years of existence are faced with? Have you identified those risks and are they re-occurring? Is [there] a continuing problem that is not being solved?

CHARLOTTE NSUBUGA-MUKASA: Some of them are re-occurring and some of them are not. I’ve got my favourites.

In fact, I’ve tabled the 14 risks that I think South Africans don’t speak about.

Through the Twitter spaces we’ve been hosting and the Instagram Lives, these are what we would call ‘from the mouths of babes’. These are the risks that entrepreneurs are telling us about. They’re quite interesting. We call it ‘unspoken risk’ because we don’t speak enough about it.

But whether it is a grandmother passing on or an aged parent saying, I’ve been running this profitable small business spaza shop, salon or whatever it is, and I need to pass it on to my children, there’s a risk in terms of passing on that inheritance. Not just in terms of estate duties – that’s what … the big guns at Momentum look at, in terms of wrapping [up] your estate – just in terms of the IP – that your child might not have to run that business.

So we’ve spoken about inheritance being a risk, or a conversation, rather, that we need to have among our family members, especially if it’s a family-oriented business – who is getting the business, who is running what part of the business, and for how long?

And if we don’t have the skill within the family, where are we going to get it, and how comfortable is the family in terms of starting to outsource some of those capabilities to non-family members, for example?

But I think the recurring risk that keeps coming back, over and over and over, is the risk or even the conversation regarding capital from banks.

We’re starting to see the solopreneurs, especially [those who need] that R20 000 cash injection to start something or to get over the legal hurdle; we’re starting to see them borrow a lot from family members, so we are picking up conversations of mistrust, of families breaking apart because of the conversation on money and business.

Not all family members have the pillars to actually keep their family structures upright because, when you mix money and business and family, it doesn’t work out for everyone else in the family.

I think the interesting [thing] that’s new to me is seeing those entrepreneurs who sell well on Instagram suddenly say, look, we’re going to start an e-commerce business and we’re going to have a shopping cart and we’re going to start a website, and realising the skill to sell well on Instagram is not the same skill that you’d use for your e-commerce transactions, running stock-taking, and just managing the website per se. They are different skills, although both of them are online.

So landing on those nuggets has been quite interesting and fascinating to watch on the sidelines. But it’s also just realising guys, we are in South Africa. This topic of tenderpreneurship, if I can call it that, is not going away.

We are country that loves tenders [chuckling]. Some of our people have made money; it’s a fact and we can’t run away from it just because it’s got a negative connotation of fast cash, or you become a millionaire overnight. It’s still a business. It still requires a skill to fill in that tender document. There are procurement practitioners who have now started side hustles to help those people who have always pursued tenders, whether from government or a big business like Momentum. Those procurement offices are helping people secure the bag, one, but to do it in a way where governance and legal structures – although you are small – are still nifty and tightly woven so that you can focus on making money and not all the i’s that are sometimes forgotten to be dotted, or the t’s to be crossed.

But I think in a nutshell, the re-occurring risk for me is debt management, cash flow management; also just servicing your debt and deciding how much to pay yourself in the first year, the second year, versus the fifth year.

You do need some income for yourself, but how much do you pay yourself? Each entrepreneur that we’ve interviewed has told us different answers.

So there doesn’t seem to be like a one-size-fits-all, even within the same industry.

And then there’s always, of course, inflation and deciding who to hire, because who you leave your business to matters. The concept of theft is a whole risk in and of itself. I don’t know if you heard about DJ Zinhle and how her businesses have fallen by the wayside because of people she’s trusted to run her business and so forth.

So there are all kinds of risks, but I think the re-occurring one is linked to money, cash flow, and then of course debt management.

AKHONA MATSHOBA: I need to come in there, because you mentioned something so important that I don’t think I’ve thought about. It’s basically about the succession plan, how entrepreneurs – because you’ve seen entrepreneurs in our communities like the spaza shops you’ve mentioned, maybe the lady who sews clothes for people – have these businesses, but there’s no real plan on how this business is going to last beyond them, or exist beyond them, or be an entity even after they’ve passed on.

I’m wondering what the initiative is doing to ensure that, one, a business has employees who are fit and well to carry the brand, the business beyond the entrepreneurs, the solo entrepreneur’s lifespan, and two, how we are creating these succession plans so that even if it is being carried on by a family member through a family business kind of structure, that there’s a clear plan of where we are going and how we going to get there.

CHARLOTTE NSUBUGA-MUKASA: So let’s talk; that’s normally left for the corporates and the boardroom tables. But you’re right in that it transcends however big your business is. Oksalayo [what remains is], at the end of the day you need to be able to make sure that it is sustainable, it’s profitable and that whom you hand it to matters.

