2. JILL MITCHELL
WHO AM I?
Jill Mitchell
BSc(Hons) Chemical Engineering
MBA
Currently studying for a PhD in Entrepreneurship at Pretoria
University
Chartered (Professional) Engineer
www.jillmitchell.net
2
4. NATIONAL SMALL BUSINESS ACT
Definition of a Small Business
“A separate and distinct business entity, including co-operative
enterprises and non-government organisations, managed by
one owner or more, including its branches and subsidiaries, if
any, is predominantly carried on in any sector or sub-sector of
the economy mentioned in column 1 of the Schedule and which
can be classified as a micro-, a very small, a small or a medium
enterprise by satisfying the criteria in columns 3,4 and 5 of the
Schedule opposite the smallest relevant size or class as
mentioned in column 2 of the Schedule”
4
5. NATIONAL SMALL BUSINESS ACT
DEFINITION – SMALL BUSINESS
Qualitative Criteria
Relate to ownership structure
Be a separate and distinct business entity
Cannot be part of a group of companies
If it does have subsidiaries and branches, they must be included
when measuring size
Should be managed by its owners
It can be a natural person, sole proprietorship, partnership, or a legal
person such as a close corporation or company
5
6. NATIONAL SMALL BUSINESS ACT
DEFINITION – SMALL BUSINESS
Quantitative Criteria
Classifies into micro, very small, small and medium, using the following
criteria for different sectors in economy
Total full-time paid employees
Total annual turnover; and
Total gross asset value (excluding fixed property)
6
7. NATIONAL SMALL BUSINESS AMENDMENT ACT 2003
Act 26 of 2003 : GG No 25763, 26 Nov. 2003)
Advisory Board to replace NSBC
Public Finance Management Act 1999 applies to Agency
Schedle revised (definition) to reflect current rand value
“other non-financial services” deleted in order to give more focus
Added: “expand, co-ordinate and monitor the provision of training,
advice and counselling to small business
Added: “to facilitate and co-ordinate research relating to support
programmes by the agency
7
8. DEFINITION FOR EXAM/TEST PURPOSES
SMALL BUSINESS – A small business is
one that is independently owned,
managed and controlled; is not dominant
in its field of operation; and employs
fewer than 50 people; with a turnover not
exceeding R5million per year.
8
9. EXAMPLES OF SMALL BUSINESSES
Spaza shops
Vendors
Franchises
Brokerages
Cleaning Services
Underwriting Agents
Photography business
9
10. ENTREPRENEURSHIP
Entrepreneurship is the process of conceptualising,
organising, launching and, through innovation,
nurturing a business opportunity into a potentially
high growth venture in a complex, unstable
environment
10
11. ENTREPRENEUR
A catalyst for economic change who uses
purposeful searching, careful planning and sound
judgement when carrying out the entrepreneurial
process by working creatively to establish new
resources or endow old ones with a new capacity,
all for the purpose of creating wealth
11
12. INTRAPRENEURSHIP
Intrapreneurship is the form of entrepreneurship
which takes place in existing businesses around
new products, services or markets
12
14. SCHEDULE
(SEE DEFINITION OF “SMALL BUSINESS”)
Sector or sub-sectors in Size or Total full-time Total annual Total gross
accordance with the standard class equivalent of turnover asset value
industrial classification paid employees (fixed property
excl)
Less than Less than Less than
Agriculture Medium 100 R 4.00m R 4.00m
Small 50 R 2.00m R 2.00m
Very small 10 R 0.40m R 0.40m
Micro 5 R 0.15m R 0.10m
Mining & quarrying Medium 200 R30.00m R18.00m
Small 50 R7.50m R4.50m
Very small 20 R3.00m R1.80m
Micro 5 R0.15m R0.10m
Manufacturing Medium 200 R40.00m R15.00m
Small 50 R10.00m R 3.75m
Very small 20 R 4.00m R 1.50m
14
Micro 5 R 0.15m R 0.10m
15. SCHEDULE
(SEE DEFINITION OF “SMALL BUSINESS”)
Sector or sub-sectors in Size or Total full-time Total annual Total gross
accordance with the standard class equivalent of turnover asset value
industrial classification paid employees (fixed property
excl)
Less than Less than Less than
Electricity, gas & water Medium 200 R40.00m R15.00m
Small 50 R10.00m R 3.75m
Very small 20 R 4.00m R 1.50m
Micro 5 R 0.15m R 0.10m
Construction Medium 200 R20.00m R 4.00m
Small 50 R 5.00m R 1.00m
Very small 20 R 2.00m R 0.40m
Micro 5 R 0.15m R 0.10m
Retail and motor trade and repair Medium 100 R30.00m R 5.00m
services Small 50 R15.00m R 2.50m
Very small 10 R 3.00m R 0.50m
15
Micro 5 R 0.15m R 0.10m
