Travel & Leisure Magazine Award Winner Dan Austin Video Shares Tourism Website Marketing Tips

Travel & Leisure Magazine Award Winner Dan Austin Video Shares Tourism Website Marketing Tips

Do You Make These Travel Business Marketing Mistakes?

Do You Make These Travel Business Marketing Mistakes?

Using SWOT Analysis to Develop a Marketing Strategy

Using SWOT Analysis to Develop a Marketing Strategy

The Family Pharmacy, A Dream Deferred

Michael Gerber, the world renowned small business consultant of the E-Myth fame, makes a distinct distinction between a personal dream and an impersonal dream. While a personal dream focuses on the needs of the dreamer and is short-lived, the impersonal dream is about making a difference in other people’s lives and is the ultimate force that drives the creation of world class companies like Apple, Microsoft, Coca Cola, DHL, McDonald's.

Kayakazi Hanise, a well qualified and highly experienced pharmacist with more than 10 years retail pharmaceutical experience under her belt, set out to build a world class retail pharmacy in East London. Driven by her dream of providing low to middle income communities in East London access to affordable, over the counter and prescription medicines, Kayakazi roped in consultants to help her put together her business plan. She submitted the completed document in the first half of 2009 to the Eastern Cape  Development Corporation (ECDC) to apply for start up loan finance . The application was rejected because the business plan was supposedly not addressing their requirements.

While waiting for ECDC's response to the second submission, she found premises next to 3 major taxi ranks. She decided she was going to sign a lease agreement to secure the premises for her business and hoped approval  for her loan application would come soon. Unfortunately for the entrepreneur and her dream, the loan application was rejected again because they said the business plan was inadequate. The entrepreneur in her took over and decided to take the all-important leap of faith, with or without the loan. If she carried on waiting for external finance, she reasoned, she would one day wake up to find all her savings gone with no loan on the horizon. Already R50,000 had been spent on consultants and rentals for the vacant premises.  And lots of valuable time, just over a year, had been lost while waiting for the rain that never came.

Kaya brought in carpenters to fit her new shop with the necessary store shelving. She bought stock from suppliers for cash and acquired a POS system to help her manage her sales, stock and procurement from suppliers. She then hired an assistant and opened for business in early January this year. In all she had spent close to R300, 000 of her hard earned savings. Business was slow in picking up because the outlet lacked visibility. She approached medical practitioners in her vicinity to ask them to refer their clients to her for prescription medicines. In no time she had 15 doctors referring their clients to her pharmacy to buy their prescription medicines. In addition, visibility was growing and foot traffic was slowly building.

Things seemed to be going well. Sales were growing albeit slowly. Customers were trickling in to buy, however, half the time they were not getting what they wanted because stock was not adequate. The sales were not enough to replenish supplies (costs were growing faster than income) and suppliers were not willing to provide credit because the business was new.

It is at this point that I was introduced to Kaya. She made an impression on me from the word go. Here was a professional woman who was giving up her career with all its goodies to pursue an entrepreneurial dream. Not that there are no others like her, surely there are, but what really made an impression on me was the equity, financial and otherwise, that she was putting into her business idea. As small business development practitioners we, as my collegues will agree, meet a lot of aspiring entrepreneurs some with great ideas who have no resources to back up their ideas. This is a problem to funders because they read lack of commitment when an entrepreneur says they have no financial contribution to make. And they read high risk too because if you cannot risk your own money it might mean your belief in your business idea is not rock solid. Any sign of doubt on your part no matter how small makes funders reluctant to open their wallets. To me, Kaya was the ideal funding prospect: she had invested her own savings in starting the business, the business had premises and a lease agreement was in place, it was generating sales, however small, the market was responding positively, Kaya had more than adequate technical skills required for a retail pharmacy, and she owns property in Gonubie, an upmarket suburb, which we thought would suffice to serve as as security for the loan. All she needed now was R150,000 working capital to buy stock. Surely, what bank would not see such an opportunity, I asked myself. To me, it was a given her application would be  considered favourably.