I wanted to move away from the word ‘risk’ for a moment and just use the word ‘conversation’, because it’s umama and uthatha [parents], that you spoke of, that need to have a conversation way before they even think of retirement upfront to understand the strength of the people around them.

Starting off with their children, do their children even have an interest in the business? Question one. And if they don’t have an interest in the business, I would suggest that you don’t force it.

That’s the first piece of advice that I would give, that you start to say who outside of your business has what it takes to deliver on your business.

Now if you don’t have an idea or a vision of where you are now versus the future, you can’t decide the who. The first thing is the why. Why do you exist, and why do you want to exist past the fifth year or the 88th year, however [old] your business is.

And then in terms of your expansion plans, if you do diversify your service or your product offering, and you are selling A but you want to try B, for example, have you done your homework in terms of what it takes to deliver the product and the service and the goods in this e-commerce digital world that we are facing?

Do you want your business to move away from that physical spaza shop or salon or barbershop and have digital tendencies? And if so, have you considered capabilities you don’t have, like a social media manager. Maybe umama [mother] doesn’t want a social media manager, even though she has [regular] clients coming to do their hair every week, every month, every year.

So you’ve got to then be able to do your research. It starts off with having a conversation to say, Hey, I saw Bani Bani’s salon is doing this. What does that mean for me?

Then through conversations, whether it’s at a party, at a dinner, a cocktail [party], a funeral, it will lead you to people who are interested in your business or interested in parts of your business. It’s then that you start planning to decide who you are going to bring in way before you retire.

I want to say that it’s not always family members. What we’ve seen with family members, especially those who started third-generation businesses, is that they’re not keen to pass the baton on to non-family members.

But the truth is the business doesn’t know blood; business understands money and business understands great ideas.

So that diversification I think is a conversation that you need to start having at the dinner table, to say: If this, then what; if this, then what? Eventually you’ll move from your why to your what, and then eventually to your who – even if it’s just on paper where you are doodling or speaking to your financial advisor to say: ‘These are the dreams I have and hopes for my future. You are my accountability partner, so dream with me, think with me and eventually hand that over to the right people.’

A lot of businesses we are seeing, especially post-Covid, yes, they’re doing well, but the number one risk is people. People don’t understand human capital – there’s a reason why they call it ‘capital’. Your human capital is everything, the IP of your processes, whether operational, strategic or even creative. If [that] is not there, then the chance of your business making [its] fifth birthday is even more [out of reach], if I can put it that way. There’s a higher risk that it won’t survive.

There are things you can control. You can control stock, you can control price points to a certain degree, depending on your competitor set. There are things you can control. But people are almost, say, uncontrollable. There’s only so much you can do.

So I would say invest in training. Invest also in picking people who align with your personal values. If they don’t align with your personal values, then the chances of you mitigating any risk, whether third-party risk or governance or legal, become something that might come back and bite you in the future.

I think the reason why we’re starting with the entrepreneur – and we’ve got this pitch which is taking place on, on Thursday, July 6, at 13:00 on our Momentum YouTube channel – the reason why we are asking random entrepreneurs from different industries to come in and pitch for their share of R1 million and a business coach is that the R1 million brings them in.

But the true value of pitching in the Momentum Big Success is because of the success coach that we have on hand. It’s the advice that you get from somebody who calls you every Monday to say ‘Hey, let’s meet for your small business Mr Entrepreneur. Let’s talk about what went well, let’s talk about what did not go well. Let’s do a Swot analysis [strengths, weaknesses, opportunities and threats] analysis for you’ – because a Swot analysis is not just for the big guns or the big corporates like Momentum. A small business needs to understand its strengths, its weaknesses, the opportunities and threats.

A small business needs to decide – even if you’re selling amagwinya [vetkoek; deep-fried dough cake] – where you are going to be five years from now? What are you going to package amagwinya with to make sure that you have a higher price point and you have more customers coming through the door?

The principles of business stay the same, but if you don’t have an advice coach or a business coach and somebody who holds you accountable for the decisions you make – no matter how small or how big – then you’re not going to, for me, make it past the fifth year because you do need to have some tough conversations with yourself from time to time.

So one of the reasons why we love the pitch is that if you are into jewellery-making, or if you own a salon, or you are a mechanic, should you be one of the top three winners we will find the coach who is specific for your industry and your business. We’re not going to get you a generalist. They have to have walked the mile before you to say, ‘Yoh, these are the mistakes that I made,’ and talk about those unspoken risks, so that you don’t make them or at least you are considerate and mindful as you pursue the same line of work that that specific coach has done before.

That’s what we’re trying to do for our 2023 gig regarding the entrepreneur.

AKHONA MATSHOBA: I’m glad you mentioned the competition and what you are looking to achieve, and what the entrepreneurs will be getting out of that. We will definitely speak a little more about it.

