Small businesses play a very crucial role in creating employment and contributing to the economy’s GDP especially in developing countries like South Africa. However, in the first few years of business, small businesses come up against a lot of different challenges. Some are harder than others to overcome. According to the U.S. Bureau of Labour Statistics, about 20% of small businesses fail by the end of their first year. By the end of their fifth year, 50% go under; and by the tenth year, that number rises to 80%.
Ravi Govender, former Head of Small Enterprises at Standard Bank, said although statistics vary, on average about 50% of all start-up businesses in South Africa fail within 24 months due to the inability and inexperience of their owners. With survival rates like that, it’s easy to understand why folks face the first few years of business with trepidation. But in fact, many common small business problems and challenges are actually fixable, from difficulty finding customers, generating leads, financial management, regulation and compliance, effective human resource management and balancing quality and growth.
In recent years, one of the main challenges facing South African small businesses has been lack of funding. Although more can still be done, there is progress in addressing this challenge as the government and finance institutions are providing funding for small businesses. However, there is a bigger threat to small businesses. Provision of funds does not guarantee success of any business. It is the necessary expertise that is required to effectively deploy those funds, set up and manage efficient and effective business processes, and respond to market changes faster while providing better service to customers. In our case, once the funding is provided, small business owners are left to their own demise and run the businesses to the ground due to lack of the above-mentioned expertise. Therefore, what exactly is the main challenge facing South African small businesses right now? It is lack of support, lack of expert professional business support to effectively manage and successfully drive their businesses through the various stages of growth. This is one of the reasons why BAAC was formed, to bring that business support to small businesses.