16. SCHEDULE
(SEE DEFINITION OF “SMALL BUSINESS”)
Sector or sub-sectors in Size or Total full-time Total annual Total gross
accordance with the standard class equivalent of turnover asset value
industrial classification paid employees (fixed property
excl)
Less than Less than Less than
Wholesale trade, commercial agents & Medium 100 R50.00m R 8.00m
allied services Small 50 R25.00m R 4.00m
Very small 10 R 5.00m R 0.50m
Micro 5 R 0.15m R 0.10m
Catering, accommodation & other trade Medium 100 R10.00m R 2.00m
Small 50 R 5.00m R 1.00m
Very small 10 R 1.00m R 0.20m
Micro 5 R 0.15m R 0.10m
Transport, storage & communications Medium 100 R20.00m R 5.00m
Small 50 R10.00m R 2.50m
Very small 10 R 2.00m R 0.50m
16
Micro 5 R 0.15m R 0.10m
17. SCHEDULE
(SEE DEFINITION OF “SMALL BUSINESS”)
Sector or sub-sectors in Size or Total full-time Total annual Total gross
accordance with the standard class equivalent of turnover asset value
industrial classification paid employees (fixed property
excl)
Less than Less than Less than
Finance & business services Medium 100 R20.00m R 4.00m
Small 50 R10.00m R 2.00m
Very small 10 R 2.00m R 0.40m
Micro 5 R 0.15m R 0.10m
Community, social & personal services Medium 100 R10.00m R 5.00m
Small 50 R 5.00m R 2.50m
Very small 10 R 1.00m R 0.50m
Micro 5 R 0.15m R 0.10m
17
18. SMALL BUSINESS:
DEFINITIONS OF OTHER COUNTRIES
Country No. of Annual Other
Employees Turnover
Australia Less than 20 None but $ limits for taxes &
employees financial reporting
UK Less than 50 Less than £5.6
employees million
Canada Less than 50
employees
France Less than 50 Less than Є10
employees million
USA 500 Manufacturing $ 6million retail &
100 wholesale trade service
$ 0,75 for 18
agriculture
19. SME POLICY
To strengthen the existing base of small enterprises by
ensuring they can compete in the marketplace and that
they are not prejudiced because of their size , relative to
large firms.
(Lundström & Stevenson, 2001:37)
19
20. ENTREPRENEURSHIP POLICY
Measures to stimulate entrepreneurship
Aimed at pre-start, the start-up and post start-up phases
Designed and delivered to address areas of motivation, opportunity
and skills
Primary objective of encouraging more people to consider
entrepreneurship as an option
To encourage and develop entrepreneurial and growth ventures
20
21. SMALL BUSINESS VS ENTREPRENEURS
Not all small businesses are entrepreneurial
Example: lifestyle firm, elderly couple purchase a coffee
shop
Entrepreneurs usually aim for high potential return
ventures
Three factors distinguish entrepreneurial ventures:-
Innovation
Growth potential
Broad vision
21
22. SMALL BUSINESS VS ENTREPRENEURIAL VENTURE
SMALL BUSINESS ENTREPRENEURIAL VENTURE
Preferred funding source Owners own capital investment Other people’s capital investments
When the business is in trouble Cut costs Sell more
What’s more important Sales Marketing
Personal control preference Retain autonomy Involve other key personnel
Focus Efficiency Efffectiveness
Meta-strategy Imitation Novelty
External control preference Control business Control market
Grow When necessary When possible
Human resources Personalise Professionalise
What limits growth Fear of loss of control Market response
Delegation orientation Delegation is difficult Delegation is essential
22
23. SMME VERSUS ENTREPRENEURSHIP POLICY
Feature Small business policy Entrepreneurship policy
Objective Protection against big business Motivate more new entrepreneurs
Target Existing firms, Business(entities) Nascent entrepreneurs / new business
starters Individuals (people), growth
orientation
Targeting “Pick winners” (i.e., General population/subsets
growth sectors, firms) (i.e., women, youth)
Client group Easy to identify “existing” Difficult to identify “nascent”
Levers Direct financial incentives (tax- Non-financial, business support
credits, loans, guarantees) (networks, education, counseling)
Focus Favourable business environment Entrepreneurial culture/climate
(i.e., tax regime, reduce red-tape) (i.e., promote entrepreneurship)
Delivery system Well-established Lots of new players
(need orientation)
Approach Generally passive Pro-active outreach
Results orientation More immediate (Results More long-term 23
in less than 4 yrs) (Results can take longer)
24. PARAMETERS OF ENTREPRENEURSHIP POLICY
Favourable business climate e.g., tax regime, competitive environment, savings, flexible labour market, competitive
banking system, low inflation, low interest rates, etc.
