After surviving the first few years as a start-up, things may be running smoothly. But, warns SANDRA SWANEPOEL, Vice President for Midmarket Africa at Sage, if you want to grow you will have to start implementing strict business processes.
You conduct your performance reviews over a casual lunch or coffee meeting with employees, get expense reports and payroll done on Saturday mornings and record customer information on spreadsheets. You have survived your first few years as a start-up, and business is on the up and up.
The last thing you feel like doing is complicating things by adopting formal business processes – after all, that’s what you and your employees hate about big corporations – restricted agility and unnecessary complexity.
The reality, unfortunately, is that unless you can support growth from a processes point of view, your business will stagnate. There comes a point when your customers will start having higher expectations from you. Your employees will, too.
To survive, you’ll need to have suitable software systems in place, start documenting policies and formalising other aspects of the business to ensure compliance and productivity and reduce the risk of reputational damage.
What you will gain
Done well, formalising the company’s structure and processes gives management better visibility and control of the organisation’s finances, speeds up paperwork, and helps align everyone in the company behind its values and strategy. It can be good for employee morale because people will feel confident about their purpose and responsibilities.
What you stand to lose
Resisting the need to formalise processes could harm customer service, make it hard to comply with various laws and regulations, and restrain the company from reaching its true potential in terms of profitability and revenue. It could also make it difficult to monitor your team’s performance or leave gaps for reputational risk, human error, insider fraud and other risks to creep into your day-to-day operations.
How to tell when the time has come
Here are three signs that it’s time to formalise your business processes:
1. Your headcount is growing rapidly
As your turnover and headcount grow, so do your responsibilities in terms of legal and regulatory compliance. The tipping point usually comes at a turnover of around R5 million and a headcount of more than 50. For example, the Companies Act exempts smaller, owner-managed companies in South Africa from needing an external audit. The act provides a Public Interest scoring system, taking into account how many employees you have, your revenues, your liabilities and your external shareholders.
As your business grows, you may need to meet the tougher demands of an external auditor, which will be far easier if you have a proper business system and formal processes in place. Likewise, it will become subject to requirements such as the Employment Equity Act and Broad-Based Black Economic Empowerment Codes and regulations. Compliance with these will be much easier with formal processes in place.
Quite apart from the compliance angle, a larger headcount and turnover means that managing your business by filing papers in a shoebox or chatting to employees over the tea break will become increasingly impractical. To remain in control, you’ll need to do things in a standardised and consistent manner and ensure that you can monitor financial and operational performance. Formal processes and systems are also essential to HR functions such as performance appraisals, succession planning and career paths.
2. Your business is multifaceted
If you run an intricate, geographically dispersed or heavily regulated business – for example, certain forms of complex manufacturing or financial services – you may need to fast-track formalising your business processes. Your customers and funders will demand it and you’ll need to have the process discipline to deliver accurate reporting, ensure consistent product and service quality, and monitor performance.
3. Your growth is accelerating
Companies cannot afford for their businesses processes, employees and management to fall behind the growth of the company. If growth is accelerating, your company is probably starting to compete with bigger companies that have economies of scale, established systems and robust business processes. That means you may also need to retool your company with formal processes and systems to boost productivity, ensure staff retention and deliver your product or service with a predictable quality level.
It’s about the right solution. If your business has survived to a point where you need more formal systems, you should congratulate yourself. Not all companies manage to survive their first few years; you can consider yourself a business hero because you are helping to grow South Africa’s prosperity. Apart from documenting standards and procedures, one of the keys to ensuring your future sustainability is usually to put systems in place to automate processes.
It is also worth remembering that just as not having the right systems in place can slow you down, so will having a system that is too sophisticated. Often these systems are also expensive and resource intensive, choose your software well, making sure that it fits the maturity of your business
The best system is one that saves time and makes you more agile, with a direct ROI that can be seen as soon as you are live on the product. This is one of the topics that we will be discussing at the Sage Summit as we seek to advise business builders how to reach the next level. The Sage Summit takes place at the Sandton Convention Centre in Johannesburg from 7-9 March 2017.
Online retail gets real
After decades of experience in selling online, retailers still seek out the secret of reaching the digital consumer, writes ARTHUR GOLDSTUCK.
It’s been 23 years since the first pizza and the first bunch of flowers was sold online. One would think, after all this time, that retailers would know exactly what works, and exactly how the digital consumer thinks.
Yet, in shopping-mad South Africa, only 4% of adults regularly shop online. One could blame high data costs, low levels of tech-savviness, or lack of trust. However, that doesn’t explain why a population where more than a quarter of people have a debit or credit card and almost 40% of people use the Internet is staying away.
The new Online Retail in South Africa 2019 study, conducted by World Wide Worx with the support of Visa and Platinum Seed, reveals that growth is in fact healthy, but is still coming off a low base. This year, the total sale of retail products online is expected to pass the R14-billion mark, making up 1.4% of total retail.
This figure represents 25% growth over 2017, and comes after the same rate of growth was seen in 2017. At this rate, it is clear that online retail is going mainstream, driven by aggressive marketing, and new shopping channels like mobile shopping.
But it is equally clear that not all retailers are getting it right. According to the study, the unwillingness of business to reinvest revenue in developing their online presence is one of the main barriers to long-term success. Only one in five companies surveyed invested more than 20% of their online turnover back into their online store. Over half invested less than 10% back.
