Boosting your business through incubation

Business incubation has been proven to reduce the failure rate of start-ups and emerging businesses. Two entrepreneurs share their experiences on how business incubation propelled their companies

With the power to transform SA’s employment rate, small, medium and micro enterprises (SMMEs) play an integral role in driving economic growth and development. According to a study by The Small Enterprise Development Agency (SEDA), almost 70% of new jobs are created through SMMEs, and the sector contributes about 40% to our gross domestic product.

Emerging entrepreneurs, however, face a host of challenges, such as access to finance and credit, poor infrastructure, and lack of business acumen – which leads many to fail in their first three years. In fact, South Africa has one of the highest failure rates of new SMMEs in the world, estimated at 75%.

Business incubators provide small enterprises with assistance programmes that include a range of administrative, consulting and networking services aimed at accelerating development and successful growth.

Thandazo Ndadza (L) and Richard Sibiza (R), co-founders of Boneka Digital Printers

RICHARD SIZIBA, FOUNDER: BONEKA PRINTERS

Richard Siziba founded Boneka Printers in 2009 with the aim of becoming a key player in the printing and gaming sector. With limited financial acumen, however, he began to struggle to keep the company afloat.

“There were times when we struggled to break even because many potential clients were sceptical about dealing with a company that had no track record,” says Siziba. “I didn’t have much business knowledge, which led to the company being exploited by an accounting firm and we paid for it dearly.”

By 2015, Siziba and his business partner wished to take the company to the next level but they didn’t know how to achieve their goals, so they joined Razicorp’s three-year programme where they received strategic guidance, client and supplier opportunities and exposure.

READ MORE: Looking for a business incubator?

“Now we know where the business is going and we have a better understanding of what role we play as directors. We changed the look and feel of the company and learnt a number of valuable skills such as pitching to investors, delegating and tracking the financial position of the business,” says Siziba.

Boneka Printers has since increased its turnover and staff morale has improved. The company has secured big clients such as UmAfrika Gaming Technologies, Vavasati Brand Logistics and Cresta Shopping Centre.

Moving forward, Siziba says his future plans are much more goal- and time-specific.

“By the end of this year, we plan to hire a new production manager and bookkeeper,” he says.

“Within the next three years, we plan to move to bigger premises and expand our footprint to include at least one SADC country.”

His advice to entrepreneurs is: “When looking for a business incubator, find one that teaches you how to fish as opposed to one that simply feeds you because that will just create dependence syndrome.”

LWANDISO MGWETYANA, FOUNDER: LITHENDO CONSULTING

Engineering consultancy firm Lithendo Consulting was conceived in 2009, registered in 2011 and full-time operation commenced in 2015.

Lwandiso Mgwetyana says raising start-up and working capital prevented the company from reaching its full potential in its early years. “It limited our capabilities to compete and presented a huge challenge when it came to job costing,” he admits. “As the business grew, we wanted to be exposed to more clients and trade channels, and partnering with Shanduka Black Umbrellas presented us with enormous opportunities.”

In February 2016, Lithendo Consulting applied to join Shanduka’s three-year programme. The application process took eight weeks and included a competency assessment, which helped Mgwetyana unlock his strengths and blind spots.

He then met with a regional manager and was given feedback on his assessment. The application culminated in a presentation session where he presented his well-refined business idea to a panel of business experts and mentors.

READ MORE: How to turn your small business into an asset of value

He walked away from the application process having learnt that compliance is key and that a business can’t be everything to everyone. “I gained an understanding that managing a business is an iterative process,” he says.

“That means what seems to work today might not work tomorrow. The other major change we made was altering our market segment. We worked towards having a focused segment, which is proving fruitful, and the results have started to show.”

Revising the company’s service offering has allowed Mgwetyana to manage and drive down operating costs. He has acquired new clients such as Woolworths, DSV Global Logistics, Neopak and Turner and Townsend, and revenue is growing steadily.

“In the next three years, we plan to grow our service offering, grow our revenue and maintain an incident-free operation,” he says.

He advises entrepreneurs to be as truthful as possible about what you can do on your own and what you need assistance with.