Make it easier to go through the Make it easier to survive and
steps Reduce entry/exit barriers. grow Improve access to resources
Improve access to advice, – financing, networks, expertise.
information, networks mentoring, Improve access to markets,
incubators. Provide access to employees, technology. Reduce
micro-loans and seed capital Opportunity regulatory and labour market
obstacles
Make it easier to gain know-how Make it easier to gain
Put entrepreneurship education in management know-how Access
schools. Tailor entrepreneurship to counselling, technical assistance,
training programs. Support student management skills, peer networks,
venture programs. Establish peer Skills “best-practice” management tools,
learning performance benchmarks
Increase awareness and Influence “will to grow”
legitimacy of entrepreneurship Motivation motivation Promote new
Provide information about its role in business possibilities.
society. Profile role-models. Promote growth possibilities.
Promote entrepreneurial role as
feasible option Promote role-models
For start-up Create entrepreneurial climate For growth
General population “A want-to-be” Nascent Start-Up Survival Growth
tn t T-42 months 24
25. A MODEL FOR ENTREPRENEURSHIP
Entrepreneurial orientation Supportive Environment Co-operative Environment
Culture Role models Infrastructure Finance Institutions which are actively
Education Work experience Laws Training involved and assist with new
Personal orientation Development services firms
Entry of entrepreneurs
Acquired abilities
+ Inherent abilities
Products / Services
Results of entrepreneurship
Economic growth occurs Tax base is enlarged by a greater number of new firms
Incomes increase Technological development occurs
Living standards improve Job opportunities arise
Investment opportunities arise
25
26. BUSINESS MANAGEMENT PROCESS AND ACHIEVING
GOALS
Management made up of 4 basic
functions:-
Planning
Organising
Leading (activating)
Controlling
26
27. BUSINESS MANAGEMENT PROCESS AND ACHIEVING
GOALS
Six additional management functions can be
added to form the management process:-
Decision making
Communicating
Motivating
Co-ordinating
Delegating
Discipline
27
28. SEDA
Small Enterprise Development Agency
Never under estimate the challenges of
running a small business: - “ it requires you
to be disciplined, organised and well
informed……to learn as much and as
quickly as you can – and then practice the
craft of managing yourself and others”
28
29. EXPERIENCE
Asa minimum small business owners
require expertise in marketing and
management if they are going to be
successful
29
31. WORK EXPERIENCE
Contributes to individuals entrepreneurial
orientation
Research required on youth entrepreneurship vs
work experience before start-up
31
32. FAMILY & ROLE MODELS
Exposure to entrepreneurial activities increases
propensity towards entrepreneurship
Entrepreneurial “heroes” e.g. Rupert, mapanya
32
33. EDUCATION
Entrepreneurship can be developed through
education
High-potential (ICT, gazelles) entrepreneurs =
positive linkage
Van Vuuren & Nieman
E/P = M (E/S X M/S)
Model for curricula development
33
34. CULTURE
Culture
= norms, beliefs, symbols, attitudes, behaviour, and artefacts that
members of society use to cope with their world and one another
= Transmitted from one generation to another
Hofstede’s cultural dimensions
Power distance index
Individualism
Masculinity
Uncertainty avoidance index
Long-term orientation
Hofstede’s research help us to be more effective when interacting
with people
34
35. INFLUENCE OF CULTURE IN SA
Africa nations have strong cultural environments that differ
significantly from other nations particularly Western industialised
countries
Cultural attributes (as identified by Hofstede and Kanungo) and their
influence on African entrepreneurship needs to be tested empirically
Therefore different interventions need to be developed for different
cultural groups
35