I just want to come back to the aspect of the cash management, debt, and how entrepreneurs are struggling with that. I think it’s quite a beneficial partnership if you ask me, because Momentum is already a large financial services company, and you guys have seen it all. You’ve experienced it yourself. You’ve gone through Covid so you’ve had that experience and you also have the experts coming on board to share that knowledge. My question becomes then how are you going to be getting entrepreneurs to understand that the business’s money is not [just] for maybe hand-to-mouth sustenance, [but] where we can grow our business beyond just monthly sustainability, even though you’ve mentioned tenderpreneurs – and that’s big-money business right there, right? Still, you will find that people get tenders from government, but that money doesn’t make it past that one month, because they are just living for now and the sustainability – paying rent, school fees and whatnot and whatnot.

How do we get entrepreneurs to understand that finance, a strong balance sheet, is important for you to be able to grow, to be able to think about packaging for amagwinya and how we are going to innovate and grow as a business?

CHARLOTTE NSUBUGA-MUKASA: It’s difficult because money is emotional. I just want to be upfront with you. Even with those people who’ve won before, we’ve found them paying themselves far more than what they should be paying, considering the tenure of the business. The more profitable the business, especially in year one and two, people tend to pay themselves very high salaries. And you need to understand that especially in the first five years you’ve got to pay the business first before you pay yourself. Yes, wages for the people who are working for you, but the business first.

For each industry the percentage does vary, and it depends on how much cash flow you have to first pay your workers and pay operational costs in the business before you pay yourself. But we do understand that money is emotional. And from what we’ve seen, even from shows like I Blew It, human behaviour is, ‘Once I’ve got the money, I have to pay myself back for the suffering that I have gone [through] and the sacrifices that I have gone through to set up this business in the first place’.

When you get into business you need to understand it’s like a baby that needs to be fed.

If you don’t invest – I’m talking about a human baby, the formula, the nappies, the vaccinations, the process of growing that baby, very similar to a business – you can’t come in there thinking that it’s time for the soft life.

When you are an entrepreneur, you understand first and foremost that you have a vision. Your vision is your baby. Your vision gets the salary first. Your vision gets the investment. And that means that for a time you might not own property, you might not own your car, you might Uber or rent, or you might be reinvesting the financials or your cashflow into the trucks or the vans of your business because you want to get past that fifth year.

After the fifth year you might start to become a little more generous for yourself. But we’ve found that when we give them not just the business coach – at Momentum we call them success coaches – we give them a free financial advisor to set them up who understands small businesses, because not all financial advisors understand small businesses. Some of them are geared for medical aid, some of them are geared for your car insurance.

So you need to find the right financial advisor who understands what it takes to sustain a small business. And then once you find that small-business financial advisor, you need to have a rhythm – in the same way that you have date night with, let’s say, your partner, your husband – you need to have a date night with your financial advisor. You need to talk about a strong balance sheet. You need to be able to put the financials out in front of them. They may actually say you don’t have the skill to do it.

In that case you need to listen to [the] advice, to then say if I don’t have the skills to manage the balance sheet – or even have a conversation regarding my income statement, even though it looks like I’m flush from this tender – you need to then go and source the right accountant or right person who doesn’t charge you much because, I’m not going to lie to you, there are people out there who take advantage of entrepreneurs and small business owners by charging them exorbitantly.

One of the ladies who entered the competition – and we’ll talk about it later – runs a company called Sister In Law. I never knew it existed. Her aim as a lawyer – she’s actually an advocate – is to find small business owners and charge them legal fees that are less than the average rates out there in the market, because she chooses a small business owner; she does focus primarily on women, that’s why she’s called Sister In Law. But [for] any small business that requires legal or governance or advice regarding how to set up the structures of the small business, her aim is to make sure she always undercuts the average rate that’s out in the market because she knows that startups and entrepreneurs need that technical advice to make sure that they meet the fifth mark.

So in summary, if I was to maybe use the power of three to then say this point of cash flow is a big thing, but it is emotional and, because it’s emotional it requires a coach, somebody who understands money – like a financial advisor or an accountant.

And then thirdly you need to be able to go and find those other smaller providers that can help to make sure that your business remains sustainable, like Sister In Law.

AKHONA MATSHOBA: Just closing off our conversation here, Charlotte, I’m interested now in the competition. Okay? R1 million is up for grabs and a 12-month mentorship programme that is going to be made available to the winners. Tell us briefly about the competition. Who stands to win this money and this opportunity, and how many businesses could benefit from this?

