NEWSLETTER | WOMEN IN MOTION
Anyone who tells you that managing a business is easy has clearly never had to manage one! The marketplace is competitive, and it is only those businesses that show a strong grasp of the fundamentals that will survive – particularly in these tough economic times.
Whether you are managing your own business or climbing the corporate ladder in the business you work for, it is important to realise that organisations the world over operate on the basis of a number of key principles. The better your understanding of these principles, the more success you will achieve in your business. If you pick up any business book, you will find tips on the do’s and don’ts of business. We cover some of the most important ones here.
by Salome Smit
Making Sense of Marketing
Marketing gurus agree that a business looking to expand should spend around 10% of its total revenue on marketing. That means that, for every R10 you make, R1 must be spent on marketing. Given this extremely high percentage, it should come as no surprise that marketing your business should be at the top of your priority list.
Before you even begin planning how to market your business, you need to do some thorough market research. Market research involves gathering and analysing information in order to answer some specific questions. These questions could include the following:
Who are my customers?
What are the characteristics of my customers in terms of age, gender, location, income level and so forth?
What do my customers want and need?
Who are my competitors?
There are companies that offer a dedicated market research service, but you can go a long way yourself if you know what you are looking for. For example, by spending a few minutes talking to customers and asking more about them, you can already get a good idea of what your customers are like. You could also develop a questionnaire or survey with some key questions that you hand out or e-mail to your customers.
Once you have a better understanding of who your customers and competitors are, it is time to put together a marketing plan. This plan will set out all your planned marketing activities for a particular period of time, such as a year. It also allocates costs and deadlines to the various activities, and describes milestones to be achieved.
When you put together your marketing plan, remember to take all forms of marketing into account, since some are expensive while others are cheaper but also effective. For example, paying for advertising in a local newspaper can be very expensive, while using social media such as Facebook and Twitter is time-consuming but not necessarily cost-intensive. However, always remember who constitute your target market – if you sell a product or service to people over 50 years of age, for example, social media might not be the way to go.
Budgeting for Profit
When you allocate anticipated costs to various activities in your marketing plan, you are in fact budgeting for them. Most activities in a business have a cost associated with them, and you will need to find out what these costs are and whether you are going to be able to cover them.
A budget is an annual financial plan that allows you to stay in control of your expenses. The first step is to determine what money will be going out of the business each month. This will include the fixed costs of your business (such as the monthly rent and utilities), wages and salaries, vehicle and petrol costs, printing and stationery, and any other expenses you have on a monthly basis.
You will also need to take into account the direct cost of sales – in other words, what it costs you to make your product or service. This could include the cost of material, subcontractors and subcomponents.
Once you know how much money is going out of your business each month, you need to determine how much will be coming in each month. You need to estimate how much of your product or service you are going to sell, and input this figure into the budget. If you are concerned about planning a full year in advance, don’t worry: you need to review your budget regularly to make sure that you are still on track, so you can revise figures where necessary.
If you compile a proper budget and stick to it, you will be able to anticipate cash flow problems in advance. Also, a detailed budget is a very useful tool for planning ahead, since you will be able to determine whether you have enough money to spend on things such as a big marketing event, a strategic retreat, an upgrade of your office space and so forth.
Working with, Not against, the South African Revenue Service
As much as businesses detest parting with their hard-earned profits, the old adage is true: the only things in life that are certain are death and taxes. Whether you like it or not, paying taxes to the South African Revenue Service (SARS) is simply a must, since not paying may see you lose everything you have worked so hard for, or even ending up in jail.
One of the most important things you need to do is include payments to SARS in your budget. SARS makes information on Pay As You Earn (PAYE) available on its website, so you will be able to determine exactly how much PAYE you need to pay for salaries and wages. Also, Value-Added Tax (VAT) is fixed at 14%, so work this into your budget.
For other payments – such as capital gains tax, company tax and payments related to the Skills Development Levy and Unemployment Insurance Fund – it may be worthwhile setting up a meeting with a tax consultant or accountant. However, these payments should also be reflected in your budget. The tax consultant or accountant will also be able to explain to you any possible tax benefits, since small businesses in particular are entitled to certain income tax benefits.
Using a tax consultant or accountant is not cheap, but the benefits usually outweigh the costs. The penalties and interest incurred on late tax returns or provisional tax payments can be substantial, and the consultant or accountant will also deal with SARS on your behalf. But, remember that you remain liable for your taxes – if the consultant or accountant makes a mistake, you will still need to face the repercussions.