36. CULTURAL INFLUENCES ON ENTREPRENEURIAL
BEHAVIOUR
Kanungo (1994) based on Hofstede’s work (1980) found
developing countries;
High power distance
High uncertainty avoidance
Low individualism
Low masculinity
36
37. HIGH POWER DISTANCE
Family, schools & work organisations believe in hierarchy of authority
Authority and control based on age and kinship
Denies people opportunity to participate in decision making and self-
confidence
Rural areas these values still very intact
37
38. HIGH UNCERTAINTY AVOIDANCE
Shun away from uncertain situations or an inherent
unwillingness to take risks
Career aspirations toward self-employment very low
Fear of failure
In SS Africa failure seen as symbol of weakness and
dereliction of duty
Limits initiative and creativity 38
39. LOW INDIVIDUALISM
Greater predisposition towards family or group interests than individual
interests
Collectivism and ubuntu
Extended family
Collective interests does not promote spirit of independence and self
reliance
Diminishes capacity for individuals to make meaningful savings
39
40. LOW MASCULINITY
Equals a low drive for achievement
Low predisposition towards success (McClelland)
Do not derive personal satisfaction from accomplishing a task
Result = heavily dependent on government to provide for their needs
High nAch = stimulates growth and prosperity
40
41. SKILLS REQUIRED FOR RUNNING AN SMME
Strategy skills
Planning skills
Marketing skills
Financial skills
Project management skills
Human relation skills
41
42. MANAGERIAL SUCCESS FACTORS
Planning
Knowledge of competitors and a market orientation
Client orientation
High quality work
Financial insight and management
Specific knowledge and skills relevant to the
business context
Making use of experts
42
43. SUPPORTIVE ENVIRONMENT
Government should help to create a supportive environment
Legislation
Policies
Environment should create a climate favourable to the entry of
entrepreneurs
Financing by ordinary financial institutions such as banks
Venture capital access
Training and development programmes should encourage entrepreneurship
(job providers vs. job seekers)
Infrastructural development prerequisite for any economic activity at an
advanced level
Deregulation i.r.o. of economic activities as well as legal regulations
43
44. INFRASTRUCTURE
The basic physical and organisational structure needed for
the operation of a society
Roads
Water supply
Sewerage
Power supply
Telecommunications network
Industrial zones and clusters
Facilitates the production of goods and services
44
47. BUSINESS DEVELOPMENT SERVICES
Training
Advice
Counseling
Mentoring
Networking
Finance
Incubators
Clusters
47
48. CO-OPERATIVE ENVIRONMENT
There must also be other institutions that actively promote
entrepreneurship
Tertiary institutions i.r.o. education and research
Institutions giving business support, finance and / or training
Involvement through SMME development units
NGO’s and CBO’s
International aid agencies
48
49. ROLE OF ENTREPRENEURIAL EDUCATION
Entrepreneurial Entrepreneurial Entrepreneurial Industry support
education: education: programmes: (partners)
reflective modes active modes (overcoming
(lectures) (Business plan, resource
case studies, field
work) constraints)
N. Ach
N. Independence
Risk taking
Role model performance Individual Entrepreneurial
Work experience factors Intention
Expected unemployment
Opportunity perception
49
Source: Walter, C. et al IECER 2009 Conference
50. SCOPE FOR SMALL BUSINESSES
Exists almost everywhere in South Africa
8 factors that lead to higher business formation in a given
geographical area:-
Population growth
Unemployment
Wealth
Workforce qualifications
Business size
Housing
Local government
Government policy
50
51. CHALLENGES FOR SMALL BUSINESS
Finding and retaining qualified workers
Legislation and regulation
Economic uncertainty
Keeping up with technology
Access to capital
Lack of time to plan
Lack of knowledge
Working hours
51
