Today I will share with you a tried-and-tested way to start a business and make a living, maybe even be successful. A way that can be used to start, run, grow and fund all the business ideas on Khoi Capital. I say “tried-and-tested” as this is the techniques used by many entrepreneurs ( including immigrants who have come to SA) to start, run and grow a business. This is the guide for people who don’t know what to do after they have chosen a business idea they are interested in and should be used as a companion to every business on Khoi Capital, Side Business, Niche Business, Luxury Business, Township.biz etc.
I am also going to use something we use in business called a framework: a framework is defined as a basic structure underlying a system, concept, or text. There are many different frameworks out there for different purposes, and in business, you will use different frameworks to guide you every step of the way. At its simplest, a framework guides you from the start and where to next.
These concepts are nothing new and have been used for a long time by entrepreneurs to start businesses, and even though some of the principles have been given names to identify them, people using common sense have taken similar routes without even knowing about such concepts, I will use an example of the foreigners that come to South Africa that open successful businesses but the locals struggle, that is because they take a practical heuristic approach to reach their goals while the locals believe that they need “capital” which they won’t get so they never start. I have also simplified some concepts to make it easier to understand.
As this is a way to start a business using what you currently have (even nothing), it is the hardest way but one that has the highest chance of succeeding. It also is designed for South Africa’s macro-environment where there is a lack of support for small business as it makes no provision for using capital to start up, funding is instead used to grow the business. This is a practical way to start a business, it does not entertain pie in the sky ideas, if you don’t have the money to start your “dream” business, you would just have to start something with the means you have available if you want to you can use that as a means to an end to start your desired business, this process may take years of hard work and you must be willing to see it through (or at least until something better comes along). If you are looking for an easy way to make a lot of money, close this page, as it cannot be found here.
The goal with this framework we call Smuse is to be able to help with any business, the business plan is no different, it will cover most aspects, some business plans might call things differently. You will also see that we use no “Executive Summary” in our business plan for the simple reason that it is not needed. We use lean planning which is short enough to be understood in one or two pages. An “Executive Summary” which is just that – a summary – is suited for large business plans: 50, 100 pages where you describe the gist of the business, as our business plan is just intended for operational purposes and not to raise finance, there is no need for that many pages. That being said our business plan format can be expanded to many pages in which you can add an “Executive Summary” which is described as “a short document or section of a document produced for business purposes. It summarises a longer report or proposal or a group of related reports in such a way that readers can rapidly become acquainted with a large body of material without having to read it all”. However don’t get too caught up with fancy words that are used, it is no different than any summary which is simply a brief statement or account of the main points of something.
I am firstly going to write about the context that we are operating under, then we will look at the prerequisites to start a successful business. Then I will look at the business plan format, then the main components of the Smuse framework. Then I will discuss how the business plan fits in the Smuse framework as well as the completed internal framework to guide you through starting, running, growing & funding your business. We will basically be building a business plan and eventually a business step-by-step. I will start with a primer then summary and then the full Framework.
This is a very important point for people who are new here or don’t know what this project is about. Whenever I use the terms “us”, “we”, “our” I am referring to normal people that are neither part of the old guard with family connections or the new guard with political connections nor with high-value skills (medicine, law etc.) that either want to have or start a business regardless of race, religion, gender, sexual orientation etc. That do not have access to formal finance and want to start a business from the ground up. If you do not meet this definition then I am not talking to or about you. Smuse does not discriminate against or favour skin colour in our business it’s not going to help you, we are right at the bottom of the market, merit, hard work (it helps in our business), delayed gratification, seriously applying your mind those are the things that will help.
There are a few things you need to start and run a successful business:
The right mindset: The reason most people can’t start a successful business is simply that they don’t believe that they can.
Business Management: Understand your business supply, value and logistics chain and the skills required for the day-to-day running. It goes without saying you should have basic maths literacy. You can hire someone to do the day-to-day management, and you might want to as you grow bigger but starting out you need to know the basics.
Work skills: You need to know something about the work required in that business and the equipment and materials needed. How to do it or how to direct someone to do it. If you going to hire a person to do the work then you obviously need to know less. But you still need to know something about your industry.
Finding a gap
Before you start a business, always try to find a niche or gap no matter how small. Almost every industry has existing companies in the market. How are you going to approach it, are you going to offer a cheaper or better or product or service?
The Business Plan
A “traditional” business plan contains a lot of redundant parts that for most entrepreneurs starting out is not necessary, its best to start out simpler and work from there. We recommend a process called “lean planning” when writing your business plan, a lean plan will allow you to rapidly prototype your business idea,
each section can later be expanded to create a more detailed, traditional business plan if required. Lean plans also help solve another problem: many entrepreneurs have such long business plans that they themselves don’t know what is going on in there.