We quickly put together a business plan and presented it to Business Partners, ECDC, Standard Bank and Nedbank. Business Partners quickly responded and told us the retail pharmacy market was not doing well and add to that Kaya did not have enough security to cover her R150,000 loan request. Maybe a word about this can paint a clear picture of the security issue. Kaya has a house in Gonubie, an upmarket suburb in East London. She bought the house in 2005 for R700,000. In December, 2010 she had the property evaluated.  The market value was estimated at R900,000. This means the equity she had in the house was R200,000. However the banks calculate what they call the forced sale value, which is what the property would likely realise if it was auctioned. According to this calculation, the security cover was not enough. And when we suggested getting security from the Khula Guarantee Scheme, we were politely told that khula seemimgly does not honour its commitments and therefore was not an option.

Standard Bank was very disappointing, not because they turned us down but because they were not responsive. Kaya has her business bank account with Standard Bank and we assumed that there were our first logical point of call. The property had also been bought through Standard Bank. We assumed the bank had a relationship with  her considering her excellent repayment record. We submitted the business plan on April 13, 2011 and were referred to a business banker who would assist. We tried to get an appointment with the banker a number of times and we were told different stories every time. We eventually gave up and started looking elsewhere. The business banker only started showing interest in mid July 2011 and by then, disappointed and dejected, Kaya was closing shop hoping that she would live to fight another fight in another day. As they say, we spend so much time waiting for the doctor by the time they arrive we are dead. PS. They also wanted additional security that she did not have, ooph, there is no winning.

Nedbank was very promising but were discouraged by the late payment of accounts record that was beginning to show as the cash flow distress intensified. I would have thought it was easy to understand that Kaya was falling behind on account payments because the business was not generating enough cash flows on time. This, after all was the reason why she wanted to get finance: to buy stock so as to build sustainable cash flows. Nedbank could not have any of that. Someone said banks are the biggest obstacle to small businesses, their clients are micro and small businesses but their processes are bureaucratic'. And he went further to demand that there be special rules for banking, tax and registration for small businesses. You said it all Bruce Wade, thank you.


By the beginning of June, the pharmacy was only selling what was in store. Basic essential items were out of stock. Kaya's reserves were drying and the sales that were coming from the pharmacy were hardly enough to replenish stock, pay the rentals and other accounts.



Yola, Kaya's first son is studying sports medicine at the University of Johannesburg while Vuyo , her second boy is doing standard 9 at Selborne College in East London. Up to last year, the boys had the best of everything for a middle income family. They were happy when their mother told them she was going into business. Little did they realise the magnitude of the sacrifices they were going to  have to make in the short to medium term. By June Kaya's reserves were drying and the lifestyle that the family used to enjoy was quickly slipping away. Tensions were building in the family. True to Michael Gerber’s words, her frustrations grew and the only way she could deal with them was to remember the thought that one day when everything is working well she will ... then will she be able to do the good things a business of your own is supposed to make possible. Meanwhile the good things never materialised, instead she was behind with her bond instalments, her credit cards were exhausted and instalments were outstanding, Vuyo and Yola were, as all boys their age do, demanding their life back, a life that was taken away by this business. Family pharmacy eventually closed its doors for business on July, 31 2011,7  months into its life.

I believe very strongly that, like in other developing and even in developed countries, micro and small businesses need accessible financial support from dedicated state funded financial institutions.  The small business financing landscape in the Eastern Cape is particularly bad. While the NYDA (formely Umsobonvu), and other developmental agencies in Gauteng, KwaZulu Natal and in the Western Cape are more responsive to the financing needs of micro and small businesses in those regions. I still have to see an Umsobomvu (now NYDA) funded small business enterprise in East london and Mthatha. Not all micro and small business initiatives have the potential to grow into viable and sustainable businesses that serve the interests of communities, however for those that can demonstrate that potential, let them be given the chance.

