By Steven Cohen, managing director, Pastel Accounting
Sage Pastel, as I’m sure you know is an ardent supporter of the development of SMEs and like all businesses we started out small. The company, which was founded in 1989 in Johannesburg, is now a leading developer of accounting and business software supplying 52 countries including 18 in Africa. The past 22 years haven’t all been plain sailing and I believe it’s worth sharing some of our mistakes and successes to highlight the fact that entrepreneurship isn’t always easy but its certainly rewarding.
We started out as three partners and two employees. Our strategy was to grow the business organically but also incorporate some acquisitive growth by using cash to buy smaller businesses with strong synergies. This way we slowly acquired new customers and from there, more employees.
Organic growth is slower than acquisitive expansion but is less risky in the long term as it comes from within the company and the management team can form strategic goals from which to guide the enterprise. This method also gives the company a chance to test its own business model while relying on independent finances. Purchasing other businesses has its merits, particularly in terms of gaining new customers and revenue quickly but it may come with challenges including shareholders that you don’t want. Integrating two businesses also involves streamlining different cultures, systems and work ethics into one entity with common values and goals – not always an easy task.
Naturally, we’ve made mistakes along the way but what’s important is what we’ve learned from them. During our growth phase we were constantly fraught with anxiety about the next move and about our overheads. We realised early on that running a business is stressful, but it’s imperative not to let this strangle your ideas. Think big, keep your feet on the ground and work on your emotional intelligence to be able to treat mistakes as growth opportunities! At the end of the day you’re an entrepreneur because of your willingness to take risks.
One of the worst mistakes entrepreneurs make is to become so absorbed in their business ideas that they forget to monitor day to day finances. Don’t underestimate the importance of tracking your cash flow and accounting balances all the time; financial statements are going to be your business’s lifeblood and should never be disregarded. In fact, entrepreneurs, it’s imperative that you know your financial terminology to ensure that you understand the nitty gritty of your business. And apart from balancing the books, I really recommend the use of information systems to help you track and report your daily operations – this just gives such insight into the overall state of your business.
When it comes to hiring employees, I’ve learned that it’s better to pay more money for a good person with the right overall fit for your organisation including the appropriate work ethic, rather than a person who is just good on paper. Business owners may be tempted to pay top dollar for the most knowledgeable and skilled employee without taking note of whether their work ethic and other cultural traits fit in with the business.
When managing new recruits, lead by example and let your staff make a few mistakes along the way. Make them love coming to work by giving them responsibility and keeping them informed and educated. It’s also really important to recognise the ones who go the extra mile.
And don’t forget your most valued asset: your customers. Looking after them will build your credibility so keep your promises and always get back to people. But don’t just rely on the customers you have – always work to increase the size of your customer-base.
While addressing your weaknesses is important, don’t forget to remember what you’re doing right. In our start up phase there were a number of things that I can say were right. We managed to sell our value proposition confidently and always remained ahead of our competitors and industry challenges. To do this we read, read and read but always drew our own conclusions and then shared this information with employees.
At the end of the day, invest for sustainability because your business needs to outlive you. Keep on moving forward as procrastination is the enemy of progress and lastly, give back to the community: it makes you feel good and you are growing your future customers.