Before I go any further let me be clear:
A business plan is not worth the paper it’s printed on if you cannot execute on those contents. So those long multi-page business plans that people walk around with but they don’t know the contents are useless. A business plan is also not necessary if you are able to work from memory. None of what I write here is necessary if you can work from memory. I hardly use business plans, nor do I use it the way most people do like its some kind of magical document that is somehow going to make them rich.
We don’t need long business plans for the simple fact that banks don’t lend startups in SA. It does not matter how good your business plan is, if you do not have existing income or sufficient assets to put up as collateral you will not get finance for a business venture or startup in South Africa. Same as no matter how bad your business plan is a bank will lend you money for a start-up if you have sufficient assets to put up as collateral (they don’t really care what the money is far as long as the loan is secured). Here we believe in starting a business based on the resources at hand. If you need to raise a lot of money for a startup you won’t get much help here. This is not something anyone here can help with as it deals with South Africa’s macro environment. Use your vote wisely next election time. Anyway, let’s get to business…
What we will be doing is:
Find a business idea
Look for opportunities
Cost and price goods and/or services
Market and sell goods and/or services
These six steps will be broken down into about 100 steps.
Lean business plan format
1. Value Proposition
2. Market Need
3. Your Solution
5. Target Market
6. Sales Channels & Marketing Activities
7 Operations: Resources & People
8. Financials: Budgeting & Forecasting
9. Funding Needs & Use of Funds
How the business plan fits into Smuse
Smuse internal framework is divided into four parts:
Starting a Business
Running a Business
Growing a Business
Funding a Business
The business plan fits in as follows:
Starting a Business
– Value Proposition
– Market Need
Running a Business
– Your Solution
– Target Market
Growing a Business
– Sales Channels & Marketing Activities
– Operations: Resources & People
– Financials: Budgeting & Forecasting
Funding a Business
– Funding Needs & Use of Funds
Putting it all together. I have tried to streamline this process to make it as “step-by-step” as possible, but due to the dynamic nature of business, it is very hard to find a “one size fits all” solution, depending on the business you would be coming back to certain points you already passed.
Starting a Business
1. You come up with a business (idea you want to start) [using the khoi.biz network: Khoi Capital, Side Business, Niche Business, Luxury Business, Township.biz etc.] – Business Idea
2. Then you research understand the industry the business is in (making sure to spot any available gaps or niches in the market). Making sure you know what skills, equipment and materials you need to carry out your value proposition and business model. (Supply Value Logistics Chain)
4. Then you write the Value Proposition of your business plan
5. Then you determine what exact problem your value proposition solves (refine value proposition if you have to) (Problem Worth Solving)
6. Then you write the Market Need section of your business plan based on the problem you are solving
Running a Business
7. Then figure out how you will be solving that problem (Business Model)
8. Write down the “Your Solution” part of your business plan going into detail about your solutions/offerings
10. Day to day running of the business (Business Management)
Growing a Business
11. Then you decide where you are going to sell Your Solution to your Target Market (Sales Channels)
12. Then you have to figure out how you are going to tell your Target Market about Your Solution to their problem and get them to your Sales Channel (Marketing, Advertising & Sales) in order to write the Sales Channels & Marketing Activities section of your business plan.
13. Then you need to figure out what you need to carry out your Value Proposition / Solution and to grow (Operations: Resources & People)
Funding a Business
15. Then you fully assess the resources/money you need to start, run and grow (Funding Needs & Use of Funds)
You now have the primer. You can now start on your business plan:
How to Start, Run, Grow & Fund a Business in South Africa (using what you currently have)
The first step to using Smuse to Start, Run, Grow and Fund a Business in South Africa using what you have is to understand what is going on [Framework]. You have to read, apply your mind, process and understand the framework. Read the next section on mindset [Mindset] if you feel the need to cut corners to see the problem with this mentality. If you feel that your mindset is not right you are unlikely to find success with Smuse as Smuse helps people to help themselves. If you don’t have the willpower then Smuse can’t help you.
Once you have assessed your mindset and rid yourself of whatever limiting beliefs you had, the next part is to understand the business plan format [BusinessPlan] we use, we use a planning technique called “lean planning”, that will not only help you quickly prototype your business but you will also understand what is going on. On our home page, each component of the business plan has the prefix of Write/[BP].
Assess if you have the following mental barriers that will limit your ability to succeed in business:
1. 1. In order to make a success of your business you need to be free of any mental barriers, in other words you cannot feel sorry for yourself.