Kayakazi Hanise
Mobile 076 202 7932
Email:kayha@webmail.co.za

This story is told to give a face to the countless impersonal great dreams that are not allowed to grow beyond infancy. It is a great cause of concern to waste away people who are demonstrating commitment by investing financial and sweat equity into their business ideas.

Can all honourable citizens stand up and be counted, Kayakazi is waiting for your call.



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The BBSDP, another Resource for Entrepreneurs in South Africa

Last week I attended a Department of Trade and Industry (Dti) workshop at the Eastern Cape Development Corporation better known as ECDC. Our hosts, Donald, assisted by Vhutsilo took us through the presentation in which they outlined what the Black Business Supplier Development is and how it works.

The objective of the programme is to leverage the competitiveness of black owned enterprises to broaden their economic participation. In layman terms, this means providing support to improve the ability of these targeted enterprises to compete in the market.  In the process, this should help them to be viable and sustainable.

What support is provided?

Black owned enterprises that require loan finance can access the programme to finance the development of their fundable business plans. This is much like the small business support programmes provided by SEDA, Khula and NYDA. A lot of emphasis needs to be put on FUNDABLE.  In my work as a small business advisor, I have seen the mass production of business plans, much like making fat cakes for sale at your local spaza shop. The difference is that in most instances the fat cakes are quality & they will literally fly off the shelf before the end of the morning. The mass produced business plans on the other end are cut and paste jobs, which are not worth even the paper they are written on.

The BBSDP also provides financial assistance in the form of grants to black owned enterprises up to R1 million. The grant provided is linked to the turnover of the business. It can be used to buy production assets such as tools, equipment and machinery. We were told the turnaround time for an application is 4 to 6 weeks, however from experience you are better advised to read that as 4 to 6 months, and I mean exactly that.

Other forms of support include assistance with the development and implementation of management systems. This is an excellent intervention considering that, according to the Nedbank Small Business Seminar, 82% of South Africa businesses that fail do so because of internal factors such as poor management, poor bookkeeping and record keeping, poor cash flow management, lack of sales and marketing systems and poor staffing. The other 18% fail because of factors external to the business such as poor economic conditions. The programme also assists enterprises in the development of and implementation of quality management systems, the purchase of accounting software, and skills training in business management, tendering and contracting.

Corporates require their suppliers to be BEE verified so that they are able to score points in their BBBEE scorecards. The BBSDP provides assistance with BEE verification and getting a BEE Certificate. For small businesses with turnovers below R5 million, the process to get a BEE certificate is very simple and costs about a grand. A cost benefit analysis would indicate that it is cheaper to self-finance your BEE certificate than going through the sometimes very cumbersome Dti processes, but again, some may see it differently.

How is this all done?

Network Facilitators are the foot soldiers of the BBSDP. Trained facilitators are tasked with identifying black owned businesses in need, carrying out assessments to determine the nature of the need, qualifying the enterprise, determining the required intervention and its scope and recommending required interventions. The Dti is currently looking for suitable people to train as Network Facilitators. If you are interested you can log on to the Dti website at www.thedti.org.za and download the application form, the closing date is 30 September, 2011.  The training carries a fee of R3,600 to ensure commitment, we were told. Personally I think this fee could be shared, with the service provider paying maybe half and the Dti subsidising the other half. Capacity building in the small business development sector is very minimal yet the challenges are enormous. Experienced small business practitioners would rather work for the big firms or work only with established successful businesses. The many practitioners who are servicing the lower end of the market which cannot pay for business advisory services require capacity building programmes to be more effective and productive. Yes I agree they benefit in terms of more business for them but the benefits to small businesses are even greater. A Dti that delivers on its mandate is a direct benefit derived from capacitating small business development practitioners.

Who qualifies for this programme?

To qualify, enterprises must have a 51% black majority shareholding, a turnover of between R250,000 to R35 million per annum, must be an existing business with over 1 year in operation and 50% of management positions held by blacks.

I hope this article will help my readers access this most important resource. I also look forward to sharing ideas with small businesses and development practitioners working in South Africa and the continent. Drop me an email if you need clarity on any issues developmental.