CHARLOTTE NSUBUGA-MUKASA: It’s so exciting because it’s not in our hands. South Africans decided who they wanted to nominate; we have no control over it. They’ve decided who they want to nominate, because we can choose whoever we want to support. We do already support small businesses and large businesses. This is us giving South Africa the opportunity to say, I have an aunt, a niece, and uncle, a malume [uncle], and you need to know about them.

So South Africa nominates these entrepreneurs. They go through a process and we have criteria. We need to make sure at least that you’ve a Vat number, Sars, the usual, banking details somewhere here and there, all of that. And then eventually the top 10 are going to pitch for R1 million.

It’s actually more than a million rand – R1 million cash is given to you, and we handle Sars and the Vat. The R1 million goes to the top three businesses.

So 10 people pitch, three people win their share of R1 million rand. And then each of those three businesses get a bespoke success coach for their industry or for their business.

And then on top of it – it’s not part of the cash – we make sure that we open our black book and we get these businesses profiled on the eNCAs, the 702s, the Kaya FMs, Moneyweb. Moneyweb, of course [laughing].

We make sure that they get profiled – the entrepreneur and their business – because they need to reach a new customer base, [get] access to market and all of that.

And then we make sure that we help them with their website, and that we give them a digital shoot – both video and photos. And we tell their stories to South Africa because South Africa needs to know who these people are outside of business, and we help profile them using our PR machine.

So it’s more than the million rand. We want to make sure that they are known, we want to make sure that they’re understood. We want to make sure that they’ve got a coach so that they can navigate their risks. And we want to make sure that when they show up, they show up as well made, seasoned entrepreneurs so that people can take them seriously.

And so when we start to have credible conversations involving these businesses, they are endorsed by Momentum because they’ve gone through the 12-month mentorship programme and people can say, ‘This I can trust’.

AKHONA MATSHOBA: And just out of interest, briefly, we understand what Momentum is doing to position entrepreneurs for success, but I’m wondering. If I’m an entrepreneur and I go through this super-supportive year, and I’m getting all the support I need, I’m getting advice, what is being done post that 12 months? Is there a relationship that is open, an open-door policy with entrepreneurs to make sure that you are still part of the family, that you can still consult and speak to us or ask for advice, because sometimes you find that these hyper-supportive periods end up leaving entrepreneurs short at the end because they’re so used to being supported that when they have to go off on their own they can’t really fly; their wings are clipped.

CHARLOTTE NSUBUGA-MUKASA: That’s such a beautiful and honest question. I love it. We mentioned that the programme has been going on for five years. So yes, they become an extension of the Momentum family. All our events, VIP, we’ve got the Signs of Success festival, there is #She Owns the Success; we put them in touch with other mentors, other coaches, celebrities, because you just don’t know what each business wants. They decide how they’re going to leverage all these platforms.

So automatically every single cohort that’s coming in from your 5, 4, 3, 2, 1 is automatically invited to these networking opportunities so they can expand their businesses. And afterwards, in terms of coaching, we [luckily] haven’t found a business that’s gone back financially since being with Momentum – touch wood.

But if ever they want to access their coach, because they do create personal bonds with these coaches, we stay open to it. But the process is so thorough that when they’re left to fly on their own they have appeared to stay stable thus far. But if they ever came back and said, we need access to that specific coach, bang, bang, bang, bang in year what, what, what, what, because I need to rejig or expand, we would in a heartbeat be able to make that connection for them again because, if they are suffering because of money, and we are an FSP [financial services provider], that doesn’t look good. So the relationship needs to work on both ends.

So far they’ve been able to float on their own. We see them often enough, because they come to our networking platforms. We have conversations with them. The dream for me would be to reintegrate them into our Momentum procurement pipeline, so that they make money from Momentum as well, because of their business, etiquette and skill and so forth.

We talk about elevating the campaign. Yes, the campaign has the hoo-ha, the million and everything, and yes, the networking, and yes, they’re going on to shows and have conversations with the Moneywebs of this world and so forth.

But for me the dream is when they are actually plugged in as part of our procurement process; and even though they’re small business they’re giving us services. That would be the next elevation for me in terms of the campaign.

AKHONA MATSHOBA: And that right there is Charlotte Nsubuga-Mukasa of Momentum Brand, speaking about what Momentum is doing through the big Success for Entrepreneurs campaign to give entrepreneurs a better shot at this entrepreneurship thing.

Thank you once again for joining us on the pod, Charlotte.

CHARLOTTE NSUBUGA-MUKASA: Oh, it was an absolute pleasure.

AKHONA MATSHOBA: If you enjoyed this podcast, please like and follow Small Business Conversations, and don’t forget to share our episodes. If you want to contribute to the conversation, you can tweet me at matshoba_a, or you can email us at [email protected] to share your thoughts and suggestions for future conversations.

Until next time, thank you and goodbye.

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