Poverty Mindset – “I am poor, I will always be poor. I cannot change…”
Spirit of entitlement – “I am owed something…”
Dependency syndrome – “the government must give me a job…”
Psychological projection: blaming others for your problems
2. You should have work ethic
3. You should not live beyond your means / Live beyond means mindset
Lack of Morals & ethics
You cannot start a business with a poor mindset, without work ethic AND live beyond your means. You can have a maximum 1 of the 3.
I will deal with number 2 and 3 quickly. But I suggest you read the whole section here.
A combination of a lack of work ethic and living beyond means will lead to a desperate or greedy entrepreneur, one that wants to cut corners. If you scanned over the above document to get here without reading it, that’s probably not a good sign. This mentality is what causes a lot of businesses to fail and keep people poor. People who live beyond their means seek quick solutions; cut corners and look for get rich quick schemes. This is not the right place for you.
Even if you were poor for 50 years and did nothing about it. And you start a business now. The clock starts running now you are not owed for the 50 years.
1. Value Proposition / Description / Identity
A one-sentence description of your business. Describe the gist of your business. This forces you to hone in on what you do and what’s special about it.
2. Market Need
The “problem” your product is responding to by being in the market. No market need = no need to market your product. If you’re not sure, ask your customers/potential customers why they like your products. You’ll get your answer.
3. Your Solution
A description of your products/services (you can add photos if you want). Describe your product and why it’s so great. Think what you’d say if someone asked you “what do you sell?”
Who else in the market is doing similar things and why your products are better? Think about who your customers will buy from (or do buy from) if your products didn’t exist. Knowing your competition is as important as knowing your customers.
5. Target Market
Who buys your products/services (or will buy your products/services)? Be specific about who buys your products (ex: gender, geography, age, shopping habits, etc). Segment your markets if you plan on reaching them differently.
6. Financials: Budgeting & Forecasting
How much does it cost you to produce one of your products? How much do your products cost, how many of them will you sell this year, and how will I make a profit? How much does it cost you to make/market your products? How much do you plan to sell in a given time period? These questions will help you develop your financials.
7. Sales Channels & Marketing Activities
Sales channels: This is where you will sell your items. Example: Your online shop is a sales channel. Perhaps you also sell at a local boutique or craft fair, and your goal is to land several wholesale accounts. It’s good to have multiple channels.
Marketing activities: How do (or will) you market your products? Examples: Search ads or advertising on a design blog. You may need different activities for each market segment.
8. Operations: Resources & People
The resources and people you have, need and want to start, run and grow your business.
9. Funding Needs & Use of Funds
How much money you need to launch or grow your business, and what specifically will you use the funds for in your business? You may need some funds (even if not a lot to purchase materials). Be sure you understand how those funds will help you.
As with the executive summary don’t get caught up in fancy words such as “value proposition” or “problem worth solving”. This is just to help you think more creatively with regards to competition. Almost any business out there will have existing competition, when thinking about adding value you think about doing things in a better way. The same thing with solving a problem, people often say a business has to solve a problem to be viable but some entrepreneurs take this literally as in they must be overcoming a bad situation, no this is not the case. If I don’t have space in my freezer for an ice tray (an actual problem that I have) and I want to drink an ice-cold whisky and coke, then I have a problem: having to drink warm drinks. How is this problem solved? By people selling bags of ice or by people selling a slimmer ice tray which will fit in my small freezer.
Another thing you might have noticed is that we did not include management in the business plan. A lot of “common sense” is left out of a lean plan. People often have a business plan and then they have a “working plan” where they go into the nitty-gritty of the day-to-day management. To me personally day-to-day management is common sense:
- Work must get done correctly in a timely manner and within budget.
- All business records (expenses and income) must be maintained accurately and kept up to date.
- You need to pay your bills, suppliers and staff when due and you need to collect whatever money is due to the business.
- Staff must be managed to make sure they are doing their jobs and not doing things that are detrimental to the business, but also kept happy like by being paid on time.
Those are all common sense and should be standard in any business. A lot of people also add sensitive information (that gives away too much) to a business plan that should be kept confidential. Once the business is larger then a more comprehensive planning, organizing, leading, and controlling (P-O-L-C) plan can be developed. I also don’t cover cosmetics like coming up with a business name, logo and corporate identity design, how important those are in our context is debatable. Again better to have an actual business with a simple name and logo than no business with a fancy name and fancy corporate strategy.
Come up with business idea
The next part is to come up with a business that you want to start [Business Idea Generation] (you can use Khoi Capital, Niche Business, Luxury Business, Township Business or Side Business to help you generate a business idea). If you still cannot come up with a business idea you can use the Khoi.biz community “Business Idea Generation” section to help you come up with an idea.
