Necessity Driven Entrepreneurs

After an interview almost three months ago, I recently found this great article on Necessity Driven Entrepreneurs, and as always, happy to be mentioned.

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Academics call them entrepreneurs motivated by Push factors. We call them necessity-driven entrepreneurs, they have different motivations than opportunity-driven entrepreneurs, and yes, we’re seeing more of them.

Ben Botes, director of program and service delivery at the South African Investors network in Gauteng, said the organization, which encourages would be entrepreneurs to start businesses, has seen so many people who have been laid off that it started a business start-up support program that regularly attracts 30 t 40 people who are looking for a helping hand with both the writing of their business plan as well as the crucial are of finding start-up finance. In 2009, attendance at the Centre’s “Exploring Entrepreneurship’’ sessions in Johannesburg, Durban, and Cape Town almost doubled in numbers from the previous year.

Barbara Nkosi was among the dozens of first-time entrepreneurs filling the seats at a beginner’s business seminar at the center. Nkosi said her job as an executive assistant will go away in March, when her employer, moves to another province and she has to find a way to make ends meat.

“Nobody is hiring,’’ she said. “I’m here because I’m taking care of my own destiny.’’

Sarah Buchannan from Durban who, between her and her husband, between them have decades of experience at local architectural and design firms, started getting together informally with a group of fellow designers and strategists last summer, after both were laid off.

“Initially, we just wanted to share our situation,’’ Buchannan said.

The group of eight women decided to collaborate, starting a business to offer clients multiple services, from print and architectural graphic design to strategic marketing. That led them to an investors network meeting.

“Because of the economy, we’re seeing more entrepreneurs who are pursuing opportunities because they don’t have to take that leap from a secure job,’’ Botes said. “They are already out of work, so why not pursue something that you’re passionate about?’’

“The people who were laid off ahead of us, none of them were getting jobs,’’ Barbara recalled. “So we knew we had to come up with a new plan, to beat the bad economy.’’

The couple honed their skills in the latest, most sophisticated 3D visualization software available, the kind that architects use to pitch projects. They also established ties to a large community of 3D designers locally. One good sign for their young business: they landed a big job before they even had a chance to print business cards or launch a website.

“It’s a little scary, but exciting at the same time,’’ Sarah said. “We’re trying to see this as an opportunity to turn adversity into an advantage.’’

John Gosling, their business coach said his advice to those planning to start a business for the first time is to give themselves “an honest self-evaluation.’’

“You should really be building on your experience, your skill sets, and your interest,’’ he said.

But he cautioned that entrepreneurship is “not a quick fix’’ for unemployment, adding that while he tries not to be “a dream crusher,’’ he often advises unemployed would-be entrepreneurs not to regard a start-up idea as 'fix all' solution.

“Even successful start-ups often don’t generate significant income for two or three years,’’ he said. “In fact, many require a significant investment up front.’’

The entrepreneurs are hoping that their fledgling enterprise will be able to overcome some of the issues that bedevil start-ups. The principals will work in “virtual teams,’’ from their home studios so overhead costs will be low.

Still the two first-time entrepreneurs admit that after years working in architectural firms, they are in unfamiliar territory as they plough through the documents that a new business requires.

They are also working through a business planning “homework assignment’’ from their SA Business Plans consultant that includes a business plan, a financial plan and a sales forecast.

“They each could have gone out on their own,’’ said Botes, “but they are better off as a team.’’

But he added that the group still has to fine tune its business plan, and possibly reduce the number of graphic services they will offer.

“They have a pretty good shot,’’ Botes said. “But it’s still a long road they have to travel.’’

The uprise of franchises in South Africa

It seems that more people are choosing the franchise option when starting out in business than ever before. With statistics showing a 49% rise in the number of franchises available over the last two years, it is evident that the promise of a proven low cost model for creating the business of your dreams is an attractive one.

Do remember that many franchises may not be the promised land it pretends to be and strong due diligence supported by good market research and a few conversations with other franchise holders and customers is a must before you sign on the dotted line.

A few basic questions to ask here are as follows:
1) Who are the shareholders of the franchiser?

2) Who are the officers and directors of the franchiser?

3) What is the business experience of the franchiser's directors and officers?

4) Have any of the franchiser's directors, officers or shareholders gone bankrupt or convicted of any criminal offense in the last 7 years?

5) How many years has the franchiser been operating?

6) How many years has it been offering franchises?

7) How many franchises does the franchiser have?

8) How many units are corporately owned?

9) What is the franchiser's financial condition? Have you received its most recent audited financial statements? Is the franchiser a member of FASA?

For further help on what to look for in a franchise look at the SABusinessHub guide to franchising in South Africa here and for details on the relevant research click here