On the surface, the industry looks healthy, as a surprisingly high 71% of online retailers surveyed say they are profitable. But this brings to mind the early days of Amazon.com, in 1996, when founder Jeff Bezos was asked when it would become profitable.
He declared that it would not be profitable for at least another five years. And if it did, he said, it would be in big trouble. He meant that it was so important for long-term sustainability that Amazon reinvest all its revenues in customer systems, that it could not afford to look for short-term profits.
According to the South African study, the single most critical factor in the success of online retail activities is customer service. A vast majority, 98% of respondents, regarded it as important. This positions customer service as the very heart of online retail. For Amazon, investment back into systems that would streamline customer service became the key to the world’s digital wallets.
In South Africa online still make up a small proportion of overall retail, but for the first time we see the promise of a broader range of businesses in terms of category, size, turnover and employee numbers. This is a sign that our local market is beginning to mature.
Clothing and apparel is the fastest growing sector, but is also the sector with the highest turnover of businesses. It illustrates the dangers of a low barrier to entry: the survival rate of online stores in this sector is probably directly opposite to the ease of setting up an online apparel store.
A fast-growing category that was fairly low on the agenda in the past, alcohol, tobacco and vaping, has benefited from the increased online supply of vapes, juices and accessories. It also suggests that smoking bans, and the change in the legal status of marijuana during the survey, may have boosted demand.
In the coming weeks, we can expect online retail to fall under the spotlight as never before. Black Friday, a shopping tradition imported “wholesale” from the United States, is expected to become the biggest online shopping day of the year in South Africa, as it is in the USA.
Initially, it was just a gimmick in South Africa, attempting to cash in on what was a purely American tradition of insane sales on the Friday after Thanksgiving Day, which occurs on the third Thursday of November every year. It is followed by Cyber Monday, making the entire weekend one of major promotions and great bargains.
It has grown every year in South Africa since its first introduction about six years ago, and last year it broke into the mainstream, with numerous high profile retailers embracing it, and many consumers experiencing it for the first time.
It is now positioned as the prime bargain day of the year for consumers, and many wait in anticipation for it, as they do in the USA. Along with Cyber Monday, it provides an excuse for retailers to go all out in their marketing, and for consumers to storm the display shelves or web pages. South African shoppers, clearly, are easily enticed by bargains.
Word of mouth around Black Friday has also grown massively in the past two years, driven by both media and shoppers who have found ridiculous bargains. As news spreads that the most ridiculous of the bargains are to be had online, even those who were reticent of digital shopping will be tempted to convert.
The Online Retail in SA 2019 report has shown over the years that, as people become more experienced in using the Internet, their propensity to shop online increases. This is part of the World Wide Worx model known as the Digital Participation Curve. The key missing factor in the Curve is that most retailers do not know how to convert that propensity into actual online shopping behaviour. Black Friday will be one of the keys to conversion.
Carry on reading to find out about the online retailers of the year.
Reliable satellite Internet?
MzansiSat, a satellite-Internet business, aims to beam Internet connections to places in South Africa which don’t have access to cabled and mobile network infrastructure, writes BRYAN TURNER.
Stellenbosch-based MzansiSat promises to provide cheap wholesale Internet to Internet Service Providers for as little as R25 per Gigabyte. Providers who offer more expensive Internet services could benefit greatly from partnering with MzansiSat, says the company.
“Using MzansiSat, we hope that we can carry over cost-savings benefits to the consumer,” says Victor Stephanopoli, MzansiSat chief operating officer.
The company, which has been spun off from StellSat, has been looking to increase its investor portfolio while it waits for spectrum approval. The additional investment will allow MzansiSat’s satellite to operate in more regions across Africa.
The MzansiSat satellite is being built by Thales Alenia Space, a French company which is also acting as technical partner to MzansiSat. In addition to building the satellite, Thales Alenia Space will also be assisting MzansiSat in coordinating the launch. The company intends to launch the satellite into the 56°E orbital slot in a geostationary orbit, which enables communication almost anywhere in Africa. The launch is expected to happen in 2022.
The satellite will have 76 transponders, 48 of which will be Ku-band and 28 C-band. Ku-band is all about high-speed performance, while C-band deals with weather-resistance. The design intention is for customers of MzansiSat to choose between very cheap, reliable data and very fast, power-efficient data.
C-band is an older technology, which makes bandwidth cheaper and almost never affected by rain but requires bigger dishes and slower bandwidth compared to Ku-band connections. On the other hand, Ku-band is faster, experiences less microwave interference, and requires less power to run – but is less reliable with bad weather conditions.
MzansiSat’s potential military applications are significant, due to the nature of the military being mobile and possibly in remote areas without connectivity. Connectivity everywhere would be potentially be life-saving.
Consumers in remote areas will benefit, even though satellite is higher in latency than fibre and LTE connections. While this level of latency is high (a fifth of a second in theory), satellite connections are still adequate for browsing the Internet and watching online content.
The Internet of Things (IoT) may see the benefits of satellite Internet before consumers do. The applications of IoT in agriculture are vast, from hydration sensors to soil nutrient testers, and can be realised with an Internet connection which is available in a remote area.
Stephanopoli says that e-learning in remote areas can also benefit from MzansiSat’s presence, as many school resources are becoming readily available online.
“Through our network, the learning experience can be beamed into classrooms across the country to substitute or complement local resources within the South African schooling system.”