Remuneration Structures That Work
Unless your business is really small, you will probably be working with others – either as their boss or as their colleague, depending on whether or not you own the business. These people don’t work free of charge; they expect remuneration. However, contrary to what many people believe, employees consider a range of factors other than the basic salary when deciding whether or not to work for a business.
Obviously, an employee’s direct remuneration is the key factor in his or her decision as to whether or not to accept the employment offer. Direct remuneration is the salary or wage paid by the business, and, when you decide on this amount, you will need to take a number of factors into account, including:
The salary or wage paid by other businesses in your industry.
he nature of the work.
The experience required on the part of the employee.
What your business can afford.
How long the employee has worked in the business.
Direct remuneration is important, but, in this day and age, most people are very aware of their work–life balance and the perks offered to them by employers. These perks are called indirect remuneration, and they include aspects such as leave, insurance, housing and car benefits. If your business cannot afford to pay a market-related salary, you could consider using indirect remuneration to enhance the employment offer.
For those employees who are going above and beyond the call of duty, a reward system can be very motivating. Such rewards could include a salary increase based on work performance or bonuses and other perks such as paid holidays. No matter how you design your remuneration structure, just remember that employees look at the total offer – not just the basic wage or salary.
Negotiating Labour Legislation
South Africa has some of the most progressive labour legislation in the world. This legislation protects employees and also places a number of requirements on employers. There are a number of important pieces of legislation that you will need to familiarise yourself with, particularly the Basic Conditions of Employment Act. However, here is a summary of some of the basics:
All applicants for a job must be given an equal opportunity to get the position, so you need to keep a detailed record of why certain applicants were unsuitable for the job. Similarly, you need to keep a record of everything you agree on once the applicant has been employed, such as a change in job description.
Labour legislation lays down certain requirements regarding the nature and safety of the workplace, as well as working hours and overtime.
The employer is responsible for training. If an employee is not achieving a certain work standard, it is the employer’s duty to try to rectify this through appropriate training.
There are formal procedures that need to be taken to dismiss an employee. Every business needs to develop a disciplinary code that takes into account labour regulations and which explains the actions that will be taken by the business in cases of ill discipline. Again, it is very important to document all stages of the disciplinary process.
To Tender or Not to Tender
Winning a tender from a public company or government department can be a good way of growing your business. These tenders usually involve supplying goods or services for a period of time, such as a year or two years, so being awarded the tender could assure you of a fixed amount of income for a period of time. But, despite what you may have heard about tender-preneurs, applying for a tender is a complicated process.
Tender advertisements can be found on the Internet, as well as in regional and national newspapers. The advertisement usually contains only a brief summary of the nature of the tender, for example:
The company or department issuing the tender.
The product or service required.
The deadline for submission of the tender documentation.
Where tender documentation can be obtained.
The contact details of the person to whom questions can be referred.
With regard to the tender documentation, this material is sometimes made available freely and on the Internet. However, in other cases, the material needs to be collected in person from a specific office, and sometimes a fee is payable for the documentation. You need to read through the tender advertisement carefully to make sure that you know exactly where to obtain the documentation.
Some tenders require that you attend a briefing session. The date and time of, and venue for, the briefing session will be provided in the tender advertisement, and usually businesses that don’t attend the briefing cannot apply for the tender. The briefing will provide details on the exact nature of the goods or services required, and you will also be afforded the opportunity to ask questions on anything that is unclear.
Once you have the documentation, the real work begins! Tender documents can range from 20 pages through to hundreds of pages, depending on the complexity of the work required. You will need to read through all the material and fill in the information required of you. Also, you will probably need to supply quite a number of documents with the completed tender material, such as company registration certificates, black economic empowerment (BEE) certificates, the identity (ID) documents of the business’s owners or directors, and so forth.
If the tender documents are completed incorrectly or have not been filled out in full, your tender application will not be considered. The same is true if you do not provide all the required supplementary documents. To facilitate the process, it is a good idea to make a check list of what is required. You can then refer to the check list before you submit the documents to make sure that everything is in order.
Finally, the process regarding delivery of the documents is very strict. The tender documentation usually needs to be submitted at a particular location, on a particular date and by a specific time. Late documentation will not be accepted.