Understand business & Industry – Supply Value Logistics Chain
Then you need to study the chosen business’s Supply, Value & Logistics Chain [Supply Value Logistics Chain]. This will help you understand the industry you want to enter and where you fit into your value chain (the skills, equipment and materials needed to carry out your value proposition). You should also try to find a gap or niche [Prerequisites] that is not very competitive.
Test business idea
When you know what business you want to start and understand the industry and what is required, you then need to test your suitability for the business [Test Idea Internally]. To see if the chosen business is right for you, you can use Effectuation Theory.
This is where you stop and analyse if you have the capabilities or know someone and have the resources to carry out the value proposition.
If you do not have the capabilities and resources to carry out your desired business, you need to go back to effectuation theory and:
– If you run into problems leverage contingency to come up with a plan b that will work (Lemonade principle)
– If you still cannot do it on your own – establish partnerships to enter an existing value chain (Crazy Quilt). See business circles to help you find partners in your value chain.
If you reach this point and you still cannot find the capabilities and resources, then it’s time to start over, perhaps at a lower point of your supply value logistics chain
Make sure you know what you can and cannot change in your chosen business (Pilot-in-the-plane)
Write Value Proposition
Now is the time to write the first section of your business plan: Value Proposition [Value Proposition]. Describing the gist of your business.
Test Market (for Value Proposition)
Then you need to refine your business idea to establish the problem you are solving. Why do people need your product/service? Do they really? [Problem Worth Solving]
This is the external testing of the idea/value proposition (Idea Validation). Depending on the outcome rewrite the Value Proposition if you have to.
Write Market Need
If you are satisfied that your product fulfils a need or a want, you can write the next section of the business plan: Market Need [Market Need]. The “problem” your product is responding to by being in the market.
If you run into any problem’s with the above, use the Khoi.biz community “Help with Business Ideas” section for help. Only once you have already done your supply value logistics “homework”.
Determine Business Model & Write Your Solution
Next, you need to add your value proposition and market need together and determine your [Business model]: how you are going to make money. How you are going to be positioned within your industry’s value chain. You have already established the problem you are solving, now you are establishing how you are solving that problem to write the “Your Solution” [Your Solution] part of the business plan.
Here you can use Porter’s Generic Strategies to determine a primary business model: are you going to be a:
Focussed Low-cost Provider
Business Strategy & Write Competition
Then determine your business strategy [Business Strategy] which is how you are going to achieve your objectives outlined in the value proposition business model / your solution considering your competition [Competition], you can use Porter’s Five Forces to guide you: a method for analysing competition of a business.
Threat of new entrants – Profitable industries that yield high returns will attract new entities. New entrants eventually will decrease profitability for other firms in the industry. Unless the entry of new firms can be made more difficult by incumbents
Threat of substitutes – A substitute product uses a different technology to try to solve the same economic need.
Bargaining power of customers – The bargaining power of customers is also described as the market of outputs: the ability of customers to put the firm under pressure, which also affects the customer’s sensitivity to price changes. Firms can take measures to reduce buyer power, such as implementing a loyalty program. Buyers’ power is high if buyers have many alternatives. It is low if they have few choices.
Bargaining power of suppliers – The bargaining power of suppliers is also described as the market of inputs. Suppliers of raw materials, components, labour, and services (such as expertise) to the firm can be a source of power over the firm when there are few substitutes.
Competitive rivalry – For most industries, the intensity of competitive rivalry is the major determinant of the competitiveness of the industry. Having an understanding of industry rivals is vital to successfully marketing a product. Positioning pertains to how the public perceives a product and distinguishes it from competitors‘.
Write Target Market
And factor in your target market [Target Market]. Starting with a primary target market: B2B, B2C, B2G, B2M, C2C and narrow it down from there to more specific metrics.
Day to day management
Business management is implementing value proposition, solving the problem, executing on the business model, organising, planning and directing your strategy to accomplish your goals.
How you will market and sell products, write Sales Channels & Marketing Activities
You know your strategy, which will have a bearing on where you sell your product or service [Sales Channels] whether brick and mortar or online. And your target market will dictate the types of marketing activities [Marketing, Advertising & Sales] you use to get your product or services in front of them. This will be used to write the Sales Channels & Marketing Activities part of your business plan: How are you going to communicate the benefits of your value proposition and business model to your target market. How you are going to get your target market to your sales channel to buy your product or service.
Business Operations: Putting all the above together.
Now you look at the resources and people that you have, need and want to execute the vision you have set out above.
Then you look at the financials: budgeting and forecasting. This with resources and people needed will partly determine your funding needs.
Funding Needs & Use of Funds
Look at the initial funding [Initial Fundraising] needed to start, the working capital [Working Capital] needed to run and the debt [Debt] and equity [Equity] sales that may be needed to grow the business.