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SMEs - survivalist start ups in South Africa present a unique problem

Guest post by: Dr. Rob Smorfitt

Article Overview: Problems associated with survivalist start ups in South Africa.

SMEs - survivalist start ups in South Africa present a unique problem

Government efforts to stimulate entrepreneurship would appear to have made some impact, as the number of people seeking finance for their ventures has most definitely increased.

The problem is that many of these people have absolutely no previous experience or knowledge of the business in which they intend to invest the money loaned to them, nor do they often have any work experience, or any form of exposure to the intended business.

This is often reflected in their HR plans / org charts, which often indicate themselves as CEO, a manager or two and a host of employees. They all see themselves heading up a "small empire" of at least 4 or 5 people. The problem is that they want to manage what they do not understand, and often a business that could hardly sustain much more than 1 or 2 people. Sales are simply edited to ensure a profitable business.

The truth is that many of these people are survivalist entrepreneurs. They cannot get jobs, and this is their last option for survival. The situation is confused by the fact that they are literate and educated, often have management diplomas, or have attended one or other business course, so they talk as though they are experienced. They also have expectations of owning a big business. Often they want a business that will make them millionaires overnight.

These people present a different problem to that of the survivalist who is older, a family breadwinner, yet uneducated and often illiterate.

While the government sees entrepreneurship as a solution to this problem, the solution is better suited to the survivalist who is older and illiterate than to the younger educated survivalist. Simply because the older illiterate person has lower expectations, and therefore they are more likely to succeed.

These young people need to learn to lower their expectations and start at the bottom. Most of the entrepreneurs I know , including myself, started as one man operations doing everything. It was only once we became more experienced and had built up our capital, that our new ventures started with staff.

South Africa faces a tough problem resolving this problem!
Rob Smorfitt

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Article Tags: entrepreneur, entrepreneurship, new venture creation, SME, SME development, SMME, Smorfitt, South Africa, startup



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Re: In-House or Outsource? - Unfortunately, in the South African context, very few SMEs see outsourcing as an option. They believe it is too expensive, and they are paranoid that someone will "steal their ideas". I believe that the three main functions that cannot be outsourced are marketing, sales and strategy. These must be done in house I believe. If you do not have the marketing skills then get them. Hire a consultant or attend a course, but get the skills. Even if you use a consultant, you need to understand what marketing is about, as no one knows your market like you do. Marketing is made to seem difficult and complex, but everyone who really understands their markets, can easily learn to do their own marketing. In South Africa, labour legislation is extremely inflexibile, and consequently labour broking is a large industry. This is an ideal starting point for SMEs in South Africa, as it is a legally complex area, whih comes with severe penalties. I say do it! Rob Smorfitt
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