With the start of the New Year many small business owners will be thinking of ways to improve their businesses in the upcoming year. One such way is by taking full advantage of the Enterprise and Supplier Development element of the B-BBEE codes which has been exploited by many companies to great effect.
As Enterprise and Supplier Development practitioners at LEAP, we are continually alarmed by how small businesses are unaware of this offering put in place to benefit them.
Enterprise and supplier development is the aspect of B-BBEE that aims to advance black businesses and all small to medium businesses with an annual turnover of under R50 million. Enterprise Development involves the upliftment of a small company in which a larger company may like to procure with in future. For a large company (with an annual turnover of over R50 million), 1% NPAT (Net Profit after tax) is the minimum spend on Enterprise Development.
However, being at least 51% black-owned business is just the tip of the iceberg in terms of the requirements. Many big businesses are looking for quality entrepreneurs and refuse to allow any businesses into their ESD programmes without a strong entrepreneurial spirit in the leader.
The rules for being considered into such programmes are simple, however, not as simple to implement. To become ESD partner of choice here are 5 requirements you should be able to fulfill.
1. Know Thyself: Small businesses should be aware of the growth stage of the business and whether they are ready to become an ESD partner. Incubator stage businesses are still in the idea stage and may not have produced revenue yet. The accelerator stage businesses have put their business ideas into practice and have been able to produce a fair amount of revenue. However, these companies require an extra resource that can catapult them to the next level of their business.
2. Get your (business) life in order: Is your business registered? Do you have your tax clearance certificate? These seem like unimportant aspects, but they show your ability to comply with basic company law in South Africa. Furthermore, corporates are in most cases, unable to do business with unregistered companies. Thus your inability to comply, is a drawback.
3. Know where your sustenance originates from: Understand the cash-life cycle in your business. The most important way in which you can understand whether your pricing, operating costs and cash flow synergise is by looking through your financial statements. Generating this document benefits you as a business owner, and also allows ESD practitioners to assess you for the efficacy of their programmes. Financial statements will also shed light on whether your business model is sustainable.
4. Know whose lives you are changing: The best way to sustainably stay in a good supply chain is to have a good fit with the company supporting you. In order to establish this correct fit you need to understand where your product/service is most suitable and whose lives it is affecting. In order to find this out, it’s important that you avoid making assumptions and ask the current customers you have. Perhaps there is something small you could add to your offering to move you into a new market.
5. Know your future: Technology is an integral part of business today. How adaptable is your business in the changing climate? For instance, is your business able to reply to emails timeously? As a small business are you able to bank from your phone, and not just walk into the bank? Is your industry using certain applications that you have not yet purchased? If yes, why? Your lack of use of technology may render you obsolete in the near future
I would like to leave you with a final thought, I urge all small businesses to learn about Enterprise and Supplier Development. These programmes often do not give cash, however, they have valuable resources such as business coaching and mentorship, assistance to adhere to your industry standards and important interventions such as gaining ISO (International Standards Organisation) implementation. These programmes are in some cases free, but are able to give invaluable resources.
About the author: Kealeboga Mokolobate is Enterprise and Supplier Development (ESD) Account Manager at Lean Enterprise Acceleration Programmes (Leap). Mokolobate is the founder of A-Plus Learning, an on campus tutoring startup offering academic support services for students.